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Banking Bill

Before seeking to achieve certainty and the removal of a degree of flexibility with this amendment, I want to draw attention to the complexity of partial transfers, which is the matter under consideration. Orders as envisaged by Clause 47 are needed only because there is the possibility of partial transfers. Paragraph 1.14 of the special resolution regime is relevant to assessing whether you can make a general order. It says that the property transfer powers provide the authorities with the flexibility to split a bank. This option would most likely be used for the purposes of transferring the good part of a failing bank’s business into a new company, either as private sector purchaser or a bridge bank. In either case a residual bank, a ““resco””, would be left behind, containing any untransferred assets and liabilities. The following paragraph then quotes Bradford & Bingley, but I do not think paragraph 1.14 applies to that company. The case of Bradford & Bingley was much more like a temporary transfer into public ownership, not a transfer into a bridge bank. There was a private sector purchaser that purchased the good assets while the bad assets, or the less good assets, were brought into public ownership, whereas in the case of a bridge bank my understanding is that it would be the other way around—that is to say, the good assets would be put into the bridge bank while the bad assets, or the less good assets, would be left behind. The justification for turning the policy around from the one that was pursued with Bradford & Bingley is in the following paragraph: it would be less expensive for the funders of the resolution, the taxpayer, and, under proposals in the Bill, the FSCS. In considering orders under this clause, it is important to understand whether the Government are committed to this different policy—indeed, as I see it, this reverse of the Bradford & Bingley policy—of taking the good assets into a bridge bank and leaving the bad assets in the existing, now residual, bank. That leads to a second question, as it leaves the shareholders with the task of dealing with the bad assets as there is no transfer of shares into a bridge bank, while the bridge bank, in the ownership of the Bank of England, has the good assets. In my submission, that brings greater complexity, and it is by no means certain that the costs will be lower; in fact, it is highly likely that the costs might eventually turn out to be higher. If and when you split a bank, although the Minister sought to reassure me earlier, I do not see how you can ever tell whether the shareholders in the residual bank will be better or worse off than they would have been had the bank been left whole. I do not understand how anyone could be sure what the outcome would have been if the bank had not been split, and therefore how you know whether people are worse off as a result. I would like to be assured that the Bank of England has argued for this approach of taking the good assets into a bridge bank and leaving the less good ones behind. If it has so argued, what arguments has it put forward? I cannot believe that these would have rested on the expression ““less expensive””. If it is decided to proceed with partial transfers, is there anything which could be called ““general”” about the order? I have sought to leave out the words which envisage the possibility of a general instrument. Indeed, the draft instrument, which is in the papers before us, looks quite specific. It will be an additional reassurance in the difficult area of legal certainty if the orders under partial transfer—if indeed they go ahead—are made specific and not left open to the possibility of also being general. I beg to move.