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Banking Bill

My Lords, this group of amendments responds to concerns raised by interested parties around the definitions used in Clause 48. I want to put on record the fact that the noble Baroness made a substantial contribution in Committee on these issues and has participated in subsequent meetings with parliamentary counsel, Treasury officials and the City of London Law Society, which have all helped to resolve the matter in a way that meets the interests of all sides. It is important to use broad and flexible provisions in this power, as we noted in Committee. It is an enabling power, designed to ensure that adequate safeguards can be put in place. Breadth to put in place protective provisions is, indeed, a virtue. Flexibility is necessary so that orders made under the power can keep pace with developments in the law governing security interests and set-off and netting arrangements, which has proved to be innovative. We understand that the need for this flexibility in primary legislation is now appreciated by the City of London Law Society and other legal experts. I can confirm that we are considering changes to the secondary legislation to reflect some of the concerns regarding commercial definitions. A redrafted order, including revised definitions, has been sent to the expert liaison group, on which the relevant legal bodies are all represented. However, there are a number of issues on which the Government accept that clarification in the Bill is desirable. Amendment 14 amends the definition of ““title transfer collateral arrangements””. These involve one party transferring to another full ownership of assets. In broad terms, such arrangements are entered into to secure the performance of obligations owed by one party to the other. Such agreements may typically provide for the return of equivalent collateral when such obligations are performed. The reference is to ““equivalent collateral”” because the assets originally transferred may no longer exist and may have been replaced with new assets. Although we thought that the original definition, in referring to new assets, reflected this, we are aware of the anxiety over this description. As a result, the amendment in the name of my noble friend Lord Myners removes this troublesome phrase, but leaves the scope of the enabling power sufficiently broad to achieve its purpose. Amendment 15 makes a change to the definition of set-off arrangements. It describes the breadth of different set-off arrangements that might exist. We consider that the broader formulation is more appropriate. Amendment 16 makes it clear that close-out netting arrangements can involve actual as well as theoretical debts. Although this provision was an inclusive further elaboration of the broader concept of netting arrangements, we are pleased to offer this additional clarification if it provides reassurance. Amendment 18 adds further provisions to the definition of arrangements, which is used as a building block for the definitions of security interests, title transfer collateral arrangements and set-off and netting arrangements. It provides broad language that makes it clear, for example, that such arrangements may operate on a bilateral or multilateral level, or involve the interposition of third parties such as clearing houses. We do not believe that the clause would have been construed to exclude these arrangements from the ambit of the power as originally drafted, but we offer reassurance through this amendment. We have one further reassurance that we need to give, which arises out of issues brought to our attention by legal experts, including the Law Society of Scotland. Amendment 9 signals that arrangements to be protected under Clause 48 can include trusts. Stakeholders have asked us to make it clear that interests protected under Clause 48 may be created through, or comprise in part, trusts. The Government are not convinced that the change is necessary, as the terms would be construed in their commercial context. If commercial practice does make use of trusts in this context, then trusts would fall within the definitions as they stand. However, we are told that Amendment 9 offers reassurance, and we are glad to offer this where we can. Amendment 17 relates to the treatment of trusts under the property transfer powers. Stakeholders have questioned whether property that a bank holds on trust for beneficiaries would fall within the definition of property, rights and liabilities under Clause 33. We believe that property held in trust would be included under the broad definition, but we are told that in Scotland there is some doubt as to whether a reference to ““property”” will be interpreted to include property that a person holds in trust. The amendment will allow us to stipulate how property held by the bank in trust is to be held after the transfer. This allows the effects of the resolution, as it relates to trust property, to be made clear in the property transfer instrument, enhancing legal certainty and allowing a more refined and proportionate approach. These amendments are a direct response to the concerns of stakeholders on how trusts are treated and, I believe, allow the authorities to act proportionately on a case-by-case basis by being specific on how each resolution can affect trusts. In seeking to meet the concerns of financial markets participants, I should also say a few words about the noble Baroness’s amendment, but it is appropriate that she should have a chance to speak to it, and I shall respond briefly after she has spoken. I beg to move.