Banking Bill

I draw the attention of the House to my entry in the Register of Members' Interests. The amendments and new clauses relate to issues affecting the safeguard on partial property transfer, which applies in circumstances where some assets are transferred out of a bank with a view to a private sector purchase. There is no need for me to rehearse all the arguments that we discussed at some length in Committee; in summary, counterparties of an original bank may find themselves prejudiced when there is a transfer of some of the property of that bank, because they find that they are the counterparty of two different institutions, or possibly more, and are unable to net or set off contracts because those contracts are now with those different parties. Even the potential of that situation creates significant problems because it may mean that legal opinions cannot be given as to the creditworthiness or security of a particular transaction. That could result in increased costs of capital for UK banks, higher regulatory capital requirements and ultimately an adverse effect for the competitiveness of UK banks. The matter has provoked considerable interest from outside bodies. To be fair, the Government recognise the issue, and have made some changes in draft legislation, particularly concerning the carve-out from potential partial transfer, and they have created a banking liaison panel, which we welcome. Safeguards will be placed in secondary legislation, but concerns remain. We are not in a position to assess the strength of the safeguards fully because that secondary legislation has not reached its final form. It would be helpful to hear some reassurance from the Economic Secretary that that secondary legislation will be in effect at the time when the Bill comes into effect. It is essential that all the safeguards are contained in secondary legislation, rather than in the code of practice. Legal opinions can be given only on secondary legislation; a code of practice will not be sufficient for lawyers in such circumstances. This is an important and ongoing matter, and the Government's position is moving constantly, which is perhaps understandable, but this means that the House is not in a position to make a full assessment of the efficacy of the safeguards, and consequently, in new clause 3, we propose an annual assessment and an opportunity for Parliament to debate the matter further so that the Treasury can provide reassurance that the safeguards are adequate. Briefly, I shall outline some of the other amendments and new clauses. We are concerned about what is now clause 72—it was clause 65 in Committee—because it gives the Government the ability to change the law by order. There are constitutional issues involved; it is a Henry VIII clause, which amendment No. 3 would delete altogether. In Committee, the Economic Secretary outlined particular areas where he considered it necessary to have powers to amend the law, two of which concerned related directorships and shadow directorships. We attempt to address those points in new clause 4, and we seek to address the financial ombudsman scheme in new clause 5. If the Economic Secretary were inclined to accept those clauses, we would argue that it would be unnecessary to have clause 72, unless he has some other examples. One point on which there has been genuine progress is our concern that clause 65, as it then was, could be used to amend protections in the Bill. I tabled an amendment to change that, and now the Government have done so as well—Government amendment No. 38. We welcome it, and we accept its wording. Amendment No. 2 would make clause 72 a sunset clause. We are not convinced that clause 72 is necessary. Unless the Government have strong reasons for it to remain, it would be helpful if it were removed, which should deal with any transitional provisions. I am keeping my remarks as brief as possible in order to allow the Minister to respond fully. In conclusion, we welcome the progress that we have seen, but we consider it vital for UK banks that we have adequate safeguards in partial property transfers and that we do not allow clause 72 to undermine those safeguards in any respect. We await the Minister's comments with interest.