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Banking Bill

My Lords, I shall speak also to government Amendment No. 73. I shall, of course, also comment on other amendments in the group. In Committee, the Government committed to revisiting before Report the penalty clauses of Parts 5 and 6. Having reflected on the comments raised in Committee and by the Delegated Powers and Regulatory Reform Committee, we have tabled amendments to address the concerns raised. I note that the noble Baroness has laid similar amendments. I think it is clear from the nature of our amendments that we largely agree on the basis on which to proceed, but I will explain why I believe that the Government’s amendments are necessary. Government Amendment 70 provides that the Bank of England must prepare and publish a statement of the principles which it will apply in determining whether to impose a penalty and the amount of the penalty in respect of a compliance failure under Part 5. It is intended that these principles will preserve the Bank’s discretion in assessing whether to impose a penalty and the quantum of that penalty but will enhance the transparency of the enforcement regime, which was a focal point of a great deal of our deliberations in Committee. These principles will no doubt reflect the range of factors that will need to be taken into account in the decision process; for example, the scale of the compliance failure and the seriousness of the consequences arising as a result of the failure, the resources of the payment system and the frequency of the offence. However, in the interests of preserving the Bank’s discretion in preparing and issuing the statement, we do not consider it appropriate to specify in the Bill the factors that must be taken into account by the Bank. The statement of policy must be published on the Bank’s website and a copy must be sent to the Treasury. This publication requirement is adequate to ensure that the policy is brought to the attention of operators of recognised interbank payment systems and the general public. The Bank must review and revise a policy from time to time, as appropriate. In the interests of fairness, naturally any penalty imposed by the Bank must be in accordance with the published policy at the time that the compliance failure was committed. This offers guidance to operators of recognised interbank payment systems, while maintaining the necessary flexibility for the Bank to impose appropriate penalties in all relevant circumstances. I hope it will be recognised that the Government have responded to anxieties about transparency expressed during Committee. I turn now to Part 6. In Committee, we sought to demonstrate that the banknote regulations will set out the matters about which banknote rules may make provision. The regulations are subject to the draft affirmative procedure, and so I set out the Government’s case that the parliamentary scrutiny to which the regulations would be subject would ensure that there was no inappropriate delegation to the Bank in making banknote rules. However, we have reflected on the comments made in Committee and, of course, we have noted with great care the comments of the Delegated Powers and Regulatory Reform Committee. This amendment provides that the Treasury must specify in banknote regulations a method for determining the maximum amount of penalty that may be imposed by the Bank for a breach of regulations or rules. I hope that this amendment addresses concerns that the Bank could conceivably have been enabled to set unlimited penalties under the banknote rules. It is intended that the banknote regulations will set out a formula for calculating the penalty to be imposed for under-backing and will make provision in relation to a statement of policy on penalties to which the Bank must have regard when determining the maximum level of the penalty imposed. I should bring to the attention of the House that provision has already been drafted at paragraph 4 of Schedule 1 to the draft banknote regulations providing that the amount of any penalty must be determined in accordance with a published statement of policy. Thus, I believe that government Amendment 73, together with existing provisions of the regulations, meet the concerns of the noble Baroness, Lady Noakes, and the noble Lord, Lord Howard, expressed in Committee and in their amendment. Finally, as regards making express provision in the Bill in respect of the statement of policy on penalties imposed under Part 6, we have conceded that an amendment to this effect is necessary to Part 5 of the Bill, but it is neither appropriate nor necessary in relation to Part 6. I beg to move.