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Banking Bill

The noble Baroness has added yet another talent to the many she has and will thus increase the admiration of the House. We will now be able to discuss betting odds with her, and I am sure that the book she would have run would have been profitable regardless of the outcome of the race. Clause 7 requires two general conditions to be met before the stabilisation powers can be exercised. The purpose of the clause is to make it absolutely clear that the authorities will not, and indeed cannot, use the stabilisation powers until it is clear both that a bank is failing and that voluntary and regulatory action is no longer appropriate to resolve it. To that end, the Bill requires the FSA to be satisfied that two conditions have been met before the stabilisation powers can be exercised. These conditions are that a bank is failing or likely to fail its regulatory threshold conditions as provided under the Financial Services and Markets Act 2000, and that having regard to timing and other relevant circumstances, it is not reasonably likely that, ignoring the stabilisation powers, action will be taken by or in respect of the bank that will enable it to satisfy the threshold conditions. The conditions are designed to ensure that a bank is put into the SRR only when it is appropriate to do so, and I believe that, taken together, these two conditions achieve that, requiring as they do both a decision on the current situation of a bank with regard to quantitative and qualitative conditions, and a further decision that a turnaround is unlikely. However, I should point out that these conditions are designed to ensure that the SRR powers can be exercised before a bank has entered insolvency. One of the reasons for this, as I discussed when debating an earlier amendment, is to preserve whatever residual value there may be in a failing bank. Acting at this stage therefore increases the chance of a private sector solution or a swift resolution through a bridge bank. I hesitate to suggest to the noble Lord, Lord Newby, that there may be an inconsistency in supporting this amendment with his earlier view in connection with enterprise value; that is, the earlier amendment might have tilted one in the direction of holding off an intervention and going into resolution in the hope that this might protect enterprise value, whereas the risk—if there is one—in the wording here is that it may encourage the authorities to move a little earlier. The noble Lord, Lord Higgins, asked about the definition. As the noble Lord, Lord Newby, pointed out, language matters in this respect as it did earlier in connection with our discussion of the term ““temporary””. The noble Lord, Lord Higgins, has reminded me of the importance of what Ministers say in debates in that the courts may come to rely on it in some respects. So with some trepidation I shall say that the authorities, having regard to their experience and their judgment of the circumstances, would reason that the balance of probabilities is that a bank would not be able to satisfy the threshold conditions. This would be a conclusion based on experience and their knowledge of the circumstances. It is a matter of judgment.