Dormant Bank and Building Society Accounts Bill [HL]

moved Amendment No. 26: 26: Schedule 1, page 15, line 15, at end insert— ““No power to borrow The articles of association of a reclaim fund must not permit the reclaim fund to borrow money.”” The noble Baroness said: I hope the Minister can give me some kind of answer to this amendment, but perhaps I shall be living in hope. Amendment No. 26 seeks to insert a new requirement into Schedule 1 for the articles of association of a reclaim fund. It is a probing amendment. It states: "““The articles of association of a reclaim fund must not permit the reclaim fund to borrow money””" Articles of most ordinary companies—this is not an ordinary company—allow them to borrow money. My amendment is designed to tease out the Government’s views on the appropriateness of that. We have already debated what happens if the reclaim fund runs out of money. One solution might be that it could borrow money until it got some more in. I think the noble Lord, Lord Newby, thought that the fund could effectively borrow from the banks until it received some money. That would seem potentially quite convenient. But my amendment raises a broader question about the prudential management of a reclaim fund. Under Clause 5(1), the reclaim fund will have to hold back funds in order to meet repayment claims. In practical terms, it will invest those moneys; it will not just leave them sitting there on deposit. The reclaim fund will need a proportion in a realisable form but I imagine that it will be investing in a range of things. Perhaps the Minister can explain that. Those investments will have decreasing levels of liquidity depending on what is chosen for the investments. This could range from quoted securities, which in most ordinary circumstances are readily realisable, through to, say, property, which is not readily realisable. If the fund does not have sufficient liquid funds it might be convenient for it to have a small overdraft to tide itself over until it can realise funds to meet repayment claims. My problem is that borrowing powers are a bit of a slippery slope. Once you have created a borrowing power—and the Bill does not prevent borrowing powers—what would stop the reclaim fund from borrowing to invest in the mistaken belief that it could somehow increase the resources available for good causes? What would stop it borrowing against future dormant account money so that it could, perhaps under pressure from the Government, distribute money ahead of having it available on normal reserve principles? What would stop the reclaim fund taking risks, in one way or another, either with its investment policy or with the way that it fed money out to good causes? The fund is intended to be a non-profit organisation. I am generally cautious about such organisations having borrowing powers because they tend to be non-commercial organisations and probably handle risks less well than commercial organisations. I am interested to hear whether the Government think that the reclaim fund is at the non-profit end of the spectrum, which typically has no borrowing powers, or at the company end which has extensive borrowing powers. In considering whether the reclaim fund should be allowed to borrow money, the issue of whether or not it has any equity capital as a kind of shareholders’ funds buffer against things going wrong is also important. This is a probing amendment to find out what the Government think. I beg to move.