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Banking Bill

I shall be brief, as I know that other hon. Members want to contribute to this relatively short debate. It seems a long time since we were in the midst of the Northern Rock debacle, but there has been a very considerable amount of water under the bridge and to some extent the Bill's provisions have been overtaken recently by other events. Nevertheless, the Bill is important and the Minister knows that we support it. I do not want to say much on that, save that there are some very welcome aspects. The banking liaison group is a very positive innovation that will be helpful both now and in the future. It also cements the sort of relationship that we need with the City in respect of matters that at times can be very delicate. If we do not get our response right, the consequences could be very profound, and it is important that we bear that in mind. The Bill does not cover important issues such as bank liquidity and capital, the appointment and qualification of directors, risk committees and so on, but they will have to be considered fairly soon. Therefore, to a certain extent this Banking Bill is just the first chapter of a continuing work in progress that we will have to keep looking at over the next few months. However, because there is a sunset clause in the Banking (Special Provisions) Act 2008, we have to put something on the stocks and the Bill can do that. Inevitably, there are still some concerns about exactly how the provisions will work, and the hon. Member for Fareham (Mr. Hoban) has outlined them. We must hope that many of the provisions will not actually be required. If they are, we could be in a lot more difficulty. The Bill is a bit like bolting the stable door after the horse has gone, but it is extremely important nevertheless that it is on the stocks, although if we have to use some of its provisions we shall be looking at some stark situations. We debated the amount for the Financial Services Compensation Fund in Committee and there was some disagreement about whether there should be pre-funding, which is, rightly, not on the agenda at present—clearly, the banks need all the capital they can get. One element that we did not much explore was public opinion. We have to recognise that public opinion is not particularly disposed to the provision of significantly more bail-out money. Although there are some objections to pre-funding, and even about its practicality, the industry has to realise that the idea that it can regularly come back for public bail-outs at much cost will not be sympathetically considered. The Bill sets out protection for depositors, which is important. That security, with timely payouts, is right. It was a great shame that the vast majority of the depositors in the Northern Rock queues were already protected under the deposit fund so they did not actually need to worry. They did not know that, because the fund was not particularly well known or advertised, so we need to do some real education following the Bill to make depositors aware of their protections and of what they can expect to happen. We need to give them confidence, so that if there are some ripples they will have a clearer understanding that they are protected, and that they do not have to whiz round suddenly and take out a few thousand pounds of their hard-earned savings. Banks are undoubtedly one of the most capital-hungry businesses—they are always seeking capital. I have concerns that the provisions may set up some hurdles to the capital-raising exercises that will be important. Even if there are no hurdles, the process will be much more expensive than in the past, which will have an effect on the cost of money generally. We need to recognise that there will be genuine costs if banks are unable to amass or attract the capital they will need both for their own stability and also to operate effectively for themselves and for the economy. Mention has been made of the significant powers that have been given to the FSA and the Treasury, and there are inevitably concerns about them. The Minister has given us some reassurance, at least in respect of the Treasury powers, which is helpful, although there will always be concern about whether the FSA will use its triggers appropriately. We shall have to see. Overall, the situation is satisfactory. The thresholds for the safeguards may be a little low, but all such assessments are subjective, so it is difficult to prove one thing or the other. Our debates on Report were truncated because of the need to prorogue. If we had had the full time, we might have reached the amendment that my hon. Friends and I tabled to deal with the necessity for a sunset clause. Just as the Banking (Special Provisions) Act was sunsetted, we shall need to revisit some of the Banking Bill's provisions in more peaceful times, given that we have been considering it during a crisis-type situation. I hope that at some stage the Government will give our proposal some thought. I thank the Minister and other members of the Committee. The Minister was courteous and good humoured in sometimes difficult circumstances. Overall, we support the Bill. We hope that it will be further scrutinised in the other place and that it reaches the statute book before the previous measure expires.