---

Banking Bill

My Lords, in view of the lateness of the hour on our final day in Committee, I did not move an amendment to what is now Clause 254, but I raised the issue of whether it is appropriate for an order under the clause to be made using the negative procedure. Clause 254 allows the Treasury to define what is and what is not financial assistance. According to subsection (2), an order can, "““provide that a specified activity or transaction, or class of activity or transaction, is to be or not to be treated as financial assistance””." That is on top of a very wide definition of financial assistance already in Clause 254(1). The importance of this is that what counts as financial assistance is critical in determining whether the FSA can invoke Clause 7 and start the ball rolling in stabilisation powers. It also drives Clause 227 in relation to Consolidated Fund cover, which we discussed earlier. Concentrating on how the FSA might use it, I find it difficult to see why the power is needed, given the wide definition in subsection (1). If it is needed, surely it ought to be considered by Parliament before coming into effect. The Treasury’s memorandum to the Delegated Powers Committee said that the negative procedure was needed because such orders might have to be made quickly while Parliament was not sitting. I do not think that that bears close examination. Since there is already a wide definition, it must be the case that the Treasury would want to use the power only if it wanted to classify something that the man on the Clapham omnibus would not recognise as plausibly equivalent to financial assistance. The Treasury would be using this power to define as financial assistance something that was not obviously financial assistance and thereby could use the revised, possibly artificial, definition to set the special resolution regime in motion, because the FSA has no option but to ignore whatever is defined by the Treasury as financial assistance when triggering the stabilisation powers under Clause 7. The clause places a potentially very damaging power in the hands of the Treasury, which I suggest ought not to be exercised without Parliament’s approval. Otherwise, we give the Treasury carte blanche to determine when to pull the plug on a bank and all the carefully crafted hurdles and tests in Clauses 7 to 9 become meaningless, because the Treasury will in effect define how it is all to work out in practice. I believe that if the power is to remain, we should have proper parliamentary oversight and not simply rely on the negative procedure, because I cannot see that it would be proper or necessary for the power to be used in an emergency. I beg to move.