My Lords, I am grateful to the noble Lord for having taken so much time to grapple with these extremely technical orders. On the difference between €730,000 of capital and the €125,000 of capital, the reference in the order to €730,000 refers to initial capital while the €125,000 is operating capital. However, the €730,000 figure is accepted across the EU as the slightly arbitrary point at which a firm is potentially significantly important. If I have got that wrong, I will write to him. He raised a bigger point, of course: how can we be sure that, if we are faced with a catastrophic event, we deal with it in a competent manner? One of the challenges here is that, slightly differently from when the noble Lord was an airline pilot or indeed running the Underground, the number of variables that can go wrong or interact with each other in a banking crisis is very high. It is not as though you can plan for 10 eventualities; there will be many more variables than that.
We have tried to put in place a legislative framework that gives us the powers we need; you cannot deal with these crises if you do not have the powers, and that is what the plethora of legislation over the past few years seeks to do. We think that we have an adequate infrastructure—or, rather, a superstructure—in place, with the PRA and the other changes at the Bank and the greater responsibilities that it now has. Secondly, we think that under the governor’s stewardship, as the noble Lord said, the quality of staff of the bank is very high.
The noble Lord pointed to the level of turnover. I think that that is a general concern in the public sector more generally, and has been in the Treasury as well as the Bank. It is fair to say that as far as the Treasury is concerned—I do not know about the Bank—the level of turnover has reduced somewhat over recent years, but it is still pretty high. In reality, that is in the nature
of these institutions: there will be quite a lot of churn among people who are coming into and going out of the public and private sectors in the banking world. However, we think that we have a very high quality of staff.
Of course, one of the challenges which the noble Lord referred to is that although there is a special resolution unit, fewer people work in this area outside a crisis than when there is a crisis, otherwise you would have a huge number of people sitting around doing nothing for a very long time. Therefore the way the Bank and Treasury seek to deal with that problem is, of course, that other people in the institution would be brought in—just as they were at the time of the RBS and Lloyds crisis—to help on resolution.
There is a recent example of where it was not in the end necessary to have the full resolution procedure because the PRA and the Treasury—and in particular the Bank—had worked so closely with the relevant institution. That was the case with the Co-op, which last autumn faced quite severe problems. In the end, it was possible for those problems to be resolved by the Co-op without recourse to the provisions in the Banking Act or the Financial Services Act. However, that was possible in part because it was working with the Bank very closely over a period, and as a result of that it came up with an effective solution.
The noble Lord quite rightly referred to the fact that when you get to a crisis, sometimes you have to act very quickly, which is what happened with RBS. I hope that in future most cases such as that would be more analogous to the Co-op case than to RBS. In the Co-op case, it was clear for a while that there was a difficulty, and over a period of months—not a huge number, but over a period of weeks and a small number of months—options were identified and implemented. If the PRA is doing its work, it will not be taken completely by surprise in the way we were with the banking crisis. Of course, that does not mean that nothing will happen as a surprise. As the noble Lord pointed out, while we hope that the degree of information the PRA gets from the banks is always perfect, it will sometimes be less than perfect. One thinks of crises in the past that have occurred because the bank’s senior management and the compliance people did not know what a rogue member of staff was doing. As we know, that brought the bank down, for example, in the case of Barings. Therefore there will always be a risk.
The noble Lord asked specifically about training and practice exercises, and about how we work with our EU and American partners. There have been a number of training exercises to look at such situations. Scenario planning is obviously part of the role of the special resolution unit, and it does that. We work very closely with our American and European partners to see what lessons we can learn, and to have in place good working relationships and mechanisms to activate if we find that a bank is in real difficulty and that we might need to use the resolution procedures.
If I can say anything about that more formally, I will write to the noble Lord. However, both the Treasury and the Bank are acutely aware of the need to be able
to use the powers they now have in an effective and timely way, and they are working very hard to make sure that they are up to snuff as regards doing that. As I said, the Government have considerable confidence that we have put a legislative process and structure in place that give the Treasury and the Bank the powers that they need and the people and structures internally to ensure that they are properly exercised. This is some way from the extremely important but rather technical amendments that we have been discussing today. I hope that all noble Lords in the Committee will feel that the statutory instruments are necessary and proportionate, and I commend them to the Committee.