Dormant Bank and Building Society Accounts Bill [HL]

The Treasury has no intention of putting its head in that particular noose, as the noble Lord so graphically put it. To be just to the noble Baroness, she is not suggesting that this is the solution to the problem that she so interestingly expounds. It is a probing amendment, so when the noble Lord, Lord Newby, accuses the noble Baroness of wanting this to happen, I say to him, ““Just hang on a moment””, as I do not think that that is what she is suggesting. She is pointing out, justifiably, a potential problem that might arise. I say ““might arise”” because we think it highly unlikely that the reclaim fund will become insolvent. In answer to the question posed by the noble Baroness, the best that I can do this afternoon is to point out something that she said to my noble friend on the first amendment that we discussed today—that seems a long time ago now. She said that the reclaim fund’s activities will be brought under the scope of FSA regulation. The Bill requires a reclaim fund to be authorised by the FSA, and it amends the relevant primary legislation to enable the activities of a reclaim fund to be specified as regulated activities. The Government will also amend the relevant society secondary legislation—the regulated activities order—following the enactment of the Bill, which will bring the reclaim fund within the scope of FSA regulation. We believe that that provides satisfactory checks and balances to ensure that consumers are protected in relation to this matter. What are those checks and balances? First, the FSA will be able to apply regulation to the reclaim fund so that it manages the assets prudently and is able to repay dormant account holders who come forward to reclaim their money. We think that that goes a long way to safeguarding the interests of consumers. Further, FSA regulation will enable claims against the reclaim fund to be brought under the coverage of the Financial Services Compensation Scheme, mentioned earlier this afternoon, subject to its meeting the usual qualification criteria and once necessary amendments have been made to the scheme rules. Therefore, we do not believe that it would be appropriate or necessary for the Government to take on the liability for repaying consumers, given the framework that we are trying to establish in the Bill. I said that it was highly unlikely that the reclaim fund would become insolvent. If that were to happen, as I said, customers would be able to claim compensation from the FSCS so long as the reclaim fund remained authorised by the FSA, subject to meeting the usual qualifying conditions. The FSA would consult on the detailed rules in relation to the FSCS and its cover in the usual way. In practice, we would expect a successor fund to be set up by the private sector to take on existing customer liabilities. Here, I hark back to what the noble Lord, Lord Newby, said in his contribution—this is a private sector organisation. Our view is that it would be best as a private sector organisation: it would have the expertise to manage these matters effectively. We would expect a successor fund to be set up by the private sector to take on the existing customers’ liabilities. The noble Viscount, Lord Eccles, and the noble Lord, Lord Hamilton of Epsom, asked why we are doing it this way round. We are taking liability away from the banks and building societies because that will ensure that those institutions do not suffer an adverse impact on their balance sheets as a result of the scheme that will—with general support, we hope—be set up. It will allow financial institutions to transfer money from the dormant accounts into the scheme, while removing the corresponding liabilities that lie, as I understand it, on the balance sheets of the banks and building societies. That is why we have done it this way round. I have no doubt that we will return to that issue ere long.