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Banking Bill

We are making phenomenal progress. We have now reached Part 4, which concerns the Financial Services Compensation Scheme. We have several topics to debate, although perhaps not all this evening. Amendment 158 would insert a new clause before Clause 167. The new clause would set out in statute what compensation should be paid to depositors under the deposit protection scheme. There are two elements to the proposed new clause. First, it sets out that the compensation limit is to be increased to £50,000 and that the amount may be amended by the Treasury by order. At present, the power to set the compensation limit is set by the FSA. During autumn 2007, the FSA was slow to respond to calls, notably from my party, to increase the compensation limit to £50,000. There are of course arguments for increasing it even further, given that there is a substantial minority of private depositors who account for a disproportionate amount of total deposits, although I will stick with the current limit of £50,000, on which there is some agreement. The Minister may say that the FSA can do it, so why should we put it in the Bill? I have a simple answer to that. The decision to increase the limit is as much political as technical, as the events of the past 18 months have shown. A political decision should be made by the Government and put to Parliament for approval. It was wrong that Parliament was completely on the sidelines in that debate and that the Government were not in the driving seat, if I may mix my metaphors. Although the FSA can currently do it, that is the wrong location for the power, as recent history has shown. The second and important element of my amendment relates to deposits being calculated on a bank brand basis. At present, the Financial Services Compensation Scheme relates only to legal entities, so if a depositor holds a deposit in more than one bank in a group, his compensation limit is restricted to the one limit of £50,000. A depositor who investigates the legal ownership of banks can work out that he needs to spread his money around to avoid legal groupings, but many investors are not that sophisticated. Recent events, such as Lloyds TSB and HBOS, Bradford & Bingley and Abbey/Santander have restricted the number of legal groups, although not the number of brands. Consumer groups, led by Citizens Advice and Which?, are firm in their view that the scheme should operate on a brand basis. I hope that the Minister can agree. I should say that my amendment would probably need further refinement to be clear what is meant by a ““bank brand””, so for the purposes of today's debate my amendment is probing, but I hope that the Minister will respond positively so that we can at least deal with this aspect when we come back on Report. I beg to move.