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Financial Markets: Credit

Volume 492: debated on Wednesday 20 May 2009

To ask the Chancellor of the Exchequer what oversight his Department exercises over credit default swap contracts with consortia in which it has a financial stake; what assessment he has made of the effectiveness of such oversight; if he will consider the merits of introducing independent scrutiny of such contracts; and if he will make a statement. (272316)

The Government's shareholdings in the Royal Bank of Scotland (RBS) and Lloyds Banking Group (Lloyds) are managed on a commercial basis by an arm's length company, UK Financial Investments Ltd (UKFI). UKFI's objective is to protect and create value for the taxpayer as shareholder with due regard to the maintenance of financial stability and to act in a way that promotes competition.

The framework document between HM Treasury and UKFI sets a requirement that UKFI will not intervene in the day-to-day management decisions or operational decisions of investee companies. The companies will retain their own independent boards, which will manage the banks and determine their strategy.

HM Treasury and UK Financial Investments does not comment on individual contracts offered by or commercial decisions taken by its investee companies.