Mr.
Breed: Will the Minister clarify two brief points? The use
of the word “share” seems to indicate that information
will be provided on a reciprocal basis. Conversely, can the Minister
confirm that should it not be reciprocal—in other words, if the
other country’s FSA, Treasury or similar organisation were not
willing to provide reciprocal information to us—frankly, we
would not provide information to them? Sharing means genuinely sharing
things, not just our side disclosing to someone
else. Secondly,
can the Minister confirm whether disclosure would include the personal
details of individual organisations and persons in respect of payments
that may or may not have been made to them through the system on which
information is being
shared?
Mr.
Bone: As regards the Government amendment on overriding
confidentiality, I would like to reinforce the point that the hon.
Member for South-East Cornwall made. I do not think that information
that is being shared under subsection (4)(c) with an overseas authority
similar to the Bank of England, the FSA or the Treasury should be
shared unless there is a similar agreement from that organisation. I
would like the Minister to give an assurance that information will be
shared only if we have that co-operation from
overseas.
Ian
Pearson: I am happy to explain that, in normal
circumstances, we expect there to be reciprocal arrangements with the
international partners with which we co-operate. As I mentioned when
introducing the amendment, we are talking about the European Central
Bank and the Bank for International Settlements. We think that it is
right to have such arrangements with them. If we think that it is
appropriate in the interests of financial stability to share
information, even if the arrangements are not reciprocal, we should do
so, because we all share an interest in financial stability. However, I
have absolutely no reason to believe that the European Central Bank or
the Bank for International Settlements would not want to share with us
information that they believed was important to global financial
stability.
Mr.
Bone: We accept the point about the European Central Bank
and the Bank for International Settlements, but paragraph (c) refers to
other Governments and organisations in other countries. It is a blanket
thing. Are the Government saying that we will share this information
regardless, or will we require the other country to participate as well
and share information with
us?
Ian
Pearson: It is important to be clear that we are talking
about a narrow and exceptional set of circumstances. If the Bank of
England has information that it believes is of importance to the
stability of the financial system, the right and responsible thing to
do is to share that information. Likewise, if an authority from another
country was in a similar position, we would expect it to want to share
that information as a matter of
course. On
the question of sharing personal details, I want to repeat that the
Bank of England is subject to the Data Protection Act and must abide by
data sharing principles which confer particular protections with regard
to personal information. It must also act in accordance with its
obligations under the Human Rights Act, particularly article 8, and
have regard to the right of protection of private and family life.
There are a lot of safeguards there and in the very unlikely
eventuality that information which threatens the financial stability of
the system comes to the attention of the Bank, the responsible thing to
do is to share that with our international
partners. Amendment
agreed
to. Clause
190, as amended, ordered to stand part of the
Bill.
Clause
191Pretending
to be
recognised Question
proposed, That the clause stand part of the
Bill.
Mr.
Gauke: The clause states that it is an offence to pretend
to be recognised under these provisions. If I remember correctly, the
Financial Services and Markets Act 2000 has similar provisions. I do
not know whether the Minister is in a position to tell us how
frequently prosecutions have been brought under those provisions. I
know that there have been some and in those circumstances they tend to
be very much at the retail end. Given that participants in inter-bank
payment systems will be banks and sophisticated institutions, does the
Minister think it necessary to do this and to have this
provision? Secondly,
will a central list of recognised inter-bank payment systems be
available on the Bank of England website, in the way that there is a
list of authorised entities on the FSA website? There is a legitimate
point about wanting to make it clear which entities are recognised and
where participants could get some sort of regulatory protection. Does
the Minister intend to have such a list? In those circumstances it
would not really be necessary to have this provision. I do not see that
it does any great harm, but I am not sure that it adds to the efficacy
of the provisions we are debating
today.
Ian
Pearson: This is yet another backstop. I perfectly accept
the logic of the hon. Gentleman’s argument. It is not the policy
intention that any value should be attached
to a payment system being recognised as such. However, simply to deter
operators of payment systems from trying to exploit the new framework
in such a way it is necessary to impose a criminal offence on anyone
who wilfully misrepresents a payment system as being recognised when it
is not. It is highly unlikely that someone would want to do that, but I
am advised that it is helpful to have a deterrent there. That is what
the clause
does. Question
put and agreed
to. Clause
191 ordered to stand part of the
Bill. Clause
192 ordered to stand part of the
Bill.
Clause
193Overview Question
proposed, That the clause stand part of the
Bill. 6
pm
The
Exchequer Secretary to the Treasury (Angela Eagle): I wish
to spend a little time setting out the broad structure and intent of
part 6 of the Bill, and then I will not make a habit of leaping up to
speak on clause stand part debates unless I have to.
Clause 193
provides an overview of part 6, which repeals and replaces certain
provisions regarding the commercial issuance of banknotes in Scotland
and Northern Ireland. Before we discuss the details of clauses in part
6, it might help the Committee if I set out the background. The
issuance of national banknotes is usually a function undertaken by the
central bank, which in the UK is the Bank of England. With the
exception of Hong Kong, the UK is highly unusual in allowing a number
of commercial banks to issue their own banknotes. The right to issue is
set out in the Bank Notes (Scotland) Act 1845, the Bankers (Ireland)
Act 1845 and the Bankers (Northern Ireland) Act
1928—for ease I shall refer to them in future discussions on
part 6 as “the current legislation”. Although 1845 might
not seem all that current, we are in the process of updating it in part
6 of the
Bill. The
provisions in part 6 update, modernise and strengthen the current
regime for note issue, which dates back, as I just said, more than 160
years. Clearly, the world today is a very different place from when the
legislation was first enacted, so I should like to take the opportunity
to discuss some of the history of banknote issuance in the UK, to
ensure that our future debates are informed of the
context. The
Bank Charter Act 1844 prohibited any new banks in England and Wales
from issuing banknotes and barred existing note-issuing banks from
expanding their issue. The 1845 legislation in Scotland and Ireland
made similar provisions in respect of banks in those nations. At the
time, 21 banks applied to become certified to continue issuing
banknotes in Scotland and Northern Ireland. That number has decreased
over time through mergers, insolvency or by banks choosing to stop
issuing, so a total of seven issuing banks remain. Those seven banks
are currently authorised to issue banknotes and will continue to be
authorised to do so with the commencement of part 6, provided that they
abide by the requirements placed on them under the provisions of this
part.
Stewart
Hosie: It was my understanding that banks would continue
to be able to issue, but that there would be a higher bar should a new
bank emerge and say, “I want to issue a banknote”, which
is highly unlikely. However, a question emerges from that: if the
Lloyds TSB-HBOS merger goes ahead, would the Bank of Scotland part of
the new organisation continue to be an authorised bank under the new
legislation, and therefore entitled to continue to issue
notes?
Angela
Eagle: The answer is that the issuing rights are vested in
the underlying corporate entity. What happens to the issuing rights
depends on the individual circumstances of a takeover. I can assure the
hon. Gentleman that in the specific case of Lloyds TSB and HBOS, the
Bank of Scotland, which is a subsidiary of the latter, is the issuing
bank, and the issuing rights attach to that corporate entity alone. The
change in ownership—in this instance, of Bank of
Scotland—would not mean that a bank would be forced to stop
issuing banknotes, so it continues under the current proposals to be
eligible to issue banknotes. I hope that that reassures
him. I
was discussing the history of the matter—it might seem odd to do
so, but it creates a context for subsequent debate. To reassure the
hon. Gentleman even more, the Government are committed to maintaining
the long-standing tradition of commercial banknote issuance in Scotland
and Northern Ireland and we are not seeking to discourage commercial
issuers of banknotes from continuing the practice. However, our
priority is to ensure that holders of Scottish and Northern Ireland
banknotes have a level of protection similar to the holders of Bank of
England notes, so that in the event that an issuing bank fails, they
can expect to obtain full face value for their notes. This is an
important part of the Government’s commitment to protect
consumers. There is more detail in part 6 on how that is to be
achieved. With
that small history lesson and my reassurance to the hon. Gentleman, I
commend the clause to the
Committee.
Mr.
Gauke: I thank the Minister for her informative
introduction to part 6. There are various issues that we want to
address, not least the issues of backing assets and the balance between
Bank of England notes and other assets. I will address those when we
come to the appropriate
clauses. I
should be grateful at this stage if the Minister would list the
commercial banks that are currently entitled to issue notes. She stated
that the Government are keen to continue to allow commercial banks to
issue notes. We do not disagree with that. It is an historical
curiosity, but there is nothing wrong with historical curiosities. The
Minister will not be surprised to hear a Conservative say that. Will
she elaborate on why the Government are keen to continue to allow that
to
happen? Finally,
I thank the Minister for publishing the draft regulations that relate
to this matter. They will help our debate as we proceed through the
coming
clauses.
Mr.
Bone: I was not expecting to speak on this matter.
However, as I understand it, the Minister said that if I had a Scottish
note issued by the Bank of Scotland and the Bank of Scotland failed, I
would not get my money back. I did not think that that was the
position.
Mr.
Bone: The Minister says that I got that totally wrong. It
would not be the first
time. Was
this legislation brought about because of the current crisis, or was it
planned before that? If something has worked for close on 200 years, it
probably works pretty well and there is no reason to change it for the
sake of changing it. Is there any difference between legislation in
Northern Ireland and Scotland? How many banks in Northern Ireland issue
notes?
Stewart
Hosie: I thank the Minister for her helpful reassurance on
the Bank of Scotland notes. The bulk of my concerns come under the
banking assets debate in clause 203. I put it on the record at this
point that after numerous consultations over the past 15 months or so,
we finally have something that almost works and that the industry by
and large is satisfied
with.
Angela
Eagle: The hon. Member for South-West Hertfordshire asked
me to list the seven remaining banks that have rights of issuance. In
Scotland, they are the Bank of Scotland, which as has been mentioned is
a subsidiary of HBOS; the Clydesdale; and the Royal Bank of Scotland.
In Northern Ireland, they are the Bank of Ireland, First Trust Bank,
the Northern bank and the Ulster
bank. The
hon. Member for Wellingborough asked whether the legislation was
brought about because of the financial crisis that we are living
through. It was not. As the hon. Member for Dundee, East hinted, this
is the end of a process that began in 2005 with consultations that have
been ongoing since then between the Bank of England, the Treasury, the
authorities and the banks that issue to try to bring more reassurance
in the backing assets
issue. The
hon. Member for Wellingborough asked whether current banknotes were in
danger, or were not worth as much as they are meant to represent.
Clearly that is not the case, but some aspects of how the notes are
backed are old-fashioned—they date to 1845—and do not fit
in with current approaches, so they need tightening up. That is what
part 6 will do. There is nothing wrong with the current legislation
that cannot be put right by modernising and refocusing bits of it, and
part 6 seeks to do so. I hope that, with those reassurances, the
Committee will be able to agree that clause 193 should stand part of
the
Bill. Question
put and agreed to.
Clause 193
ordered to stand part of the
Bill. Clause
194 ordered to stand part of the
Bill.
Clause
195“Issue” Question
proposed, That the clause stand part of the
Bill.
Mr.
Gauke: I have a brief query for the Minister. The clause
relates to the definition of “issue”. The explanatory
notes state:
“The
definition ensures that a banknote is regarded as issued once it enters
circulation, even if it enters circulation in error or as a result of
theft.” I
assume that the reason is that a note issued in that way still needs to
be treated as issued to protect the position of noteholders. There
could be a mismatch for the protection of noteholders. Was equivalent
protection provided under the old
regime?
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