Banking Bill

Let me deal first the Government's new clause and amendments. I am sure that my hon. Friend the Member for South-West Hertfordshire (Mr. Gauke) will be heartened to hear that the Government took note of his comments, in Committee, about the appropriate place for the institutions that have been mentioned. We have no problem with that. We would expect resolution regime costs to be paid up front, especially in the light of recent transactions in which the FSCS has taken part. The Minister will know that we are not as convinced as he is about the safeguards, and we will discuss the contribution that the FSCS has to make in such situations when we come to later amendments. On the concept of being able to meet up-front payments, we are content. The new clause and amendments that I have tabled tackle three issues, the first of which is the pre-funding of the compensation scheme. We touched on this matter in Committee, and I want to revisit it today. The second issue—how to protect people who bank with branches of overseas banks—has caused a great deal of concern to constituents. The third issue is who should bear the costs of the special resolution regime. That has already been mentioned in relation to Government amendments 41 to 48. Clause 164 gives the Treasury the power to make regulations for a pre-funded compensation scheme that could cover any part of the financial services sector, not just the banking sector. The argument in favour of pre-funding is that the FSCS needs to be pre-funded to ensure that there are sufficient resources to make a payout to the customers of a failed bank or other financial institution. Currently, the FSCS works on a post-funding basis. There is a levy on financial services businesses through industry groups. One such group, deposit takers, includes banks, building societies and credit unions. Once the levy payable by that group is exhausted, other financial services institutions outside that group will be required to make payments to the FSCS. The scheme is important, in that it has an impact not only on the sector concerned but on others as well. When we debated these matters in Committee, the Minister would not be drawn on whether he thought it necessary to have a pre-funded scheme. He thought it appropriate for the powers to be available and for there to be further consultation and discussion on whether that was the right way to proceed. Not knowing whether this will be the next step forward will put the financial services sector in a difficult position, because it will not know what preparations it needs to make. However, the case for pre-funding was not made properly in Committee. An argument for pre-funding can be made, and new clause 6, which requires a report to be laid before Parliament before the regulations are made, is a vehicle for making that case. Amendment No. 5, which I have tabled, would remove clause 164 from the Bill entirely. I would like to make it clear that I want to press that amendment to a vote at an appropriate point in our deliberations.