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Banking Bill

I am grateful to the noble Baroness for welcoming the fact that we have moved on to the next part of the Bill. At one stage, I began to think that we might not make that this evening. I am pleased to reply to her amendment. Clause 94 sets out the powers of the court in relation to the submission of such an application, including the grounds on which the court may make a bank insolvency order. In keeping with the UK’s existing insolvency legislation, an application for a bank insolvency order may be made where a bank is insolvent or where winding up its affairs would be in the public interest or fair. The noble Baroness asked me about the meaning of the word ““fair”” in this context. We assume that it has the same legal meaning as the phrase ““just and equitable””, which is used in insolvency legislation. In all the circumstances, it will then fall to the court to decide whether it is appropriate to make a bank insolvency order. Under Section 367 of the Financial Services and Markets Act 2000, the FSA may present a petition to wind up a bank and the court may make such an order if it is satisfied that either the bank is insolvent or that winding up would be just and equitable. It should also be noted that, under Section 359 of that Act, the FSA may apply to the court for the making of an administration order on the grounds that a company is or is likely to become unable to pay its debts. In many respects, Clauses 93 and 94 therefore preserve the current insolvency framework, with the addition that, given the important role of the Bank of England in the special resolution regime, the Bank may apply for winding up on the same grounds as the FSA. As I see it, the noble Baroness’s amendments would diverge from the current position under insolvency legislation and the Financial Services and Markets Act and would mean that a bank could not be wound up on just and equitable grounds unless it was also insolvent. Similarly, the court would be able to make a bank insolvency order only where a bank was insolvent if it also considered that winding up would be fair. A key intention behind the bank insolvency procedure, which has received wide support among stakeholders, is to adhere as far as possible to existing insolvency legislation. We seek to maintain the existing grounds on which a bank may be put into insolvency; that is, an order may be sought and made on the grounds of insolvency or on the grounds that winding up would be just and equitable. I am sure that the Committee will agree that it would not be desirable to have an insolvency regime for banks that was more restrictive than that for companies generally, given the important public policy interest in protecting depositors and preserving financial stability. The only real change is the addition of the Bank of England into the framework. Otherwise, we are preserving the existing insolvency regime. That is the basis on which we hope the noble Baroness will feel able confidently to withdraw her amendment.