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Banking Bill

The Minister in the other place might have run out of steam, but quite clearly the noble Baroness has not. Let me summarise briefly the purpose of the bank resolution fund. It is to provide either the failing bank or its shareholders, depending on the nature of the transfer power exercised, with a contingent economic interest in the net proceeds of the resolution. The fund is thus a proxy for compensation. A resolution fund order can provide for which parties will be entitled to a share of the proceeds, and how such proceeds will be calculated. Importantly, the proceeds may be calculated net of any resolution costs. Those costs could, for example, include any financial assistance including loans or guarantees provided from, or backed by, public funds or any other administrative expense incurred by the authorities during the course of the resolution. The provision is necessary to ensure the taxpayer receives a suitable return for public funds that have been invested, or put at risk in the bank, during that resolution. I understand that the purpose of Amendment 99 is to remove the ability of the Treasury to confer, in a bank resolution fund order, a discretionary function on a Minister, the Treasury, the Bank of England or any other specified person. In summary, I do not agree with the amendment, as it is essential that the Government should have the ability to confer functions on persons to ensure that the appropriate level of compensation is paid to appropriate persons. The bank resolution fund order may specify a role for a number of persons: an independent valuer, an independent auditor of the resolution costs, or a monitor of the fees could, for example, be appointed to perform certain roles. Therefore, instead of listing all persons that may have discretionary functions conferred on them, subsection (4)(d) allows the Treasury to, "““confer a discretionary function on … any other specified person””," in the bank resolution fund order. I recognise that this discretion does not appear in the clauses on the compensation schemes or third-party compensation schemes order—the noble Baroness is quite correct in that observation. This is because the bank resolution fund is a new device, specific to this Bill. It is possible, therefore, that we find that various individuals will be required to perform ad hoc functions. Clearly, those cannot all be specified in advance in the Bill. I hope my explanation of the importance of this power reassures the Committee and I therefore beg that this amendment be withdrawn.