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Banking Bill

I propose to deal first with the more difficult amendment—Amendment 195, with which we disagree—but hope to give the noble Baroness a better response to Amendment 194. In appointing court members the Government will seek to ensure that the appropriate mix of skills are available to the court as a whole, including the Financial Stability Committee. The process of recruitment, which is already under way, is being run in accordance with the commissioner’s code of practice, regulated by the Commissioner for Public Appointments and overseen by an accredited independent assessor. It is vital in deciding the membership of the Financial Stability Committee to maintain a balance between ensuring that members have relevant expertise and experience of financial markets and the importance of avoiding damaging conflicts of interest, as the noble Baroness emphasised. Under the Bank of England Act 1998, non-executive members of the court can be active participants in the financial markets as long as they declare any possible conflict of interest and absent themselves from any decision that may produce a conflict. It has of course been suggested—the noble Baroness emphasised this—that current market participants should be excluded from membership of the FSC. I can understand the reasoning behind this because the issue of conflict of interest has become sharper. However, the Government consider that members of the FSC need to have more relevant market experience, not less, than current members of the court in order to give effective advice on the Bank’s activities in pursuit of financial stability. If we excluded active market participants from being members of the FSC it would simply unacceptably limit the pool of talent from which we could appoint directors to the court and the FSC. I recognise that this is a matter of balance. I can reassure the Committee that both the Treasury, when appointing members of the court, and the chair of the Court of Directors. when deciding the membership of the Financial Stability Committee, will seek to limit the probability of conflicts of interest as much as possible. It is clearly in no one’s interest if several members of the FSC have repeatedly to absent themselves from vital discussions and cannot vote. I am confident that the chair of the Court of Directors will do whatever he can to avoid this while ensuring that the members of the FSC have sufficient relevant knowledge and experience to support effectively the executive in taking action to protect what we all regard as a very important objective, the UK’s financial stability. I hope that I have explained the reasons why we have decided to impose the same restraints on the members of the Financial Stability Committee as those that exist already for current members of the court. They must declare any direct or indirect interest in any dealing or business which could potentially produce a conflict. If the FSC considers that a conflict of interest could occur, the member involved will have no influence or vote on the matter. I hope the noble Baroness will at least give credit for the fact that the Government have thought about these issues very seriously. She believes that it will be difficult to recruit people under these criteria, and so it may be, but our objective is to achieve the appointment of people, particularly to the FSC, who have this crucially relevant experience. I substantially agree with the noble Baroness on Amendment 194—this is the first time today that I have been able to express such sentiments. However, we recognise the points that she makes. As she pointed out, it is not only in relation to the Bank that a member of the community may or may not have a direct or indirect interest that could be discussed in the committee; the committee may discuss a range of subject matters in respect of which it would clearly be appropriate for a member to disclose his interest—for example a shareholding in a banking institution in relation to which the committee was considering an exercise of the special resolution regime powers. I am grateful to the noble Baroness for Amendment 194 because it highlights the way in which the current wording excessively limits what might be considered a conflict of interest for the purposes of the Financial Stability Committee. Although I cannot accept her amendment as it stands—that would be going a little too far even at this time—we agree with the sentiments behind it. On Report I shall bring forward an amendment that addresses this point in line with her thinking. I hope that she considers that a recognition of our joint constructive work on the Bill.