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Banking Bill (Money)

The Minister said in his concluding remarks on the previous group of amendments that the Government were prepared to listen, but sometimes they do not listen immediately and it can take a while for the message to sink in. I was struck by Lords amendment 1, proposed by Lord Myners, which would add a reference to"““the continuity of banking services””" to the objectives, because in Committee in this House I introduced an amendment to incorporate the continuity of banking services into one of the objectives of the special resolution regime. It therefore seems that the message eventually sank in that it is important to make sure that there is a reference to the continuity of banking services in those objectives. This is an important matter, and I wish to consider it briefly. One of the contrasts in how different events have been handled over the past few months is in terms of the continuity of banking services. Depositors with some of the Icelandic banks—such as those who found their accounts flipped across from Kaupthing or Landsbanki to ING—will have seen the continuity of services in action, in that they were able to access their money almost immediately. However, those depositors who were not with the internet banking arm of those two Icelandic banks had to await payment through the Financial Services Compensation Scheme, and it took several weeks for them to receive their money. Clearly, if we want to give people confidence in the financial system, the fact that we can demonstrate that there is continuity of service is an important way of responding to their concerns. That would help in giving depositors a sense of confidence in how problems will be handled in future. I am therefore glad that there will be a reference to the continuity of banking services in the objectives. One feature of this debate, which we have now been having since autumn last year, is the banking reform package that has been proposed. It has three elements: the Bill that is before the House today, the secondary legislation that will be brought forward at the appropriate time, and the code of practice. The package needs to be looked at altogether. The Bill gives significant powers to the Government, secondary legislation will implement them, and the code of practice is important in giving confidence to the banks and other financial institutions and their advisers about how the powers will be used in practice. They can take comfort from the code as to how the powers will be applied in future. We spent a great deal of time in Committee discussing the code of practice. The Minister ensured that we saw a draft of it then, and I was grateful to him for doing so. Lords amendments 2, 3 and 4 are important in that they increase the comprehensive nature and coverage of the code of practice to ensure that the objectives themselves are understood. The Bill's original drafting said that the code could provide guidance on"““how to achieve the special resolution objectives””." Lords amendment 2 inserts the word ““understood”” into the provision to ensure that there is a clear link between the objectives in the Bill and the way in which the Government will seek to achieve them once it is enacted. As the Minister pointed out, significant debate took place in Committee about the stabilisation options and what preference there would be in terms of their use. I tabled an amendment in Committee ranking those options in order of preference, with a private sector solution coming first, a bridge bank second and temporary public ownership or nationalisation as the final preference. Although he listened to my proposal, he rebuffed it on that occasion. We wanted to help people understand how the stabilisation options would work and what factors the Government would bear in mind when considering which option to use to deal with a bank crisis. Lords amendment 4 inserts more specific guidance on clauses 63 and 66, and on the compensation clauses—those are welcome additions to the remit of the code. Continuity of service is a very important concept in protecting consumers. Clauses 63 and 66 look at continuity of service in a different way, by imposing service obligations on contractors or other suppliers where there has been a share or property transfer, which is part of the means by which the stabilisation options are put into practice. There was concern as to how those provisions would work, and the fact that they are to be included in the code of practice helps in establishing that. The second part of that amendment relates to the important issue of compensation. The Bill gives the Government significant powers to vary the rights of creditors—people who have entered into a borrowing or lending relationship with the bank or the shareholders, or with suppliers. Normally, suppliers would be able to enter into a contract whereby if there is a significant change in the person with whom they are contracting, they would have an option to terminate the contract, but that goes against the thread running through this Bill of minimising disruption to the financial system and ensuring continuity of service. It is important for suppliers to know what will happen when these powers are invoked, and it is right that that exercise is reflected through the code of practice. On Lords amendments 5 and 6, the Minister at an early stage identified the importance of expert advice and guidance on this Bill. This House is dealing with complex and wide-ranging powers in this Bill, and it was right to ensure the liaison panel's involvement in its evolution over the past few months. I know that a number of discussions have taken place between the Treasury and the members of that panel about the Bill and the secondary legislation. The ongoing engagement between the Treasury and the various experts is welcome, and we are pleased to see the extension of the group's remit. We want things such as the impact of the special resolution regime on banks, their customers and the financial markets to be examined, because the purpose of the code, the panel and so on is to ensure that this legislation does not damage the UK's financial markets, but strengthens them. The best way to do that is to ensure that there is proper engagement with outside interest groups, and Lords amendments 5 and 6 put the panel's future involvement on a statutory basis. I wish to press the Minister on one aspect of the panel. My hon. Friend the Member for South-West Hertfordshire (Mr. Gauke) asked whether the minutes of the panel would be published—whether there would be some more transparency about its deliberations and contributions to the formation of legislation, and its future role. The Minister said that he had no specific objection to this, barring concerns about market sensitivity, and would go away to reflect.