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Banking Bill

I shall speak also to Amendments 177 and 178. Amendment 176 would add three new subsections to new Section 2A of the Bank of England Act 1998, with the aim of providing the Bank of England with clarity about its financial stability objective. My three amendments draw on the mechanism used by the Government to inform the Bank of England what price stability is to be taken to be in relation to the monetary policy objective. This is set out in Section 12 of the Bank of England Act 1998. The main difference is that the price stability objective is set annually. I have drafted the amendment so that the financial stability objective stays in place until formally changed. It would be an open and transparent way forward, and avoid ambiguity. It is important because when the Bank articulated its view of financial stability in another place, both in evidence to the Treasury Select Committee and the Public Bill Committee on this Bill, it gave a narrower definition of financial stability than is contained in the draft code of practice. The Bank’s definition was process-driven and focused on the payments systems. Others who gave evidence to those committees gave a broader definition, and the Government use a broader definition in the code of practice. If the Treasury set out what it meant, it would be clear that the Bank was working to the right objectives, and not some narrower ones. That would be preferable to the proposal in new Section 2A(2) that the court sets the Bank’s strategy in relation to its financial stability objective in consultation with the Treasury. Amendment 177 would delete the need to consult the Treasury as to the Bank’s strategy for financial stability, which would be consistent with the way that the Bank works in relation to all its other functions. There is no mention of the Treasury in any aspects of the Bank’s strategy and objectives set out in Section 2 of the 1998 Act. Finally, Amendment 178 would provide an alternative to the Treasury specifying what it means by financial stability and require the Bank to use whatever definition is in the code of practice. As I have mentioned, the definition given by the Bank of England in another place was narrower than that in the draft code. If the Government cannot accept the letter-writing solution specific to the Bank’s objective proposed in my amendments, I suggest that they consider Amendment 178, which at least provides a cross-reference to the code of practice. I beg to move.