---

Banking Bill

Clause 20: Directors Amendment 37 37: Clause 20, page 9, line 33, at end insert— ““( ) No action by the Bank of England or the Treasury under subsection (1) or (2) shall have the effect of removing or modifying existing contractual rights of directors.”” Amendment 37 adds a new subsection to Clause 20, which deals with directors. I can completely see why Clause 20 is thought to be necessary. It will save a lot of fuss and bother if directors of a bank which is dealt with by the Bank of England by way of a transfer to a private sector purchaser or a bridge bank, or by the Treasury taking it into temporary public ownership, can be got rid of or their terms altered by one simple instrument. My amendment is designed to limit the impact of such changes. It states that an action by the Bank or the Treasury under the clause does not remove or modify existing rights. It may be easiest if I pose some questions to the Minister to see whether my amendment is necessary. What happens if the Bank of England or the Treasury decides to remove some bank directors using Clause 20? Are those directors entitled to make claims against the bank for breach of contract, including any early termination provisions included in those contracts? What happens if the Bank of England or the Treasury decides to change the conditions of a bank director, so that he is paid less or loses an entitlement to a bonus? Would the director still be entitled to pursue a constructive dismissal case in appropriate instances and, if he proved his case, could he be awarded damages? Could bonuses that have been earned in accordance with existing contracts be removed before payment without any right of action against the bank? I am aware of the public anger directed towards banks as a result of the credit crunch. Much of that anger is justifiable, but public anger should not be allowed to affect legal rights. In many instances, agreements will have been reached with directors—we have seen instances of that in recent times—but that will not always be the case, especially if one or more directors is aggrieved by what they perceive to be premature or unnecessary action by the tripartite authorities. In addition, if the clause could overrule existing contractual rights, there is the little matter of European law and the Human Rights Act, which does not allow rights to be taken away just like that. In that context, I note that the noble Lord, Lord Myners, has signed the customary human rights declaration for the Bill. I have put some specific questions to the Minister to try to discover how Clause 20 interacts with pre-existing rights. On that basis, I beg to move.