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Banking Bill

My Lords, Clause 242 removes a requirement laid out in the Bank Charter Act 1844, which stipulates that the Bank of England should publish a weekly return. The weekly return is a one-page summary of the Bank’s monetary assets and liabilities for the week in question. Under the clause, the Bank is no longer required by law to publish such a weekly statement, although, if it so chose, it could still publish such a return and may continue to do so for a period of time. When we discussed this issue in Committee, it became apparent that the issues underlying the debate were twofold, with the need for transparency set against the need to protect against untimely disclosures that could have a negative impact on market sentiment. If noble Lords will permit me, I should like to begin by addressing some of the points that emerged in that debate. In Committee, the noble Baroness, Lady Noakes, suggested that the Government were taking an all-or-nothing approach to the transparency of the Bank of England. I reassure noble Lords that that is not the case. The Bank of England has no plans immediately and comprehensively to cease reporting as a consequence of this provision. Rather, it will be empowered to determine an appropriate level of reporting frequency and I believe that it will propose to consult when determining that reporting detail and reporting frequency. Noble Lords also expressed concern that this step could have a broader negative impact on the transparency of the Bank of England as a public institution. As I indicated in Committee, the Government have a strong commitment to transparency and believe that the free and effective flow of information is vital to efficiently functioning markets, as well as to the trust that is placed in public institutions. Indeed, matters of public interest with regard to the Bank of England are already published by other means. I reiterate the point that I made in Committee, which was that the weekly return is not needed to ensure that the Bank operates transparently. Other reporting obligations are placed on it, including the requirements to respect Companies Act reporting standards as laid out in Section 7 of the Bank of England Act. I alluded to this in Committee. Furthermore, as I indicated previously, the retention of a legal requirement to produce a weekly return may force the Bank of England to make disclosures that are harmful to financial stability. For this reason, the Government, with the support of the Bank, consider that it is appropriate to revoke the requirement to publish a weekly return and to allow the Bank, after consultation, to decide how it is to disclose such information as is required to maintain market confidence. In the light of the difficult tension between transparency and the need to retain market confidence, to which I alluded earlier, I have some sympathy with the amendment laid by the noble Baroness. I appreciate that she has carefully considered how to modify the provision in question, but I reluctantly remain of the view that the Bank of England is best placed to determine how to balance the very real tensions to which I have referred. Noble Lords have previously highlighted the fact that it is unusual for a public institution to determine the level of transparency to which it is subject, but I remind the House that the Bank of England will be doing so under its statutory duty to contribute to the protection and enhancement of financial stability, and that this level of delegation is appropriate, given that duty. Appropriate transparency on the part of the Bank will contribute to confidence in the financial system and I am sure that the Bank will recognise that. I turn to the technical aspects of the noble Baroness’s amendment. Under the amendment, the reporting of the Bank of England would cease to be a weekly return and would become a periodic return. An effect of the amendment would be that the period would be prescribed by the commissioners of Her Majesty’s Revenue and Customs, given the stipulations of the Bank Charter Act 1844. I assume that that is not her intention. The technical difficulties aside, my objection to the amendment is that it does not answer the Government’s concern that, whenever a return is published, those speculating about liquidity support could still be avidly reading it to determine whether it gives any indication about a bank, or banks, that face difficulties. The second part of the amendment tabled by the noble Baroness addresses this concern. The amendment would allow some flexibility in the publication time, requiring the return to be published as soon as is practical, subject to the need to protect the public interest. I have great sympathy with this approach and, again, I appreciate the careful thought that has gone into striking a balance between the need for transparency and the need to retain market confidence. Unfortunately, the amendment still does not quite work. If there is to be a periodic return, which in good times is published as regularly as clockwork, and then—for whatever reason—it is decided to delay publication, a chilling signal would be sent that steps were being taken concerning banks. Whatever the reasons for delaying publication of a particular return, it may well have an adverse effect on the market and it would be very difficult to predict what that effect might be. The amendment fails in so far as it does not manage to reconcile in a workable way the competing concerns of transparency on the one hand and the need to maintain market confidence on the other. At the broadest level, however, this debate is about whether to do away with the requirement to publish a periodic return of the nature of the weekly return or whether to keep some form of requirement for a return. The objections to this amendment that I have outlined would apply more generally to a wide range of any similar amendments. By imposing a requirement specific enough to be meaningful, an expectation of publication is raised and, as soon as a return is not published, or is published with significant redaction, market speculation is likely to escalate. Removing the obligation is, the Government believe, the appropriate way in which to give sufficient flexibility. I hope that I have reassured noble Lords about the intentions behind this clause. It is an appropriate and proportionate step to enable the Bank of England to take proper control of the reporting process and to avoid a serious failure of market confidence in periods when liquidity assistance has been offered. Given these concerns and the very real difficulties with the amendment, I ask the noble Baroness to reconsider whether her amendment is necessary or desirable.