Examination of Witnesses (Questions 435
- 439)
TUESDAY 11 MAY 2004
EXPORT CREDITS
GUARANTEE DEPARTMENT
Q435 Chairman: Perhaps, Mr Weiss,
in a moment you could introduce your colleagues. We have a copy
of your opening statement here.[1]
We try to discourage these because we work on the basis that people
provide us with written evidence after which we then ask questions.
If you could introduce your colleagues, without any more ado we
will get on with things.
Mr Weiss: Thank you, Chairman.
Introducing myself first, I am currently Acting Chief Executive
of ECGD and I am in this position until probably early July until
Patrick Crawford arrives, who it was announced at the beginning
of April is the new Chief Executive of ECGD. On my right is John
Ormerod, Director of Strategy and Communications. On my left is
Tom Jaffray, Director for Risk Management in ECGD.
Q436 Chairman: Thank you very much
and thank you also for the various pieces of evidence you have
already provided us with. If we could start with the capitalisation
and progress towards the Trading Fund status. This has been something
of an on-going saga. You missed the original target date by two
years, we have evidence already from the SBAC who are not your
greatest critics—if anybody is called fans of yours I think
it may well be them—but both they and the CBI have told
us that delay has created a degree of uncertainty amongst their
members and customers and this has made their business more difficult.
When are you guys going to get your act together and get the risk
management systems into a shape which will be capable of having
the operation of a trading system? What sort of timescale are
we now thinking of?
Mr Weiss: I think you are right
to say it has taken a long time. We did originally envisage Trading
Fund status two years ago for ECGD but undoubtedly the project
has proved more challenging than we originally thought. You are
quite right to say that the problem has been mainly in the area
of setting up our risk management systems in a way which would
be fit for the moment when, as intended, we become a Trading Fund.
To explain that a little, ECGD as a Trading Fund will be the biggest
Government Trading Fund in capital terms of all, indeed it will
be five times larger than the rest put together. That does not
mean we are the biggest business in terms of income, but in terms
of capital that is what we are, and that is a very, very challenging
and complex job, and we are very keen we should get it right and
the framework is right. The position that we have reached at the
moment is, with our colleagues in the DTI and the Treasury we
have now reached a very advanced stage in discussing the future
framework for the Trading Fund, to a point where our Ministers
are now actively considering the emerging outcomes of that work,
and issues such as the respective roles of the three departments
under the Trading Fund and other issues which have been discussed
before your Committee about the commercial rate of return and
the level of capitalisation are currently on their agenda. We
hope for some early conclusions. In fact what we are doing is
working towards a ministerial announcement about the Trading Fund
before the summer recess.
Q437 Chairman: You tantalisingly
quoted something of the order of five times all of the other Trading
Funds added together.
Mr Weiss: Yes.
Q438 Chairman: Given a couple of
weeks we could probably find out how much that amounted to. Could
you tell us?
Mr Weiss: I cannot tell you exactly
because Ministers have to decide on that figure.
Q439 Chairman: Would a figure of
£1.7 billion be a million miles away from what we are talking
about?
Mr Weiss: Our working figure for
this, between ourselves and our colleagues, is £1.8 billion.
I know it has been put to you that that might be somehow an inadequate
figure for British exporters. We have to get the balance right
between enough capital to support the level of business we think
we will be asked to do by British exporters, but on the other
hand not having too much because if we have to remunerate it or
cannot use it and just put it in the bank it will not produce
enough return on the capital we need to achieve. So we are trying
to get a good balance between these two pressures. We think on
our best view of likely future business levels that something
around £1.8 billion is possibly more than adequate but certainly
not a constraint. There was a figure, probably two years ago,
of £4 billion which was mentioned and this has caused some
concern I think, that we have these two rather different figures
and does this imply some cutting back. The fact is that was on
a completely different basis and included the ECGD pre-1991 business
in the capitalisation. This figure, which, as I say, ministers
have yet to agree to and sign up to, this working figure of £1.8
billion, is intended just to get our new account, our Account
2, business capitalised.
1 Printed as Appendix 12 Back
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