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Banking Bill

I shall speak also to the Question whether Clause 167 shall stand part of the Bill, and I shall start with the clause itself. I hope that noble Lords will not have mistaken my earlier amendments, which were designed to improve Clause 167, as approval of the clause. We on these Benches have grave misgivings about pre-funding the Financial Services Compensation Scheme. We agree with the British Bankers’ Association that the case has not been made for pre-funding. In the US, the Federal Deposit Insurance Corporation operates in a very different banking market, with many small regional banks for which failure is not an uncommon occurrence. Banking in the UK is very much more concentrated. The size of UK banks has an implication for the size of the contingency fund. If it were funded at around £15 billion, as I suggested in my earlier amendment and as I understand has been suggested by those who have been proposing contingency funding, that would not come anywhere near the amounts that would have been required, for example, to pay out Northern Rock’s depositors, had that been necessary. A Barclays or an HSBC does not even bear thinking about in relation to contingency funding. If the contingency funding is perceived to be puny against the large banks, that will not do anything for confidence in the banking system. So we are perplexed as to why the Government have set upon this path. The regulatory impact assessment calculated the cost to the banks of between £100 million and £200 million, but the banks believe this to be a gross understatement. The amount is considerably below the real opportunity cost to them of retaining the funds within their businesses until they are needed. I do not believe that it is the right time to introduce legislation for pre-funding, and I do not believe that even the Government would claim that the issues have been fully thought through yet. I know that the Minister will say that it is only a power and that there will be consultation followed by an opportunity for Parliament to approve the detailed regulations, but he knows full well that the affirmative procedure falls far short of the scrutiny that a Bill receives. As an order is unamendable, Parliament has only the nuclear option of refusing to pass it. There cannot be a timing argument. It could never be the case that contingency funding was urgently required. If and when a case was properly made, the Government could take primary legislation in the ordinary way and argue their case to Parliament at that time. We have tabled Amendment 160 as an alternative to deleting Clause 167; it requires the Government to table a report before Parliament before any regulations under proposed new Section 214A of the Financial Services and Markets Act 2000 are laid. The report should deal with the impact on the persons who will be required to contribute and whether the contingency funding is the best way to achieve the special resolution regime objectives. That will allow Parliament to initiate a debate on the issues and not simply be presented with a government fait accompli in the form of a statutory instrument. For the reasons I have given, I believe that it is premature to take a power to set up contingency funding. I shall listen carefully to the Minster’s arguments, but even if he convinces me that it is right for the Bill to contain the power, I am sure that it would be equally right for the Bill to contain the additional safeguards in terms of parliamentary scrutiny that I have set out in Amendment 160. I beg to move.