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Banking Bill

My Lords, the other issue that I would have raised on what was Clause 228, now Clause 235, was whether creating a Financial Stability Committee within the Bank, along the lines currently proposed, was the best way forward. I accept that the starting premise of this is correct: the Bank would benefit from what might be called ventilation, or exposure to a greater degree of outside thinking. It is ironic that at a time when this is more necessary than ever, the Bank’s senior leadership will shortly, for the first time since 1997, be made up entirely of insiders, defined as those who have been with the Bank for more than 10 years. While correctly identifying the problem, I wonder whether the proposed solution is indeed the best available; that is, to take four members of the court and put them into a committee chaired by the governor, assisted by the two deputy governors. Oddly, the executive member responsible for markets would not be a full member. I was not convinced by the Minister’s explanation that this was a sufficient gene pool—the phrase that was used—to assemble the experts necessary. Some of them, who would be excellent in the role of experts, would not necessarily want to work, in effect, as the non-executive directors of the Bank, with the much wider range of responsibilities that that carries. I am also puzzled as to why, if a committee of this kind is needed, it could not have been set up months ago without primary legislation. As the noble Lord, Lord Eatwell, has pointed out, it is inevitable that the whole architecture of regulation will be revisited, not only in the UK but internationally. I, too, wonder whether it makes sense to commit ourselves to legislate on something that will probably have only a short life and whether we could proceed by non-statutory means. I expect that we will probably return to what I would much prefer—a body that acts as a forum to oversee and guide not only the individual players in the system, but the whole tripartite system itself. This Bill provides for a Banking Liaison Panel to help the Treasury and a Financial Stability Committee to help the Bank, while the FSA already has various practitioner panels. What is missing is something to bring this all together at the tripartite level and sort out the conflicts and trade-offs that the different parties will inevitably bring. For example, the FSA is currently encouraging banks to husband their capital with great care and build it up, while the Treasury wants to encourage banks to commit more of that to increasing their lending. That is precisely the kind of issue that something working at the tripartite level could help to sort out. The Bill currently addresses a particular issue but misses an opportunity to look at something that would have a greater purpose. We will have to wait, but time will probably tell that the noble Lord, Lord Eatwell, and I are right.