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Banking Bill

Amendment 11 11: Clause 4, page 3, line 21, at end insert— ““( ) Objective 3A is to protect and safeguard the value of the enterprise.”” The amendment would add a further objective to be taken into account when contemplating using the special resolution regime: to protect and safeguard the value of the enterprise. This would in no way undermine or reduce the significance of the objectives already in the Bill, but it is important that we do not lose sight of those other stakeholders affected when the special resolution regime is brought to bear: the shareholders and the creditors. We will come to the issue of creditors on Amendment 13 tabled by the noble Baroness, Lady Noakes, but my concern with this amendment is for the banks’ shareholders. Of everybody involved in this saga, it is, in a way, easy to have little sympathy for the shareholders. One is necessarily worried about the overall banking system, the depositors and their ability to continue their ordinary day-to-day activities, as we have just discussed—it is crucial that the banks continue in operation—but the position of the shareholders is also important. In considering this, it is important to think about who the shareholders are. In much popular discussion of shareholders there is a view that they are fat cats who have nothing better to do than speculate left, right and centre. However, as we know, shareholders, not least in banks, and very often pension funds, are individuals who see a low-risk investment in a bank—as they see it—as part of their individual pension pot. Therefore, if you look at in those terms, it is very much in the public interest as well as that of the individuals concerned that the bank’s assets are maintained as far as possible. It may seem a bit perverse to talk about preserving the value of a bank which by definition is in difficulties and without this special resolution procedure is likely to go bust anyway. That is the only basis on which the special resolution regime is brought into action in the first place. However, the extent to which there is a residual value in the bank at the point when it goes into the special resolution regime can vary dramatically depending on the point at which action is taken by the authorities to put it in the special resolution regime. The obvious example is Northern Rock. If the Bank had facilitated the transfer of Northern Rock to Lloyds TSB in late August, early September 2007, there would have been a residual value for the shareholders. Now there is none. We are not talking about a theoretical issue here; it is a matter of practical significance. Including this amendment in the Bill would put pressure on the authorities to move quickly when they fear that the SRR may be needed in order to protect these assets. At the moment, the authorities want to act before the bank goes bust and before the queues start, but there is no particular pressure on them to move quickly and to have any regard at all to shareholder interests. That is the purpose of the amendment. I hope very much that the Minister will feel able to accept it.