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Banking Bill

I welcome my noble friend’s support for the central thrust of the Bill and I note the measured and constructive way in which he proposes the amendment. To the extent that we will ever have to use the special resolution powers that the Bill creates, I sincerely hope that it will be in the case of the smallest deposit-taking institutions rather than the major banks. It would be wrong to assume that, because of the circumstances in which we now find ourselves, this legislation is framed solely to meet the needs of very large banks. That is where the competition issue arises, but it would be wrong to assume that every use of the special resolution powers would raise the type of competition issue to which my noble friend referred in his comments in support of this amendment. That leads me to find myself in a rather similar position to that of the noble Lord, Lord Northbrook, which is to say that, where special resolution is under contemplation for a very large institution, this issue of competition is just one of many factors that would have a bearing. The amendment is designed to make provision for a situation where the exercise of one of the stabilisation options results in a company with a dominant market share. In such circumstances, as defined in the amendment, two provisions would come into force. The first provision is that, if the company is still a dominant market player, as defined in the proposed new clause, after 18 months, the case must be referred to the Office of Fair Trading. It is important to note that the OFT and the Competition Commission already have functions that can address competition issues. For example, they have an active role under Part 4 of the Enterprise Act 2002 in investigating markets that do not appear to be meeting the needs of consumers. This can have a variety of outcomes, including the OFT making recommendations to the Government or referring the market to the Competition Commission for a more detailed investigation. Therefore, we can be satisfied that the competition authorities will continue to keep the relevant markets under review in order to protect the interests of UK consumers and the British economy. An example of another safeguard can be provided. Part 6 of the Enterprise Act provides cartel offences, such as those relating to price fixing. Further to this, a private sector purchase, a bridge bank and a bank in temporary public ownership will continue to be regulated by the FSA in the same manner as other financial service providers are. For this reason, while respecting my noble friend’s intention, I do not believe that it is necessary for the Bill to include provisions on referrals to the OFT. Furthermore, I am not convinced that this Bill is the appropriate place to provide legislation on such matters. It is for the Competition Act, the Enterprise Act and related legislation to cover, as they already do, the remit and powers of the OFT and the Competition Commission. On that basis, I do not, with all respect to my noble friend, agree with the first part of the amendment. I turn to the second part of the amendment, which would require certain panels to be set up to advise the dominant company following the exercise of a stabilisation power on matters important to consumers and small business. First, I agree with the broad thrust behind that part of the amendment. It is of course right that the policies of private sector companies should be informed by the needs of their consumers, including small businesses and individuals. However, I do not believe—here I find myself on common ground with the noble Baroness, Lady Noakes—that it is the place of legislation to enforce on companies a structure such as the panels proposed in the amendment. The noble Lord, Lord Newby, suggested that we should draw the comments of my noble friend Lord Whitty and the thrust of the amendment to the attention of the chairmen of Lloyds Banking Group and the Royal Bank of Scotland. That I will definitely do, and I will copy my letter to my noble friend and to the noble Lord, Lord Newby, and ensure that they also have copies of their reply. I absolutely find myself at one with the central thrust of the argument that successful organisations are aware of and responsive to the needs of their customers. One could argue that some of the failings that our banks have experienced have been because they became too distant and remote from their customers and too engaged in financial alchemy, as opposed to meeting consumer needs. I ask my noble friend to withdraw his amendment. I hope that he will take considerable comfort from the views expressed on all sides of the Committee about the importance of the consumer. I also pay great tribute to his great commitment to consumers through his energetic work as chair of Consumer Focus.