Banking Bill

In new clause 8, the hon. Member for Fareham (Mr. Hoban) seeks to establish a statutory basis for the order in which the authorities must consider the stabilisation options of the special resolution regime. The Government consider it appropriate for a range of options to be available for the resolution of the problems of failing banks. Banks may fail for a number of reasons in many different circumstances, and the optimal solution may be different in each case. Of course, resolution by way of the transfer of a failing bank to a private sector purchaser will generally be the authorities' favoured option, but I have emphasised during our debates that the choice of stabilisation option will be determined by an assessment of the special resolution objectives. We do not agree with the principle of ordering the stabilisation options. Forcing the order to be followed under primary legislation could delay or harm the chances of a successful resolution, and could constrain the flexibility with which the SRR tools can be applied in accordance with the individual demands of particular circumstances. The Government have already made it clear that temporary public ownership is an option of last resort. That is demonstrated by the test for intervention in clause 9, which we discussed extensively in Committee, so it is unnecessary to describe this further in the Bill. I also remind the hon. Member for Fareham that the draft code of practice makes provision on how the authorities will select which tool to use, so I hope that this provides a clear indication of how the authorities will consider the relative merits of each stabilisation option. On new clause 9, I do not agree that the financial services compensation scheme should have control over the onwards management of a bank once the stabilisation powers have been exercised. First, once the bank or banking business has been transferred, it will be controlled by another party. Secondly, it would be inconsistent for the FSCS to decide how depositors should be protected in such circumstances, as that would impact on how the bank or banking business should be controlled. The FSCS has an operational role in paying out compensation, but it is not a strategic decision maker in the context of the SRR. I also do not agree with the prioritisation of the objective to protect depositors—objective 3—to the exclusion of the other objectives in this proposed new clause. Objective 3 must be considered alongside these objectives, but not to the exclusion of them.