Select Committee on Treasury Minutes of Evidence


Examination of Witnesses (Questions 1100 - 1119)

TUESDAY 13 NOVEMBER 2007

MR PAUL TAYLOR, MR CHARLES PRESCOTT, MR MICHEL MADELAIN, MR FRÉDÉRIC DREVON, MR IAN BELL AND MR BARRY HANCOCK

  Q1100  Jim Cousins: How many banks have told you that they have approached the credit facilities of the Bank of England?

  Mr Hancock: I think, certainly from S&P's point of view—

  Q1101  Jim Cousins: How many banks have approached S&P's to tell you that they have approached the credit facilities of the Bank of England?

  Mr Hancock: I think that would have to be something, if we even have the information, that would have to remain confidential, given the sheer sensitivity and confidential sensitive nature of banking.

  Q1102  Jim Cousins: Do you take the same view, Moody's?

  Mr Madelain: We also take the same view.

  Q1103  Jim Cousins: You would say the same thing to the French Finance Minister, would you?

  Mr Madelain: I am not sure I understand your question.

  Q1104  Jim Cousins: Christine Lagarde, do you tell her that it would be confidential if a bank told you that they had approached the credit facilities of the Bank of England? You would tell her that too?

  Mr Madelain: We would, yes.

  Q1105  Jim Cousins: A brave man. You do see the point I am making. If such a simple and obvious point as the one I am putting to you is lost in these mysteries so that you neither know whether some bank has approached you to approach the credit facilities of the Bank of England, nor would you tell us if they had, means that, frankly, the public cannot have a lot of confidence in anything you say or do, can they?

  Mr Hancock: I think certainly information that we are hearing on a confidential basis and retained confidential within the rating agency, we incorporate into our rating opinions, but we do not necessarily disclose that information on behalf of the client.

  Q1106  Jim Cousins: But if you want a high level of transparency and you are very happy and you are very welcoming of all the efforts that are going on in the United States to increase that, why are you telling us that you neither know, nor would you tell, if a bank approached the credit facilities of the Bank of England when it is an obvious, important contribution to the markets?

  Mr Bell: We are bound by confidentiality with our clients and of course follow the code of conduct.

  Q1107  Jim Cousins: If you are bound by confidentiality then all your ratings are suspect?

  Mr Taylor: I do not agree with that. One of the guiding principles of the IOSCO Code of Conduct that was applied to us was how we treat confidential information and how we keep that information to ourselves. So, in complying with the IOSCO Code of Conduct, we would not be able to answer the question on a specific-name basis. We answered it by saying nobody has approached us, we have not had any information that that happened, so we have answered your question, but if it was confidential information we could not do it.

  Q1108  Jim Cousins: In your case nobody has told you that.

  Mr Prescott: Yes.

  Q1109  Jim Cousins: What is the case with the other two?

  Mr Madelain: I would make two comments.

  Q1110  Jim Cousins: We have actually been told no-one has approached them. Has no-one approached Moody's?

  Mr Madelain: I cannot make such a comment.

  Q1111  Jim Cousins: So we do not know whether anyone has approached you?

  Mr Madelain: What I can tell you is two things.

  Q1112  Jim Cousins: Fitch are willing to tell us that no-one has approached them; you are not willing to tell us that no-one has approached the credit facilities of the Bank of England?

  Mr Madelain: It is not that I am not willing. I am not informed in a way that I can tell you that.

  Q1113  Jim Cousins: You would not come to this Committee today and not know whether a bank had approached the credit facilities of the Bank of England and they had told you.

  Mr Madelain: I believe it will be the responsibility of the Bank to communicate that.

  Q1114  Jim Cousins: What is all this stuff about transparency and "we welcome it" and "we want more of it", when I ask you a very simple question and total confusion and mystery comes?

  Mr Hancock: I would repeat what Fitch said, that we operate the IOSCO Code of Conduct, and that is very specific on what we can say and cannot say in terms of confidential information.

  Q1115  Jim Cousins: If your code of conduct prevents you from telling the market such a simple and obvious issue about whether a bank has approached the Bank of England credit facility (and I have not asked you who, I have just said how many and you are not willing to say), then I do not think your ratings are worth anything?

  Mr Madelain: Our ratings will reflect that information.

  Q1116  Jim Cousins: If you had had such information, it would be reflected in the ratings?

  Mr Hancock: We reflect all relevant information that we have in our ratings, even if we do not disclose confidential information.

  Q1117  Jim Cousins: But you are not willing to tell the Committee whether a bank has approached you to tell you that?

  Mr Hancock: Correct.

  Q1118  Jim Cousins: You are not willing to tell the Committee whether you would expect a bank to approach you and tell you?

  Mr Hancock: I think, as I said in the earlier question—

  Q1119  Jim Cousins: Would you expect a bank to tell you that?

  Mr Hancock: I would not be shocked if they did not, given the nature—


 
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