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Banking Bill

Amendment No. 29 would require the Treasury to lay a report before Parliament addressing various aspects of the use of the stabilisation options. While I agree that it is important to provide information to Parliament and public over such actions, let me set out why I believe that the amendment is not necessary. Following the recent resolutions under the Banking (Special Provisions) Act, the Chancellor made a Statement to Parliament on his actions. It included the reason for the action and the steps taken to resolve the failing banks. These statements were also accompanied by a press notice from the Treasury website. I would be the first to acknowledge that they did not go as far as the noble Viscount, Lord Eccles, would have wished. Nevertheless, I think that they provided good and proper explanation as to why actions have been taken. Therefore, I believe that in each case to date the authorities have demonstrated the appropriate level of transparency, and that Parliament has had sufficient power to call the authorities to account for their actions. We touched on that issue earlier in Committee. However, I accept that some further reassurance is needed that this and future Administrations will continue to provide sufficient information to Parliament on their actions. For that reason, the code of practice will place an obligation on the Treasury or the Bank of England to provide a public statement on why the specific conditions for the use of stabilisation options were determined to have been met. As noble Lords will know, the authorities must have regard to the code of practice. This approach is appropriate as it allows the lead authority in any resolution to provide a public explanation of its actions. The code notes, as does the proposed new clause in Amendment 29, that it will not be possible to divulge certain information—for example, the release of information that could threaten stability or confidence in the banking system. It again demonstrates our commitment to transparency on these matters. This is all in addition to the fact that Parliament can call a debate or request information on any action of the authorities under the SRR at any time. Therefore, I believe that there are sufficient mechanisms to call Ministers and the other authorities to account over their actions. The proposed new clause makes two specific proposals with regard to the action of the FSA. I should like to address these points directly. The proposed new clause requires that any report should include, in particular, information from the FSA on how they concluded that conditions in Clause 7 were met and what regulatory actions were taken to avoid the use of the SRR. Again, I do not believe that such a report should be needed. In addition to the statements made by the Chancellor, the FSA has published information on its actions with regard to recent resolution when it has used the variation of permission powers under the Financial Services and Markets Act 2000. For example, the FSA has published statements on its actions with regard to Heritable and London Scottish. In these statements, the FSA provided detail of the powers used under the FSMA and its reasons for action. This shows that the FSA produces relevant information on the use of its regulatory powers, and, of course, it can be called to the Treasury Select Committee at any time to explain its actions further, should that be necessary. Further, under paragraph 10(1) of Schedule 1 to the FSMA, the FSA is required to produce an annual report, which the Treasury can direct to include certain information should it think that is necessary. Again, I believe that there are already a number of mechanisms for the FSA to produce information on the use of its powers and for Parliament to question and to call to account the actions taken. Before concluding, I should like to point out that I am not comfortable with one phrase in the new clause. The new clause, if accepted, would require any report to include information on action taken by the FSA to avoid the use of the SRR. Let me be clear, the FSA takes action to meet its requirements under the Financial Services and Markets Act 2000 and the objectives contained within that Act. It does not take action to avoid the use of powers under another piece of legislation, and it would therefore not be appropriate for the FSA to provide information in such a manner. Further, this phrase focuses to an inappropriate degree on the role of the regulator rather than that of the bank itself. As I said earlier, if a bank fails, the primary responsibility must lie with the bank’s management, not the authorities, a point with which I think the noble Lord, Lord Newby, is in considerable agreement. I understand that information provided by the authorities to Parliament would naturally focus on the conduct of the authorities themselves. If accepted, however, the proposed new clause would convey the wrong impression about the role of the FSA and ignore the role of the failing bank itself. For this reason, with the greatest respect, I cannot agree with the amendment. I hope that I have provided reassurances to the Committee that Parliament has many ways to call the authorities to account, and that recent actions by the Chancellor and the FSA have shown their willingness to share information on these important matters. I also hope that I have demonstrated my concerns with one of the provisions of the proposed new clause and its treatment of the role of the FSA prior to the SRR. For this reason, I urge the noble Baroness to withdraw the amendment.