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Banking Bill

I am grateful to the noble Baroness for initiating this debate if it gives me a chance to recover from the past sins of omission that she suggested were committed from the Treasury Bench earlier in the Bill. The intention of the clause is to allow the FSCS to obtain, in a timely fashion, the information it needs to ensure that compensation can be paid out swiftly. The noble Baroness asked whether the clause was directed towards swift payment, which is of course an important part of the thinking behind it. We need to be able to pay out swiftly and accurately to eligible claimants in the event of the failure of any institution. I am sure that the whole Committee shares in that objective. The first subsection allows the FSA to make rules allowing it to obtain information that will assist the FSCS in carrying out its work, particularly preparing for a possible need to pay compensation even when no default is imminent. It allows the FSA to use its existing powers to require individual firms to provide information that would be of use to the FSCS. There is nothing exceptionable about that. It is an even clearer illustration of the concern over payouts for depositors. The provisions will also enable the FSCS to undertake contingency planning and risk assessments in relation to the ability of firms to pay out in future, should it be necessary. This is an obvious, sensible contingency exercise for the Financial Services Compensation Scheme, and will also mean that requests for information from the FSA in relation to any such payout will not automatically be taken as a signal that the firm in question is in difficulty. That is important. We do not want the powers to be exercised and the search for information to take place only when crisis potentially looms. Otherwise, every search for information will cause anxiety about the difficulties of the institutions concerned. We are trying to regularise this for the needs of any Financial Services Compensation Scheme payout. The remaining subsections allow the FSCS to obtain information directly from authorised persons or certain other persons from the time that the authorised person could be declared in default for the purposes of the scheme. They allow the FSCS to obtain information from a bank which is subject to the special resolution regime—by which time, of course, we will have got into difficult circumstances. This is to enable the calculation of the maximum amount that the FSCS would be required to contribute to the costs of the special resolution regime. That, as all sides of the Committee will appreciate, is one of the legislative changes needed to make depositor payout more effective. The provisions in the clause are a fundamental part of the authorities’ work to speed up the payment of compensation to depositors by ensuring that the FSCS has the necessary information to make preparations for payout. I am sure that the Committee agrees with those objectives. We want to ensure that information can be collected by the compensation scheme before the bank becomes insolvent. The current position is that the FSCS can get information after the bank has gone into insolvency. By definition, that involves delay in the scheme’s response to real needs. I agree with the noble Baroness on continuity and service through the special resolution regime. Clearly that is preferable, but it is necessary to have a fast payout as a backstop should the other resolution options prove unworkable. We have debated these at some length in Committee and they have problems attendant upon them. It would do nothing for consumer confidence if a fast payout proved unavailable when the institution was in difficulty. The FSA is consulting on the single customer view; the noble Baroness is concerned about the costs that may be borne by the individual institution. The clause is directed towards faster payout but the FSA can require the single customer view under existing powers. Therefore, we are not adding to those in this clause. The objectives of the clause are clear. I understand the noble Baroness’s anxieties about the element of costs involved. The authorities will direct their search for information towards the objective of a faster resolution of a situation when things have gone wrong. That is an important priority for the Government and is why the clause needs to remain part of the Bill.