Banking Bill

No, I shall make some progress; otherwise it will not be fair to those who wish to speak in the debate. The Bill will build on that framework, and I shall outline the broad scheme that it follows. Part 1 provides for a permanent special resolution regime that is at the heart of what is proposed. As hon. Members are aware, it will allow us to accelerate the transfer of a bank to another private sector bank or to transfer some or all of a bank's business to a publicly controlled bridge bank, on the way to a private sector sale. It will also modify the insolvency procedure and allow us to take a bank into temporary public ownership, should that be necessary. Part 1 also includes measures to strengthen the Bank of England, which I have touched on and to which I shall return, including a role in overseeing the inter-bank payment system because of its possible systemic importance. Part 4 of the Bill will improve protection for depositors through the Financial Services Compensation Scheme, and it includes other measures to build confidence. I shall return to those points later, but I wish first to deal with the provisions in part 7 to strengthen the Bank of England. These will have a new statutory objective of financial stability. They will provide the Bank with statutory immunity as a monetary authority in pursuit of its financial stability objectives. The provisions will also establish a financial stability committee as a sub-committee of the court. That is important. The Monetary Policy Committee, which of course determines interest rates independently of the Government, has been a great success and other countries have followed our lead. We also need to bring in outside expertise to advise the Governor on financial stability. The court, which is at present too large at 19, will be reduced to 12 members. The committee of court members will bring in expertise from the City and elsewhere to advise the Governor, and that will be important. It will ensure that the Governor has at his disposal a wider range of advice. Its deliberations will be made public, although probably not immediately in many cases for obvious reasons. In situations such as we have seen in the past few weeks, it would not be wise to provide a daily, weekly or even monthly commentary on what has been discussed, but the Bank will consider how the deliberations of the committee can be publicised when it is right to do so. Clause 229 of the Bill, as I said earlier, will allow the Bank of England to provide liquidity assistance to building societies on the same basis as banks. In that difficult area, I wish to draw the House's attention to further provisions on the disclosure of Bank of England assistance. The matter arose throughout last year, especially when we were dealing with Northern Rock in the autumn. The Bank must publish its balance sheet weekly at the moment, but that proved quite difficult in the autumn. Of course, the Bank published that information, but I am concerned that when we are trying to help an institution to get through a difficult period, the very fact that we are helping that institution can actually be quite damaging to it, as we found with Northern Rock. The Bill seeks to make changes to the situation. I want to emphasise that we need to find a mechanism that allows the fact that there has been assistance to be dealt with transparently, whether in general terms or when matters with particular institutions are fully resolved. The Bank is reflecting on the matter, but I want to draw the House's attention to it as it came up in the Treasury Committee time and again. It was a live issue 12 months ago and it could potentially become an issue again at some stage in the future. It is important that we get that right. As I said, part 5 of the Bill formalises the Bank of England's role in the oversight of the payment systems. That is important. The FSA regulates the recognised clearing houses, but the Bank of England will have a role in the oversight of the system as a whole. Let me turn to the special resolution regime, which is key to much of what we are trying to achieve.