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Banking Bill (Money)

I explained that ““necessary”” is a high test. The second point to make is that the Treasury will also have regard to the SRR objectives, which ensure that the objectives in exercising the power in relation to holding companies include protecting and enhancing the stability of the financial systems of the UK, protecting and enhancing public confidence in the stability of the banking systems of the UK, and protecting depositors—areas with which we are very familiar. Action could be taken only where the Treasury has considered whether exercise of the powers in relation to holding companies would further those objectives. That narrows the context of what we are talking about. Thirdly, by limiting the tool to temporary public ownership, a higher public interest test must be satisfied, which we previously debated. The application of the safeguards will always depend on the facts of the case. However, in the light of those safeguards it is highly unlikely that it would be possible for the Treasury to take a holding company into public ownership where the holding company does not have a close connection with the operation of the bank or where the primary activities of the holding company are not related to financial circumstances. Onward transfer powers apply only to banks in the group and the holding company, not to other non-financial institutions. I hope that that helps to clarify the matter. Let me briefly turn to the other amendments in this group. Clause 71 provides for a transfer instrument or order to make provision about pensions. A modification to a pension scheme may be necessary in order to facilitate a fully effective transfer. The clause applied only to pension schemes in which the failing bank is or was an employer. However, following consideration, the Government are of the view that it does not provide sufficient flexibility for the authorities to deal with all possible resolution scenarios involving group companies. Therefore, Lords amendments 49 and 50 allow the pensions power in clause 71 to take effect at a group level, instead of at the level of the deposit taker. Finally, Lords amendments 70 and 71 make consequential provision to part 3 of the Bill in relation to the bank administration procedure, as part of the extension of the temporary public ownership tool to holding companies. In summary, this group of amendments is an important addition to the Bill that will allow the special resolution regime to be effective for banks that are part of complex corporate groups. I hope that I have demonstrated the strong rationale for taking these powers. The matter was debated in the Lords, and we are happy to concur with their views on it.