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Banking Bill

An important part of this revolves around the crucial importance to the Bill of objective 1, as defined in the clause. At present the bank insolvency procedure sets out a two-stage liquidation committee process. Following the making of a bank insolvency order, representatives from the Bank of England, the FSA and the FSCS must form an initial liquidation committee. This committee will oversee the bank liquidator and assist in achieving objective 1 in Clause 96(2), which is to ensure either that the accounts of eligible depositors are transferred to another financial institution or that prompt compensation payments are made to those depositors. A key feature of the insolvency procedure is the emphasis that we are placing on dealing with eligible depositors quickly, allowing an initial liquidation committee to be formed immediately without the need for a creditors’ meeting. This is crucial in achieving an early realisation of objective 1. Once objective 1 has been achieved, it is appropriate that, as in ordinary liquidation, it should fall to creditors to decide whether to form a liquidation committee. That is why Clause 97, in effect, provides for the initial liquidation committee to be disbanded once a full payment resolution has been passed. We move on to a second phase after objective 1 has been achieved. We consider that it would be inappropriate for a meeting of creditors to be called at an earlier stage to form a liquidation committee as the amendments suggest. This would cause procedural delays when the whole emphasis is on speed; it would take time to identify and notify creditors and to make appropriate meeting arrangements. We fear that this might undermine the achievement of objective 1, on which we place, as I have emphasised, such significance. Amendment 133 would work with Amendments 132 and 134 to allow for a liquidation committee to be made up of between three and five members, whereas the current wording of the clause refers to three or five. We are worried about four members in case there is an equal split in opinion. We have drafted the Bill deliberately to provide for an odd number of creditors on the liquidation committee—not in order to disadvantage creditors but to facilitate decision-making, as an odd number will avoid a 50:50 split and is more likely to avoid deadlock. That is the thinking behind that part of the clause. We are satisfied that Clause 97 as it stands strikes the right balance between protecting the interests of eligible depositors and those of creditors generally. It also provides for the necessary transition at an appropriate time between the initial liquidation committee and any subsequent committee formed by creditors. The clause may appear complicated in parts—it certainly does to me, although it is probably less complicated for the noble Baroness, who is so well versed in these matters—but it is necessary for us to prescribe exactly what should happen at an appropriate time in the unique circumstances of creditors forming a liquidation committee in a bank insolvency. That is why the clause is drafted as it is and why I hope that the noble Baroness will withdraw her amendment. The noble Baroness asked me about the FSCS resigning. The FSCS member may not be the original person nominated under Clause 97(2). Clause 98(6) is the relevant provision: "““A nominating body … may replace its nominee at any time””." It is therefore proper for Clause 97(6)(d) to refer to the FSCS, which might be doing just that. I hope that the noble Baroness feels reassured by that response.