On the Politics Show, Sunday, 22 February 2009, Jon Sopel interviewed Lord Myners, the Banking Minister
JON SOPEL: I'm joined now by Paul Myners, the Government's Banking Minister, thank you very much indeed Paul Myners, for being with us. So is that it? 100% mortgages are over?
LORD MYNERS: What Gordon Brown has asked the Financial Services Authority to do is to look at mechanisms for controlling excesses in lending. We've recognised … (interjection)
JON SOPEL: Sorry to interrupt you. What is an excess in lending?
LORD MYNERS: Well, I think that's one of the things that the FSA will have to define, but Gordon specifically cites 100% mortgages. You'll remember that two or three years ago, we were seeing loans of as much as 125% of house values. With hindsight, it's generally recognised in the banking community that that was a foolish thing to do.
JON SOPEL: That was a foolish - cos Gordon Brown has never admitted that. I've done two interviews in the past three months with Gordon Brown, where he's refused- specifically that point, wasn't it a mistake to have banks lending 125% and he refused to accept that.
LORD MYNERS: I said the banking community itself recognises that they over extended credit and we need to create systems through enhanced governance, more accountability and appropriate regulatory intervention, to ensure that excesses do not occur.
JON SOPEL: So it was a foolish thing to do, therefore you're saying there were mistakes made, before you were in government admittedly, but there were mistakes made in allowing that to happen.
LORD MYNERS: No. I said there were mistakes made by the banks.
JON SOPEL: Oh. But, come on, there's a government that's in charge of regulation, it could have done something about it.
LORD MYNERS: Regulation has limitations. Regulation cannot provide a zero failure outcome. The responsibility for failed institutions be they banks or any other form of business, must ultimately lie with the Boards of Directors and the owners of those businesses.
JON SOPEL: Hang on, are you really saying that government ministers washed their hands entirely of this completely. What if people say, what have you got a government for, if Gordon Brown is walking down a High Street, or Ministers, and they see that there are a 125% mortgages available, they're able to say, hang on, that's wreckless isn't it.
LORD MYNERS: I think it was recognised, and is now recognised by the banking community as being excess. There was an exuberance which we now need to address and that's why the Prime Minister is calling for a return to responsibility in lending, so that banks can provide a strong, trust based provision of credit, credit to support business, credit to support house owners, credit to support hard working British families.
JON SOPEL: Yeah. Calling for things is one thing. Saying, we want this to happen, we want you to introduce regulations, I mean I don't know what, what do you call a prudent level of borrowing if you're buying a house. Should you be able to have a deposit of 5%, 10%, 15%. I mean, what do you think?
LORD MYNERS: Well, I think it depends upon a wide range of factors. The percentage of the value of the underlying security and the multiple of earnings, and the confidence around those earnings are clearly three very strong fundamental bases for decisions that banks departed from during the last few years. What we're saying is, et's return to that and invite the FSA to suggest ways in which that can be encouraged.
JON SOPEL: I just wondered what level you think might be appropriate. I'm sure we've got people watching today who are kind of, you know, maybe young couples, trying to get their first foot on the housing ladder and they want to know whether you're saying, Well, you need a 10% deposit. What do you think would be appropriate?
LORD MYNERS: I think it depends upon their incomes, the multiple of income, whether there's one income, whether there's two incomes whether that income is assured or whether it isn't. I don't think there are any general rules. I think it's the blending of the loan to value, the multiple of income and the assurance about income. But we do want to see banks providing support for new home buyers to come in to the market, when they think it's appropriate to do so.
JON SOPEL: Okay, I understand the provisos you put in. But I mean, for example, in France, there are very strict limits on what multiple of income you can borrow on your mortgage. Would you like to see that here?
LORD MYNERS: I think we would rather see a combination of prudent, sensible lending by banks within an appropriate regulatory framework, to the extent that banks are overly generous in lending, then they must hold more .. (interjection)
JON SOPEL: I just want to push you on what you meant because I'm not sure how clear you're being. Are you saying that the 100% mortgage is now over. Period.
LORD MYNERS: I think we see real risks in the 100% mortgages. There are over a hundred products our there in the market at the moment Jon, offering 100% mortgages. Those are inherently risky products, unless you have a very low multiple of income to outstanding debt, or other forms of guarantee or collateral.
JON SOPEL: So to be clear, this is now government policy, that that should stop.
LORD MYNERS: No, the government policy is that banks should make wise lending decisions.
JON SOPEL: But you now hold a stake in many of these banks. You could say, no, I'm sorry, this cannot happen.
LORD MYNERS: We are constantly engaged with all the banks to talk about prudent lending conditions and a return to prudence, a return to safe, secure, sober lending activities, is what we need to see. We have learnt some very, very expensive lessons globally about wreckless, feckless, witless lending, by a small number of banks.
JON SOPEL: Right. There was a failure of regulation along the way too.
LORD MYNERS: There is a need to strengthen global regulation. This is not a UK problem alone. This is a global problem. The deficiency in regulation was on the global prospective and the Prime Minister has been calling for action on that for several years.
JON SOPEL: Okay, and we hear that the Royal Bank of Scotland is going to be hiving off part of its business. What can you tell us about that. Do you think it's a good idea?
LORD MYNERS: I think it's for the Royal Bank of Scotland to tell their shareholders and they will be doing that, I imagine at the end of this week, when they announce their profits for, or losses for 2008.
JON SOPEL: Have they been in consultation with you about it?
LORD MYNERS: They're in consultation with UK Financial Investments. The institution that holds these investments, on behalf of the taxpayer.
JON SOPEL: And a very quick thought on this insurance scheme that you have set up with reports in the papers today that details are being finalised for five hundred billion pounds worth of toxic assets to be taken on under this insurance scheme. What can you tell us about that?
LORD MYNERS: What I can say is we need to bring closure and finality and to achieve that Jon, we need to put the mistakes of the past behind us and to isolate those bad loans, protect them going forward and to allow the banks to go back to playing their important role in the UK economy.
JON SOPEL: I just want to ask you a final question, which I'm sure an awful lot of people want to know the answer to. Is the banking crisis over?
LORD MYNERS: I think we've got a very good handle on the banking crisis. We've addressed the issue of capitalization, funding and liquidity. Later this week we'll be making further announcements about support for the banking system. We want to have a properly functioning banking system, which works well for the UK economy. That's our goal, that's our objective and that's where we intend to be.
JON SOPEL: Okay. Paul Myners, thank you very much indeed for being with us.
END OF INTERVIEW WITH PAUL MYNERS
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The Politics Show Sunday Sunday, 22 February 2009 at 1200 GMT on BBC One.
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