Banking Bill

As with the previous group, I should like to begin my remarks by addressing the Government new clauses and amendments. I shall speak at a later date about the other amendments moved in the names of members of the Opposition. I noted in Committee that the Government would introduce technical amendments to the continuity obligations provisions. A general continuity obligation arises automatically following a transfer, by the operation of law under the provisions of clauses 62 and 64. The intention is that that general obligation would be replaced with a special obligation as soon as the authorities could determine the specific and precise nature of the required service or facility. For example, in the case of a property transfer, the special obligation power gives the authorities powers to create, modify or cancel contracts between a transferee and the group companies of a residual bank and the residual bank itself—but only in relation to services and facilities required to operate the banking business effectively. New clauses 12 and 13 allow the continuity obligations, both general and specific, to be extended following an onward transfer. The clauses aim to provide the maximum level of flexibility so that, for example, a continuity obligation may be owed to both an initial transferee and an onward transferee. That may be necessary if only part of a bank is sold in an onward transfer. Of course, the requirement for a reasonable consideration to be paid for services still stands. Government amendment No. 37 is consequential to new clauses 12 and 13. Amendments Nos. 27 to 36 do three things. First, they clarify that continuity obligations apply in the case of multiple initial transferees. For example, if part of a bank is sold to a private sector purchaser and the remainder is transferred to a bridge bank, former group companies may need to provide services to both transferees. Secondly, the amendments make a minor technical correction to ensure that continuity obligations can apply to group undertakings other than companies. That is a technical point, as the legal definitions of the terms ““undertaking”” and ““company”” differ slightly. Finally, they require Treasury consent for the Bank of England to exercise the power to modify the general continuity obligation under clause 64 for a share transfer to a commercial purchaser. That was an unintended omission, and the amendment brings clause 64 into line with all the other continuity obligation provisions. I want to say a short word about an announcement made in the pre-Budget report in relation to groups, as I signalled in Committee. The Government intend to introduce amendments in another place to increase the Bill's effectiveness in allowing the authorities to deal with risks to financial stability. The Government propose to extend the Treasury's power to take a failing bank into temporary public ownership—where it would be in the interests of financial stability or the protection of public funds—to include banking group holding companies. That power would be used in cases where the resolution of a deposit taker in isolation would not be sufficient to prevent a serious risk to financial stability, public funds or both. Stakeholders understand that it is important that the authorities are in a position to resolve banking groups, be they large or small, and we will be working with them as we develop the necessary changes to the Bill. I have spoken to the Government new clauses and amendments, and I will seek to catch your eye later, Mr. Deputy Speaker, to respond to amendments in the names of other hon. Members. I will give them the opportunity to speak to them first before passing my comments on them.