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Banking Bill

My Lords, the amendment concerns putting in place a resolution fund as a means of compensation and whether, once a fund is in place, there should always be a requirement on the Bank of England to manage the bridge bank in a manner that maximises the proceeds available in the resolution fund. I understand the intention and, indeed, the logic behind the amendment, but I shall set out for the House, as I did in Committee, why there may be circumstances why such a requirement would not be appropriate. The authorities and stakeholders alike have been cognisant of the benefit of a bridge bank as a stabilisation option that can be used for a very short period to facilitate a commercial purchase onwards from it. The transfer of Bradford & Bingley into temporary public ownership and the immediate onward sale of its deposit book to Abbey Santander is an example of how the bridge bank might be expected to work. I note that this was achieved under distinct and different legislation, which does not explicitly contain reference to bridge banks. This was the effect of the resolution, both intended and achieved. In such a situation, I do not believe that the bridge bank is in existence for long enough for any reasonable management duty to be applied. For this reason, I do not believe that it should always be a requirement. The noble Baroness may be concerned about the Government’s discretion over this matter. For example, the Government have discretion over the cut-off point after which a management duty should be put in place. However, this decision will of course be subject to full parliamentary scrutiny through the affirmative procedure and is challengeable through the courts. Therefore, there are enough safeguards to prevent this discretion from being misused in any way. During the debate in Committee, there were a number of questions over elements of the bank resolution fund as set out in Clause 58. While the Government tried to answer them during the debate, those questions prompted us to reflect that this new concept should be described in more detail through the code of practice. This, therefore, is one of the reasons why we have added compensation arrangements as something that can be included in the code of practice through the amendments to Clause 5. I believe that this is a helpful and constructive development. Given that, I urge the noble Baroness to withdraw her amendment in due course. Amendment 46 would remove, or perhaps it probes, Clause 58(6)(b). It may be helpful if I set outs the purpose of the provision. It is important to set out the nature of any duty owed by the authorities. As noble Lords will be aware, a number of different duties can exist in civil law. For example, in certain cases, a strict liability duty will arise. No matter how much care is taken, if the duty is not discharged, the person owing it will be liable for its breach. No one would suggest that that was appropriate in this context. But other standards exist—for example, of negligence and gross negligence. This provision enables an appropriate standard to be imposed by which the breach of the duty should be assessed. Without such provision, the clause would not work properly, as the nature of the duty would not be clear. The Government of course will need to justify their choice of extent to Parliament and, again, that can be challenged by interested parties through the courts. For that reason, this subsection is essential and workmanlike and I beg the noble Baroness not to press her amendment. In Committee, the noble Baroness, Lady Noakes, expressed misgivings about the term ““subserviate””. While admitting that it is defined in the Oxford English Dictionary and was used several times in the speeches of Sir Winston Churchill, the noble Baroness was concerned that the term is not used in legislation. Since the introduction of this Bill, the term ““subserviate”” has had quite an airing. Indeed, an internet search would reveal quite a few references in Hansard. Therefore, one is tempted to keep the term to try to raise its popularity and profile, or possibly create a Facebook page for it. But it was a serious concern and I must provide a serious response, or risk another chiding from the noble Baroness. In drafting statutes, we do not seek to be hidebound or to adhere always to precedents. Rather, we seek to use the best words to encapsulate the concept in question. I do not think that the meaning of ““subserviate”” is opaque or confusing. However, concern was also expressed in the other place, where the standards of learning are perhaps not as exceptional as in this House, and it is for the Government to respond in a constructive manner. Therefore, I bring forward this amendment to replace the term ““subserviate”” with a new subsection to Clause 58. The amendment states in plain language our intention that the management duty to manage a bridge bank or bank in temporary public ownership in a manner that maximises the proceeds available in a bank resolution fund will apply only so far as the duty is compatible with the special resolution objectives and the code of practice. I hope that this amendment satisfies both Houses’ concerns on this point and demonstrates our willingness to respond helpfully on these matters. I beg to move.