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TOPICAL DEBATES Financial Stability

My knowledge of international accounting standards comes from the fact that I am a chartered accountant, although I am no longer practising. When looking at mark-to-market, and international moves to deviate from that—my right hon. Friend the Member for Witney (Mr. Cameron) proposed a temporary suspension of mark-to-market last week—it is important that we adopt a common approach. It is unhelpful if the US adopts one approach while UK and European markets adopt another. There needs to be some consistency if we are to have comparability of financial statements. The seizing up of inter-bank lending has led to illiquidity as banks seek to hold on to cash. As Northern Rock shows, a bank can be solvent, but still face problems because of liquidity. We believe that action needed to be taken to tackle both liquidity and capital and that you could not tackle one without tackling the other. This is where yesterday's £50 billion rescue package is pivotal in its support for recapitalisation and further moves to improve liquidity in the inter-bank market. I want to raise some detailed questions about yesterday's package in a moment. Taxpayers will ask us why we needed to do this, who else is sharing the pain and more crucially, how we will know if it has worked. The answer to why we need to do it is clear: financial instability has caused problems for businesses and households, and if action had not been taken those problems could have got far worse. It is also clear, however, that if taxpayers are to bear risk they need to know that others are taking their share of responsibility, too. Banks will have look again at dividends to conserve their capital and there will be little public support for banks paying bonuses when the taxpayer is at risk.