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Banking Bill

I am grateful to the noble Baroness for the way in which she introduced her amendment, and for the fact that she accepts that the power given to the Bank of England is important. The Bank will make a direction to the operator of an inter-bank payment system only where it is necessary in the interests of protecting the stability of or confidence in the UK financial system, or to protect business or other interests in the UK. I would have been shocked if the concept of the power had been challenged in a direct way and I am relieved that all sides of the Committee endorse that position. In undertaking its formal oversight role in accordance with this part of the Bill, the Bank will work collaboratively with the operators of payment systems. It will communicate regularly in order to ensure that recognised payment systems are being operated in a way that minimises deficiencies and the likelihood of disruptions to inter-bank payment systems that could give rise to financial instability or other concerns. The Bank will give directions only in the event that other informal and formal regulatory tools are ineffective or where action is urgent because it is necessary to avert a particular risk. As in the case of the intervention powers of other authorities—for example, the FSA’s powers to give directions to the managers of authorised unit trust schemes—it is inappropriate to exempt the operators from liability in damages as a result of those directions. The payment system in question will have been recognised as having systemic or system-wide importance, including for business or other interests across the UK. Therefore, any directions with which the Bank may ask a system to comply will ultimately be preventive in order to seek to ensure that the system is not running unnecessary risks that could threaten financial stability. I hope that I have established the significant purpose of this clause and indicated how the Bank will operate its power under this clause in consultation and fully in accord with the seriousness of the potential difficulty that might arise—namely the Bank’s enhanced role in protecting the stability of or confidence in the UK financial system, or to protect our business or other interests. I hope the noble Baroness feels that I have justified the clause enough to enable her to withdraw the amendment.