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Banking Bill

Not for the first time the noble Viscount, Lord Eccles, has brought us down with a bump to the reality of the situation. In our consideration of the legislation there is a danger that we might forget the dire, crisis circumstances we are seeking to tackle. We need to consider carefully the nature of the problem facing the authorities. I understand the concerns expressed by those noble Lords who supported the amendment, but I do not think that it is necessary. The specific conditions for the temporary public ownership stabilisation option set out a different test which must be met, as compared to those for transfer to a private sector purchaser or bridge bank. Clause 9 is very different from Clause 8 and envisages very different circumstances. The Bank of England can use either the private sector purchaser or the bridge bank stabilisation options, where it is satisfied that this is necessary to protect depositors, financial stability or confidence in the banking system. The Treasury can take a bank into temporary public ownership only if it believes that it is necessary to resolve or reduce a serious threat to financial stability or where it has provided financial assistance to the bank for the purpose of resolving or reducing a serious threat to financial stability. These are different and more restrictive conditions than those faced by the Bank of England. For example, the Bank of England could transfer all or part of a bank to a private sector purchaser if it believed that it was necessary to protect the bank’s depositors, even if it believed that the failure was not a direct risk to financial stability. The Treasury cannot take a failing bank into temporary public ownership for such a reason. The purpose behind the amendment is already met in the Bill. The code of practice is helpful in this regard, as it provides additional information on the considerations that take place in choosing between the tools that are employed. As was discussed earlier at some length, we have consulted on a draft code of practice. We therefore know the framework within which the authorities will operate. The noble Lord, Lord Higgins, asked whether temporary public ownership occurred only after public financial assistance. It is not the case that temporary public ownership can be used only where the Treasury has provided public funds. That is one of the conditions, but not the only one. Conditions A and B are alternatives. I hope that I have established that we have thought through the issues. Very different circumstances obtain when the Treasury moves into action from those for the Bank of England. That is clearly spelt out. Clause 9 is very different from Clause 8. I hope that the noble Baroness will feel that we have in place a position to which her amendment would not add anything of significance. I hope that she will feel able to withdraw the amendment.