Clause
228Information
Mr.
Breed: I beg to move amendment No. 11, in
clause 228, page 107, line 28, leave
out ‘or in any other
way’. I
suppose that my concerns about the clause are similar to those
expressed by the hon. Member for Fareham about the previous clause, in
the sense that I seek only to remove the last five words from the
clause. The FSA should, quite rightly, have powers to collect and share
information. Those functions are clearly set out in section 165
of the Financial Services and Markets Act.
The
Government have a tendency to add little bits
like “or
in any other
way”, which
serve two purposes. The first is to undermine the basis of the original
authority of the Financial Services and Markets Act. The clause might
just as well say that the FSA can perform its function in any way that
it likes without any reference to the Act. The second is to provide
legislative cover for any actions that might be considered
inappropriate. That justifies the means by the ends. Hence, the assets
of Landsbanki were seized under terrorism
legislation. The
gathering of information from individuals in their homes or places of
work in any way, at any time of the day or night and in any
circumstances, such as breaking into premises, can all be justified by
this legislation. I can see people shaking their heads. We have had a
simple respect for Government, but far too often we have received
assurances that legislation will never be used in such ways.
Regrettably, that was said in the context of animal welfare and
inspectors have totally misused the powers that were
granted.
Angela
Eagle: Will the hon. Gentleman give
way?
Mr.
Breed: In a moment. While I will not press the amendment
to a vote, I think it right to raise these issues. The Minister thinks
she need merely say that of course the FSA will not carry out illegal
acts in the future. There is no evidence from the FSA that the current
powers for it to perform its function under the Financial Services and
Markets Act have been restrictive, have stopped it obtaining the
information it requires or have stopped it from sharing information.
There is no evidence that it requires any such use of the
words “or
in any other
way”. Frankly,
unless the Minister explains to the Committee exactly why this power is
needed or how the FSA has been restricted by the Financial Services and
Markets Act, she will have to justify it to the House if the matter is
raised at a later
stage.
Angela
Eagle: I wanted the hon. Gentleman to give way earlier
because he seemed to be suggesting that the FSA is somehow plotting to
break into premises to gather information. It has perfectly legal ways
of gathering information and does not need to resort to break-ins or
illegal acts. I hope that he will realise that these measures are about
trying to do things legally, not illegally. The FSA is a regulator. A
few weeks ago, people were condemning it for not being effective enough
in its regulation. He is now worried that it will resort to illegal
break-ins to gather information.
Mr.
Breed: Will the Minister give
way?
Angela
Eagle: The hon. Gentleman would not give way to me, but I
will give way to
him.
The
Chairman: Order. Mr.
Breed.
Mr.
Breed: Such means of gathering information will not be
illegal if we pass this measure. That is the problem. They may well be
illegal at present, but in justifying them with the words “in
any other way”, such acts will be perfectly
legal.
Angela
Eagle: The hon. Gentleman must have had rather a long day
because there is no way that “in any other way” means a
whole load of illegal ways. I can reassure him about that. The
standards of behaviour that are legal and are expected of public bodies
do not extend to criminal acts. I hope that that reassures
him. The
clause will place a duty on the FSA to collect information relating to
financial stability. Giving it that duty will be to the benefit of us
all. We are not giving it that duty because it likes to collect
information, but for a particular point to do with the public good.
Subsection (2) confirms that the FSA may perform its function by using
its information-gathering power as in section 165 of the Financial
Services and Markets Act 2000, or in any other way. By removing the
words
“or in any other
way”,
the amendment would
substantially reduce the range of tools available to the FSA for
collecting information on financial stability. As the reference to
section 165—“Authority’s power to require
information”—illustrates,
the FSA has the power to gather information and this
clause ensures that formal powers can be used to gather information on
financial
stability. The
other ways in which the FSA might gather information include general
rules, which could be made under section 138 of the 2000 Act, requiring
reporting by all firms on particular issues—in this case
financial stability—and direct requests to individual firms for
specific information. Firms will tend to comply because of their duties
of general compliance under principle 11 of the Financial Services and
Markets Act handbook. Other tools include section 166 of the 200
Act—“Reports by skilled persons”—and
section 167—“Appointment of persons to carry out general
investigations”. The
words
“or in any other
way”
do not create
unfettered powers for the gathering of information by the FSA; they
merely indicate that the FSA is not required to use section 165; it
could use one of the means that I have just mentioned, or it could rely
on its good relations with the companies that it regulates, in that
they would provide information voluntarily. I am pleased to reassure
the hon. Gentleman that criminal acts will not be
involved. The
amendment would have the unfortunate effect of limiting the
FSA’s powers to gather information on financial stability to its
formal ones. Cutting off all those other avenues would significantly
reduce the FSA’s powers in that regard. The authority would be
constrained in its ability to collect both general and specific
information. It would not be able to make specific requests for
individual items, or make rules on general reporting. In drafting
clause 228, the Government had in mind that the FSA’s ability to
collect information on financial stability should be no less than its
ability to collect other information in pursuit of its general
functions. The amendment would undermine that
intent. I
hope that I have reassured the Committee that the words “in any
other way” do not imply unfettered powers. They do not give the
FSA total power to gather information. Any information that the FSA
might gather under the clause would be collected with due regard to the
principles of proportionality under which the authority operates, and
under the constraints imposed on all public bodies by criminal law. I
would expect the FSA to work constructively with the companies that
it regulates in gathering the information. I hope that I have
reassured the hon. Gentleman that the amendment is not needed and that
it would be detrimental if it were to be in the
Bill.
Mr.
Breed: I am not in any way persuaded—in fact, just
the reverse. No evidence has been given that the FSA has been
restricted by its current ability to secure information. I see no
reason why it should be given extended powers by the use of those
words. I should like to press the amendment to a
vote. Question
put, That the amendment be
made:— The
Committee divided: Ayes 1, Noes
9.
Division
No.
3]
Question
accordingly negatived.
Clause 228
ordered to stand part of the
Bill.
Clause
229Financial
assistance to building
societies Question
proposed, That the clause stand part of the
Bill. 3.30
pm
Mr.
Hoban: I have a quick question for the Minister. The
matter was covered in the Banking (Special Provisions) Act 2008, but it
is covered in this Bill
too. The
building societies are limited in the amount of wholesale funding that
they can use. It was 50 per cent., although the Bill sponsored by my
hon. Friend the Member for Bournemouth, West (Sir John Butterfill)
provided for that to be increased to 75 per cent. I think that the
Banking (Special Provisions) Act said that financial assistance, where
given, should be disregarded for the purposes of calculating the 50 per
cent. limit. Is that still the case in this
Bill?
Angela
Eagle: The clause provides powers for the Treasury to
amend the Building Societies Act 1986, as the hon. Gentleman rightly
pointed out. The purpose of such an amendment would be for building
societies to access financial assistance from central banks or the
Treasury on the same basis as banks. The Building Societies Act
includes a number of provisions that could restrict the ability of
societies to accept emergency lending from central banks or the
Treasury. In
particular, building societies are currently prohibited from granting
floating charges under section 9B of the Act. When seeking emergency
liquidity assistance, financial institutions may have to grant floating
charges over their assets, to provide sufficient security to a central
bank. The Bank of England would typically want to take and rely on
higher-quality collateral, except in urgent or unusual cases, and it is
likely to insist on title transfer collateral or fixed charges over
defined assets. However, in those urgent or unusual cases, it is
important that building societies are also able to offer a floating
charge, as a bank can. The fact that building societies cannot grant
such floating charges means that they are disadvantaged in comparison
with banks when seeking emergency liquidity support. There are two
possible implications. The first option could be that the Bank of
England could offer liquidity assistance without taking any charge,
which would leave the Bank exposed to a lack of security. The
alternative is that the Bank of England may not feel able to offer
liquidity support if it is unable to gain sufficient collateral. Both
outcomes are highly
undesirable. The
prohibition on the granting of floating charges is one of a number of
provisions of the 1986 Act that could prevent effective financial
assistance. Other important
provisions that might need to be modified for this
purpose include lending limits, funding limits and provisions
concerning what has to be in the memorandum of the rules of a society.
Such provisions remain appropriate in most normal circumstances. The
Government support a strong and vibrant building society sector,
separate and distinct from the banking sector, but with regards to the
provision of liquidity assistance, the legislation currently creates
anomalies with potentially serious consequences. The Bank of England
and other central banks, including the European Central Bank, and the
Treasury where appropriate, must be free to provide emergency support
to banks and building societies on an equal basis. That is what the
clause brings
about. The
hon. Gentleman asked about percentage limits. I need to write to him
about that, because I do not have the answer to hand. I hope that he
will accept that I shall do so as soon as
possible. Question
put and agreed
to. Clause
229 ordered to stand part of the Bill.
Clause
230 ordered to stand part of the
Bill.
Clause
231Abolition
for
cheques Question
proposed, That the clause stand part of the
Bill.
Mr.
Hoban: When the Paulson plan was going through the US
Congress, I read with considerable amusement about the number of things
covered by the plan, including excise duties and the importation of
wooden bows and arrows. One assumes that that sort of thing would not
happen in the UK, but clauses 231 and 232 seem to have little bearing
on a Bill that is designed to increase financial stability in the
banking sector. I said in connection with clause 226 that we are
encouraging the Bill to go through at speed, because it aims to tackle
the current financial crisis, but I wonder what role the “Funds
attached rule (Scotland)” and “Financial collateral
arrangements” play in supporting progress in the banking
sector.
The
Chairman: Order. The hon. Gentleman referred to clause
232. He has asked the same question of both clauses. I am perfectly
happy for the Committee to take both of them together if that is
convenient.
Angela
Eagle: I have to admit that the hon. Gentleman probably
has a point with respect to the clause on Scottish cheques. It was
originally unsuccessfully introduced as a private Member’s Bill
in 1999. It is a deregulatory clause which modernises the treatment of
cheques in Scotland and aligns their treatment with the rest of the UK.
The abolition of the “funds attached” rule will mean that
if several cheques are presented simultaneously when there are
insufficient funds to satisfy all of them, the bank will choose which
it can satisfy from the funds available. That could be done in a way
that would do the least damage to the interests of the customer of the
bank while also ensuring that some creditors receive payment. The
current legislation is outdated and can cause problems with the smooth
running of financial transactions by causing delay, expense and
inconvenience for banks and their customers.
The Committee
of Scottish Clearing Bankers estimated in 1999 that the “funds
attached” rule causes expense and inconvenience for
approximately 100,000 bank customers each year. It was also estimated
in 1999 that the retention of the “funds attached” rule
causes Scottish clearing banks an administrative expense of
£270,000 a year. The hon. Gentleman is right about clause 231.
It is a deregulatory clause that accomplishes something that many
people have wanted. It is not controversial. It is within the scope of
the Bill. That is why it is here, but for me to stand here and say that
it has a major bearing on financial stability would probably be pushing
it a bit, if I could put it that way. It is something that many people
have wanted. It benefits consumers in Scotland. It irons out a little
kink in the law. That is why it is here in this part of the Bill. I put
my hands up, but it is still a reasonable thing to
do.
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