Examination of Witnesses (Questions 120
WEDNESDAY 1 MAY 2002
120. What was the response?
(Mr Earls) The response is that they are very interested
in what is happening in the United States. They tend to question
its applicability, but as we say, we are not talking about the
transposition of that legislation. I do hope that the Government
do still retain an open mind to this as a policy option.
121. I am interested in that aspect of the Community
Reinvestment Act because when the Committee visited the United
States in January, we did meet Bill McDonagh who is the Chairman
of the Federal Reserve in New York, and indeed, a few weeks before,
he had taken Gordon Brown to Harlem to look at the good work that
was going on in that community as a direct result of investment
from the Community Reinvestment Act and he stated to us, in an
American context, "If banks had been doing their job properly,
there would be no need for the Community Reinvestment Act."
How far does that apply over here, and what particular characteristics
do you think we should take from that Community Reinvestment Act
and use in this country?
(Mr Murphy) There are huge parallels and what we have
to bear in mind is that this is not something that the United
States of America have done recently, they have had this for 25
years. This is quite an old piece of legislation in that respect.
The bits that we are particularly keen on is banks accepting an
obligation to meet the credit needs of their communities. It is
a two-way street, it is not just a one-way street, and that is
something that we mentioned in our submission. But also any decision
to pull out, there has to be evaluations of the lending performers,
financial institutions, so they cannot just make a Boardroom decision.
It has to be based in the community, based in the type of business.
Nobody is suggesting that then you would ignore all of that. All
that performance has to be taken into account when considering
merger, acquisitions, closure, whatever, and that seems to be
a very positive way of making sure that we can get the balance
right between what business requires and what the communities
(Mr Earls) The key element centres around information
disclosure because that is what enables people to make informed
choices about what banks are doing.
122. There is insufficient information -
(Mr Earls) There is insufficient information about
what the banks are doing. I know this is a concern of the Government
and previous ministers in the past have very publicly and quite
strongly encouraged banks to disclose more information on a voluntary
123. Like what information?
(Mr Earls) About their lending activities to the communities
that they serve. We also highlight to you in our submission that
the Social Investment Task Force in its report to the Chancellor
highlighted again the issue of greater disclosure by banks to
their communities, and they also recommended that if this was
not pursued quickly on a voluntary basis, the Government should
consider some CRA type legislation.
124. So you would like to see a public notice
in the local papers indicating what particular projects and communities
the banks have invested in?
(Mr Murphy) I think there is that element of it. There
is also the element of their business decision, as they call it,
for pulling out. I remember a few years ago Nat West closing a
branch in Toxteth and the reason they gave us is that they were
not selling enough mortgages. It did not surprise us, to be quite
honest, and if that was the measure and the only measure, then
the decision was something that had nothing to do with that. So
it is a question of getting this balance right. I think it comes
to the point Mr Plaskitt was saying earlier, we recognise that
branches will close, people's way of accessing their financial
services alter and change, but there needs to be some understanding
of why those branches have been closing, why particular disinvestment
policies are being pursued, and we do not have that transparency
at the moment, we do not know. It is a mysterious system that
produces a list that says, "These 70 will close on Friday".
125. I think we are winding up now. Maybe I
could ask you just a couple of questions to end with. In terms
of your relationships with the banks, maybe not confined to the
big four and without necessarily naming banks on that, how do
you get on with banks and what characteristics define the banks
that you have best relations with?
(Mr Murphy) We get on fantastically well with all
of the banks on a day to day basis.
126. There is no need for us to call the banks,
(Mr Murphy) I think there is. One of the difficulties
that I think banks have is understanding what it is that we as
a Union want to have in our relationship with them. Some people
that we deal with still do not quite believe that the flat caps
and donkey jacket era has gone, and that we want to sit down,
as I said before, and be at the centre of the decision making
process with the employer. That is the process that we want. All
the banks that we deal with we have a good relationship with.
We do fall out occasionally, and I will not name names, but items
do appear from time to time in the press of issues that we have.
We do fall out over matters of pay. At the moment, we think there
is a bit of a disparity between what our members get and what
some of the Chief Executives get. The Chief Executives do not
seem to have a problem with it but we do. On the whole though,
if we have an issue or a problem, we can go and talk to them about,
and we do go and talk to them about it. I am not sure that all
of the banks that we deal with, if they have a difficulty or problem
they feel able to come and talk to us about it first off, we would
maybe pick it up second or third hand. Banking has gone through
a revolution in the last 5-10 years, will continue to go through
a revolution. There are issues about mergers, there are issues
about acquisitions that we sometimes come head to head with the
bank aboutLloyds TSB is a classic example on their proposed
takeover of Abbey National. We had a different view to the one
that they had. It has caused some local difficulty along the way,
but the relationship is robust enough for us to be able to go
through that and move on to what the next issue is.
127. Finally, within these four walls, give
us a telling knockout question we can ask the banks.
(Mr Murphy) "How do you justify paying your Chief
Executives so much when some of your workforce get zero pay increase?"
128. Nothing wider?
(Mr Murphy) You can ask them how sometimes whether
the banks are successful or not and some are more successful than
others, but they still manage to have massive pay increases for
senior executives regardless of the performance of the bank. It
is the mysteries of the Remuneration Committee, they are all on
129. But this is not confined to the banks,
this is corporate government's issue, is it not?
(Mr Murphy) Of course.
Chairman: However, I do not know if we
will ask that telling question but we will put it in the bank
anyway for future reference. Can I thank you again for your Memorandum
and your contribution today. It is very helpful to us in this
***-Asterisks denote commercial-in-confidence
matter and have therefore not been reported.