Financial Services Bill

My Lords, Amendment 13 concerns the reports published by the Bank of England and the FSA dealing with risks to financial stability. Under Clause 2(2) the Council for Financial Stability must consider any such reports at its next quarterly meeting. I shall leave aside the leisurely approach to risks that this timetable implies. I would hope that if the FSA or the Bank of England produced a report which highlighted serious risks, perhaps imminent risks, the Council for Financial Stability would not sit back and content itself with the fact that a meeting was already scheduled for, say, two months’ time. Clause 2(6) allows the council to meet more often than quarterly and we have to hope that the council would meet when necessary. As I understand it, the shadow council is already meeting more than quarterly. My amendment merely says that the council must publish its response to the risks identified in a report from the FSA or the Bank of England either in the minutes of its meetings or otherwise. The importance of ensuring that the response of the council is visible is that this element of response was clearly absent from the way in which the tripartite authorities operated. I have referred already this evening to the Minister in another place, who said: ""What we are doing through the Council for Financial Stability is formalising arrangements that have already been in existence".—[Official Report, Commons, Financial Services Bill Committee, 8/12/09; col. 5.]" It is clear that the Bank of England’s warnings on excessive debt, as set out in its financial stability review, were not acted upon. It is also true that the Bank did not make a big fuss about it, but the warnings were there, however sotto voce, and the tripartite authorities ignored them. We have to be sure that the Council for Financial Stability does not make that mistake again. When this amendment was debated in another place, the Minister said that it was unnecessary because all this is dealt with in the terms of reference, which will be issued under Clause 1(5), which we debated earlier. I put it to the Minister that that is not an adequate response. The terms of reference are subject to no parliamentary procedure and will say whatever the Treasury wants them to say from time to time. But let us assume that the current draft of the terms of reference represent what the Treasury intend to issue formally if this Bill becomes law. Does it do what my amendment asks for? Perhaps I may read what the terms of reference say at Annex A about minutes. It states: ""Minutes of the quarterly meetings of the Council dealing with strategic matters will be published. These will be the meetings where, amongst other matters, the Bank’s FSR"—" the financial stability report, "the FSA’s" financial risk outlook— ""and the annual report on the"—" Council for Financial Stability— ""will be discussed … A final minute to be published no later than one month after the meeting ... As necessary, minutes will attribute comments to individuals ... Discussion of all matters involving firm-specific or market sensitive issues will not be included in published minutes"." There is absolutely nothing in the terms of reference which requires the minutes to be substantive. Anyone who has experience of boards, whether in the public or the private sector, will be aware that there is a spectrum of minuting practice. At one end, there is the blow-by-blow account of what was discussed. At the other extreme, there is the minimalist school, which records not much more than the headings of any papers discussed, together, where necessary, with the formal decision. Under the terms of reference, the minutes could be anywhere on the spectrum. My amendment seeks to ensure that the minutes contain the response to risks identified by reports which the council considers. These minutes will be a public document and the Government have stressed that they are an important component of transparency. As we have debated earlier today, the Government have claimed that transparency is one of the key features of the new arrangements, but the Bill does not ensure that, in this key area, the council’s response to risks is achieved. I beg to move.