Banking Bill

I will check the record. The general public will not consider it unreasonable to take a power to allow banks to pay up front for the costs of dealing with potential future difficulties. They will think that that is the right thing to do. The hon. Member for Fareham has sought to explain amendment No. 17, but I am not sure about its purpose. If I explain how the FSCS applies to foreign banks, it will answer some of his questions. First and simplest, if a foreign bank owns a subsidiary that operates as a bank in the UK, the subsidiary is a UK-authorised person with a FSMA part 4 permission to accept deposits. In other words, it is a UK bank, which means that the FSA regulates it, that it is a full member of the FSCS and that it pays FSCS levies exactly like other UK firms. Secondly, if a bank incorporated outside the European economic area operates in the UK through a branch established here, it needs a FSMA part 4 permission to accept deposits like a UK bank. It must be a full member of the FSCS, and it must pay levies like UK firms, although that is, of course, calculated solely on the deposits held at the UK branch. Thirdly, as is well known now, an EEA bank can operate through a branch here using a passport under the relevant EC directive issued by its home member state. Depositors are protected by the home state deposit guarantee scheme, and the bank may also join the FSCS top-up arrangements, provided that the FSCS offers better protection to depositors than the home state scheme. If it joins the FSCS top-up arrangements, it must pay an appropriate contribution to any levies. Foreign banks are already required to make appropriate contributions to any FSCS levies that apply to the relevant class of firm. If pre-funding were introduced, foreign banks operating here through branches would have to make an appropriate contribution to levies to build up a contingency fund, which could be used to meet the compensation costs of the FSCS arising from the default of such a bank. In the Government's view, there is no need to include any additional provision in the Bill along the lines proposed by the hon. Member for Fareham to make that happen. I hope that he agrees with that point on reflection and will not press his amendment.