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Banking Bill

The Government fully accept that it is crucial for the partial transfer safeguards to work effectively. That is the burden of this amendment, which calls for an annual report to assess their efficacy. We recognise that partial transfers might be invasive, and have made it a matter of the utmost priority that effective and appropriate safeguards are indeed in place. I hope that the extensive consultation carried out by the Government demonstrates our commitment to working with the industry to get those safeguards right—a key reason for establishing the expert liaison group. The Committee will know that the group is to be put on a statutory footing; the Government will, therefore, be bound to have regard to its recommendations. Clause 10, which we considered some time ago, thus provides a mechanism for the Government to receive not annual but regular and expert feedback on what we should consider regarding these issues. Regular feedback is important, but we contend that it will be necessary to update the safeguards over time, with the feedback being crucial in indicating to the Government why they should be changed. That is the basis of the secondary legislation we are bringing forward under the Bill. The Government consider it desirable to retain flexibility to adjust and refine the safeguards in the light of experience, particularly in the context of set-off and netting, because those arrangements have proved to be highly innovative and a challenging development. In particular, the latter has developed and evolved in a comparatively short time, illustrating that this legislation needs built-in flexibility to cope with a significantly changing environment. Changes to the safeguard may be necessary to ensure that it continues to protect what it was intended to and that innovations do not undermine the policy aims that the special resolution regime is intended to serve. The expert liaison group will continue to advise the Government on the development of secondary legislation related to the partial transfer safeguards, but the Government consider its remit to be wider than that. Clause 10 makes it clear that the group should advise on the secondary legislation in Parts 1 to 3 of the Bill, although, as I made clear in our earlier debate, use of the stabilisation powers and compensation provisions rightly fall outside the group’s remit. It is appropriate that the Government continue to consult with the industry over the broad range of secondary legislation made under the Bill—not just on the safeguards, important as they undoubtedly are given the focus of this amendment. On the amendment itself, the formal reporting requirement is neither desirable nor necessary. What form of assessment may be made, or may be possible, might depend on whether any resolutions are carried out; the authorities have already committed to report on those resolutions in the draft code of practice. I agree with the noble Baroness when she emphasises that reviewing the safeguards is important, but the Government consider that to be done best through the mechanisms that we are putting in place, particularly the group. That is for two key reasons. First, it may be necessary for evaluation and improvement to be undertaken more often than annually. The expert liaison group can meet on a number of occasions during the year, and report to the Government on those matters. Secondly, an assessment by market experts and industry practitioners is important. I note that the noble Baroness shares this view because a requirement for consultation with the expert liaison group forms a crucial part of her amendment. As far as Parliament is concerned, any amendment to the secondary legislation in relation to safeguards will be subject to the draft affirmative procedure. Therefore Parliament will have an opportunity to scrutinise and debate the provisions of the safeguards. I hope the noble Baroness recognises that, through her amendment, she has pressed the Government on the nature of the reporting on these developments, which will take place much more frequently than annually, and that Parliament will also play its part with regard to the orders. Surely that is the basis on which the Government should act on what we propose in the Bill. I hope that the noble Baroness will feel able to withdraw her amendment.