---

Banking Bill

My Lords, this amendment would add additional words to objective 3 of the special resolution objectives as set out in Clause 4(6). Currently, objective 3 is to protect depositors, which we agree is a very important objective. We know that in practice the protection of depositors is one of the most important considerations that have driven government actions to date. Indeed, some of us have struggled to see that some of their interventions have genuinely been about systemic risk at all and that the protection of depositors has driven policy. However, this focus on protecting depositors concentrates on those who have financial assets in the system and ignores the wider dimension of banking services. Of course, many people have deposit accounts in which they store their savings or spare resources. However, many more do not have savings but have a crucial reliance on their bank for everyday transactions. Those bank accounts might not even be in credit at the date when a bank fails, yet the continuity of service is just as vital to those people as to those who are owed money by the bank. In Committee, I cited the statistics in the Government’s regulatory impact assessment, but they bear repetition. Ninety per cent of wages and 98 per cent of benefits are paid into a bank account or a Post Office account and 75 per cent have at least one direct debit. I doubt whether there is a business in the land that survives without a bank account. I go so far as to say that ensuring the continuity of banking services is at least as important as protecting depositors. It is one thing to have to wait for one’s deposit money to be returned; it is quite another if one has no ability to manage household finances or draw cash from a hole in the wall. The one thing that would destroy confidence in the banking system is if banking services were disrupted. Therefore, continuity of banking services is essential for the achievement of objective 2, which is about that confidence, as the Minister pointed out in Committee. The Government have included words about continuity of banking services in the code of practice, but omission of such words from the objectives means that the continuity of banking services is no more than an optional extra as far as the objectives are concerned. The Minister will be aware from our exchanges in Committee that the banking industry has a particular concern that, if continuity of banking services is not hard-wired into the special resolution regime, the Financial Services Compensation Scheme could end up being overengineered at a cost of around £1 billion. That is what the FSA’s current consultation could involve. While this is a cost that the banks would have to pay in the first instance, we should be in no doubt that consumers would end up having to pay for it. If we ask the man in the street what they want from the bill, I am sure that they would tell us that they want their bank accounts to remain functional and that they do not want to pay any more for that. That is what my amendment is designed to achieve. In Committee, the Minister said that the code of practice was a better place for explaining the meaning of terms. I accept that up to a point, but not when it drives at the heart of what the objectives are. Clause 4 has only the protection of depositors as an objective. It is perfectly possible to protect depositors without protecting banking services at all; the two are not synonymous. For example, I do not regard my internet savings account with a bank that is not my main bank as part of the banking services that I need. It is simply a financial asset, which I need to have repaid if the bank goes belly up. However, I most assuredly need the banking services to deal with everyday life from my main bank. That is why we need to ensure that continuity of banking services is clearly specified as an objective in the special resolution regime. I beg to move.