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Banking Bill

I shall move Amendment 179 and speak to the other five amendments in this group. In doing so, and in subsequent groups, I am broadly taking the structure of the Financial Stability Committee as the Government have drafted it, but seeking to improve it. However, that is in no sense to say that I have moved from my position on the first group of amendments, which we debated at length. These amendments concern the nature and membership of the Financial Stability Committee. The Bill provides for it to be a sub-committee of the court. We find that concept odd, as the FSC will have functions extending well into the realm of the executive functions of the Bank rather than the court, yet the court will have the responsibility to determine and review the Bank’s strategy on its financial stability objective. Amendment 179 turns the FSC into a committee of the Bank rather than the court, which is how the MPC is constituted. By emphasising the role and responsibility of the Bank, the oversight role of the court is made much clearer. The Bill proposes that the FSC is composed of the governor, two deputy governors and some non-executive members of court. My other amendments deal with two questions: who from the Bank should be on the committee, and should court non-executives or external members be appointed? Look at the composition of the MPC: the Bank’s members are not only the governor and two deputy governors, but its two most senior executives with monetary policy responsibility. My amendment has the effect of replicating that for the Financial Stability Committee. Why have the Government chosen to exclude the senior executives with responsibility for financial stability? Take the case of Mr Paul Tucker, the current executive director with responsibility for markets. He is soon to be a deputy governor, but would it have been realistic to have had a Financial Stability Committee operating without him? What is the relationship between that committee and the Financial Stability Board, which has operated within the Bank for some time? That board has the governor, two deputy governors and the four key executive directors of the Bank. Will the Financial Stability Board be subordinate to the FSC, operate in parallel to it or disappear? This point links to one made earlier: that it is perfectly possible for the Bank of England to create the equivalent of the Financial Stability Committee without legislation. The Bank has had a Financial Stability Board ever since the 1998 Act came into effect. There is no reason at all to create that committee within the Bank. My Amendments 182, 185 and 189 would have the effect of replacing non-executive members of the court with four external members, appointed by the Chancellor of the Exchequer. Importantly, the Chancellor would appoint only those members with the right knowledge and experience, a formulation mirroring how external members of the MPC are appointed. The noble Lord, Lord Turnbull, who is unable to be in his place, made the telling point that trying to seek non-executive members of the Financial Stability Committee from the court meant that those four members would come from an extremely small gene pool of nine independent court members. It is obvious that someone sitting on the Financial Stability Committee needs knowledge and experience of financial stability matters, but neither the 1998 Act nor this Bill make it a requirement for membership of the court that a person has any specific knowledge, or experience of anything. I have no problem with that, as membership of a board is an art, not a science. The overall driver should be the ability to contribute to the full range of issues affecting the Bank. It may unnecessarily narrow the pool of potential members if at any time appointments to the court were driven only by the need to fill a place on the Financial Stability Committee. As I said, nine members of the court and four going on to the FSC start to restrict options. Other detailed points I might pass for the time being, but may raise them depending on what the Minister says. Confusion of roles is implicit in the arrangements for the Financial Stability Committee set out in the Bill. The Select Committee in another place explored these issues and made a number of recommendations, but the government proposals in the Bill still lack clarity. I am sure that the Government need to look at this again. I beg to move.