My Lords, first, I declare an interest as a commissioner of the Guernsey Financial Services Commission. I will raise an issue which relates, as far as possible, to the territory being addressed right now: what will be the position of the banks in Crown dependencies of the UK under the new arrangements for ring-fenced banks? I have made inquiries of the Financial Secretary and got an answer. However, I have some reservations that the answer will not work very well. An issue analogous to the comment about foreign banks in London is that most of the banks in the Crown dependencies are not branches but subsidiaries. The proposal is for branches to be within the ring-fence and not subsidiaries. However,
there is little incentive for banks to convert from subsidiaries to branches to come within the ring-fence. At the heart of this is an issue of UK interest in that those banks mostly effectively gather deposits that are lent to London, and are in some senses merely a legal fiction. Therefore if they will be within the ring-fence and will all have to convert to being branches, there is a strong practical case for including them within the UK deposit insurance scheme. If not, the banks in the Crown dependencies will stay as subsidiaries in the main, they will be outside the ring-fence, and there will be a decline in the deposits they upstream to the UK partly for regulatory reasons and partly because they will not be a subsidiary of the ring-fenced entity. I ask the Minister to think again about the precise arrangements regarding ring-fencing for the Crown dependencies.