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Banking Bill

My Lords, I move this government amendment in the name of my noble friend and will speak also to Amendment 115. I note that the noble Baroness, Lady Noakes, also has an amendment in this group. We have given careful consideration to the points made by the noble Baroness in Committee regarding exemptions from liability for payment system operators acting under direction from the Bank of England. We know that she has been in touch with the Payments Council, a key representative body of payment system operators. I thank her for bringing the concerns of that body to the attention of the House. It is a valuable representation. In Committee, the noble Baroness referred to a scenario in which an operator could be instructed by the Bank of England, under its power to give directions, to continue to allow a failing bank to participate in a payment system even where that bank no longer met the criteria for participation. The point was raised as to whether the operator would be provided with an exemption from the Bank in respect of any liability in damages arising from acting in accordance with the Bank’s direction. The power to give directions is intended to provide a tool for the Bank to use in furtherance of the objectives of this part of the Bill; that is, to ensure that recognised interbank payment systems are operated in a manner that minimises deficiencies and disruptions that could threaten the stability of, or confidence in, the UK financial system, or have serious consequences for businesses or other interests throughout the UK. Therefore, we do not envisage circumstances in which the power would be exercised in the manner suggested by the noble Baroness. Given her concern, however, we have sought to address the matter further. The government amendments in this group would confer a power on the Treasury to grant an operator exemption from liability in damages for acts or omissions carried out in accordance with a direction, if this is appropriate in the circumstances. Amendment 68 enables the Treasury to, "““confer immunity from liability in damages in respect of action or inaction in accordance with a direction””." Amendment 115 is consequential, updating the statutory instrument table in Part 8. We consider that the Bank should notify the Treasury before making a direction so that the Treasury has an opportunity to consider whether it would be appropriate to make an exemption order. As the Bank may need to give a direction urgently in the interests of financial stability, we consider that the order should be subject to the negative resolution procedure. For obvious reasons, it will be important that any exemption is in place at the time the direction is given. The noble Baroness’s amendment would give a rather more blanket exemption from liability in damages in respect of actions or inactions taken in accordance with any direction of the Bank. We do not think that such an exemption is appropriate. We have accepted that there is a need to have this power but it would not be appropriate to give an exemption from liability in damages in all cases. For example, if the Bank merely directs that an operator should comply with specific minimum standards in respect of business continuity, no such exemption from liability would be necessary. I hope that I have established the case for the government amendment and that the noble Baroness will not move her amendment.