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Banking Bill

I am sure the noble Lord, Lord Forsyth of Drumlean, has baited me into responding on this point, standing, as he is, waist deep in his waders, seeing a big, fat fish coming towards him. The noble Lord knows that there is a very significant difference between the rate of interest on a deposit and the cost of risk capital. In the circumstances prevailing in the middle of October, we were advised by our own financial advisors at the Treasury that 12 per cent was an appropriate rate for the instrument that was being offered to and accepted by the banks. Clearly, that was the view of their directors and their financial advisors as well. One major bank chose not to use that route to securing more capital. I salute them for that because our interest was in ensuring that the banks were appropriately capitalised, rather than where they drew the capital from. That bank certainly had to pay more than 12 per cent when you take into account the dilution and the warrants and new instruments they created which gave them short capital. We could debate this issue for some time. The noble Lord, Lord Forsyth, is no doubt aware that we announced this morning that the Royal Bank of Scotland is converting its preference shares into ordinary shares. I indicated earlier that should the Lloyds Banking Group approach us with a request, we would look at that, as long as it represented good value to the taxpayer, because that is the other side of this transaction.