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Banking Bill

My Lords, I am not surprised that the noble Baroness has probed this clause, because it is technical in nature. It clarifies an important provision in the Financial Services and Markets Act 2000, specifically Section 45(1)(c). This section gives the FSA the power to vary or cancel on its own initiative a permission that it has granted to allow an authorised person to carry out regulated activities. It allows the FSA to exercise this power in a number of circumstances, such as when the person with permission is failing or is likely to fail to satisfy the threshold conditions or has failed within the last 12 months to carry out the activity to which the permission relates. Subsection (1)(c) also allows the FSA to exercise its power where it is desirable to do so in order to protect the interests of consumers or potential consumers. Usually in the FSMA, where there is a reference to consumers, this means consumers generally and not just a particular firm, and this is the appropriate interpretation of Section 45. As recent events have shown, that is entirely appropriate. We need to consider the interests of consumers generally, not just on a firm-by-firm basis. Clause 245 would introduce an amendment to subsection (1)(c) to make it clear beyond any doubt that the reference to consumers includes consumers generally. The amendment makes it clear that, for example, the FSA could exercise its powers in the interests of consumers where firm A is conducting investment activities for firm B and is not adhering to regulatory standards, but where the contractual relationship is between firm B and the consumer. It should be noted that the effect of this amendment would relate to any exercise by the FSA of its powers under Section 45 of the Financial Services and Markets Act. In addition to providing important clarity in relation to banks, which are the institutions on which we are focusing in this legislation, the Government believe that the effect of the amendment should be general in application. It applies in relation to any financial institution that operates by way of permission from the FSA. This is appropriate because the point is one of clarity of the general interpretation. An amendment that applied only in relation to banks would suggest two different meanings to the interests of consumers rather than one, which would create further confusion and uncertainty. I hope, therefore, that the noble Baroness will accept that I have described why the clause sets out a sensible provision and should remain in the Bill.