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Banking Bill

My Lords, this is something of an anti-climax. I shall speak also to the other five amendments in my name in this group. They amend the termination rights provisions in Clauses 22 and 38. They do that in a common way for both share transfers and property transfers. We have now reached one of the technical areas of the Bill about which practitioners in the City are concerned. I thank the Treasury for including me in a meeting with, first, with parliamentary counsel and, secondly, various lawyers last week involved on all sides. That was indeed most useful. The Government have three amendments in this group to which I hope the Minister will speak in due course. They deal with slightly different issues from my amendments. My amendments deal with two separate but related issues. Amendments 4, 5, 10 and 11 amend Clauses 22 and 38 so that a default event provision is not defined to include a contract or other agreement to which the bank is a party. The purposes of this set of amendments is to ensure that contracts, such as certain credit default swaps and other derivatives which are written with the failed bank as a reference entity or an underlying share but which do not directly involve the bank, are not caught. We completely understand that the Government want Clauses 22 and 38 in order to protect against contracts in a subcontracting chain being capable of being broken, if they relate to services which are essential to the bank. But the definition also takes in financial services and therefore takes us into the highly technical area of the contracts which I have just described. The second set of amendments, Amendments 6 and 12, seek to make it clear that set-off, netting and similar arrangements will be outside the scope of an order under Clauses 22 and 38. That is part of the wider debate on set-off and netting, which we shall come to, but it has a very specific importance in the context of termination rights. If these clauses interfered in the operation of set-off and so on, legal certainty in those markets might well disappear. As I understand the position, the Government’s intention is that secondary legislation under Clauses 47 and 48 will be used to ensure that set-off and netting arrangements are not affected by the termination rights clauses and that this will be predicated on an assumption that Clauses 22 and 38 will raise a problem only if a partial transfer is involved. I further understand them to believe that the issue of the bank not being a party to the contracts will, in practice, arise only in connection with set-off and netting arrangements. I hope that the Minister can explain all of this for the record. On the basis that he does so, I am sure that I will be able to withdraw my amendments in due course, but I thought it was important to table them again so that the explanation of how these issues are to be dealt with was clear for all concerned. I beg to move.