It is a great pleasure to welcome the new Minister to these rather long-winded proceedings. I believe we started on this Bill back in February, but he should not worry, as this is shortly to be followed by the banking reform Bill and possibly even a banking standards Bill—to be determined—so we will probably have plenty more opportunities to chew over these issues then. It is a little preposterous to have a knife coming down at 7 o’clock, by which time we have to put the Question on 150 or so of these Lords amendments. That gives us about 25 seconds per amendment [Interruption.] I will get on with it; I lost about a dozen amendments just then.
That is why we have tabled several amendments to those Lords amendments—you will be impressed with that, Mr Deputy Speaker—and I wish briefly to explain why we have done so. The first Lords amendment that we are seeking to amend is Lords amendment 3, which, as all hon. Members here know, deals with the creation of an oversight committee within the Bank of England as a sort of subset of the court of directors, where it is to have a reviewing and, supposedly, a scrutinising role. There is a problem: the oversight committee has a series of responsibilities, not one of which is set out, in overseeing what the Bank of England does. The committee has a set of responsibilities to monitor, to review procedures and to conduct performance reviews, but all of that is retrospective—it looks backwards, not forwards. May I gently suggest to the Minister that it might be more appropriate if he were to call this a “hindsight committee” rather than an oversight committee, because as things stand I do not think there is a sense in which this is a proper check and balance within the governance of the Bank of England?
Why does that matter? It matters because the Government are giving phenomenal new powers to the Bank of England within our economy as an overarching financial regulator. The Minister says that the PRA is independent and will report to Parliament, but let us be honest: this is a creature of the Bank of England and the Bank will control very much what happens in the regulatory framework. Although we welcome the concession that was made to create an oversight committee, people
have misgivings—we will probably hear about some of them, perhaps from members of the Treasury Committee, in a moment—that there is still a very hierarchical and centralised set of governance structures in the Bank of England.
We therefore need to make sure that this crucial verb “oversee” is included in the oversight committee’s remit. That would help to shift the balance of power between non-executives and executives in the Bank of England framework just that bit more. These are important lessons of governance, certainly from the private sector. While we are moving towards that executive and non-executive balance, it is important that we recognise that the Bank of England is being dragged into the 21st century. If we are taking the opportunity to do that in legislation, making that particular change would be very welcome.
The other amendment we wish to make to Lords amendment 3 relates to crisis management. As I said, the Bill gives massive new powers to the Bank of England, but in a crisis there will be very little time to figure out and design standing orders, or to work out arrangements for who will meet whom and for how decisions can involve the right people. You will recall, Mr Deputy Speaker, how during the global financial crisis crucial decisions affecting billions of pounds of taxpayers’ money and whether people could access the cash machines were made in the space of hours over weekends. In hindsight, it would have been nice to have had a carefully planned set of arrangements, and this legislation needs to learn the lessons from that. We are concerned that the crisis management arrangements are still thin and inadequate. We have suggested that if there is going to be an oversight committee in the Bank of England, the Bill needs to set out explicitly that it is to have a duty to ensure the adequacy and effectiveness of arrangements with the Treasury for crisis management.
There is no role for the new financial conduct authority in the drafting of the arrangements. Apparently it does have a veto, but it is not part of the drafting of that memorandum of understanding. The Government are still resisting proposals to ensure that deputy governors and the chief executive of the FCA can consult directly with the Treasury in circumstances where there might be differences of opinion. Given the import and the size of the FCA, the PRA and the FPC within the Bank, it is important that the deputy governors have an ability and a right to talk to the Treasury, so that everything is not hidden and suppressed within one view of the Governor of the Bank of the England.
There is a very bizarre set of provisions excluding the ability of the memorandum of understanding to make provision about the relationship between the Bank of England and the PRA, which goes to prove that the PRA is very much a creature of the Bank. It also suggests that the Governor will have powers to suppress the voice of the PRA in a crisis. Shockingly, there is no parliamentary approval process for that MOU; no statutory instrument arrangement has been made, as I understand it. The crucial paragraph of the MOU that deals with what happens in the white heat of an emergency simply says, “Oh well, there will be ad hoc or standing committees just to sort these things out.”
That is not good enough. The whole of best practice in preparedness and in emergency and contingency planning would suggest that now is the time for Her Majesty’s Treasury and the Bank of England to sit down, and calmly and methodically work through what would happen in those circumstances. There should be some draft standing orders to pre-empt those scenarios.