Clause
110Role
of FSCS
Question
proposed, That the clause stand part of the
Bill.
Mr.
Hoban: I would like to confirm the purpose of subsection
(2)(a), which says
that “money
may be raised through the imposition of a levy under Part 15 of the
Financial Services and Markets Act in respect of expenditure or
possible expenditure under this section”.
Does
“expenditure” cover only the funds that have been
transferred or other costs that might be incurred as
well?
Ian
Pearson: The clause sets out the role and functions of the
FSCS in relation to a bank insolvency. It provides that the FSCS can
impose a levy, under its powers in part 15 of FSMA, in order to be able
to meet the expenditure under part 2 of the Bill. The word
“expenditure” in subsection (2) covers both the areas
that the hon. Gentleman asked about. I hope that that clarification is
helpful to the Committee.
Question
put and agreed
to. Clause
110 ordered to stand part of the Bill.
Clause
111Transfer
of
accounts Question
proposed, That the clause stand part of the
Bill.
Mr.
Hoban: This is a slightly odd question, but does the
acquirer have to make a payment to recognise the economic value of the
accounts being transferred from the failed bank to a new institution?
Of course, in accounting terms they would be transferred at their book
value, but the acquiring institution will gain economic value from
them, because it has picked up a new raft of current or depositor
accounts and some may be profitable, even in these straitened
times.
Ian
Pearson: My understanding is that that might be the case
but it would be the subject of negotiation and agreement. That has
already occurred in previous instances and it is likely to occur again,
but it will be dependent upon
circumstances.
Mr.
Hoban: Presumably, the profit made from the difference
between the book value and the economic value will be used to offset
the costs incurred by the FSCS.
Ian
Pearson: That is my understanding of the
situation.
Question
put and agreed to.
Clause 111
ordered to stand part of the Bill.
Clause
112Rules
Ian
Pearson: I beg to move amendment No. 160, in
clause 112, page 59, line 1, leave
out subsection (2) and
insert— ‘(2) After
subsection (1)
insert— “(1A)
Rules may also be made for the purpose of giving effect to Part 2 of
the Banking Act 2008 (bank insolvency orders); and rules for that
purpose shall be
made— (a) in relation to
England and Wales, by the Lord Chancellor with the concurrence
of— (i) the Treasury,
and (ii) in the case of rules
that affect court procedure, the Lord Chief Justice,
or (b) in relation to Scotland,
by the
Treasury.”’.
The
Chairman: With this it will be convenient to discuss
Government amendments Nos. 161, 162, 175 and
176.
Ian
Pearson: The amendments concern the secondary legislation
that will set out rules for the bank insolvency procedure, the BIP, and
the bank administration procedure, the BAP. Government amendments Nos.
160 to 162 mean that the general BIP rules for England and
Wales—those that do not affect court procedure—will be
made with the concurrence of the Treasury, rather then the Secretary of
State for Business, Enterprise and Regulatory Reform. Rules that affect
court procedure will be drawn up with the concurrence of the Lord Chief
Justice, as usual. The Treasury, rather than the Secretary of State,
will make the rules for Scotland. Government amendments Nos. 175 and
176 make the same provision for the
BAP. We
have done this because the Treasury rather than the Secretary of State
for BERR takes policy responsibility for banks. The BIP and BAP have
been designed with specific objectives, which have been set out by the
Treasury. It is right that the Treasury should take responsibility for
agreeing the rules to make the procedures function in pursuit of those
objectives. It is likely that the rules for the BIP and BAP will draw
on existing insolvency rules. Throughout, the Government’s
approach has been to ensure that we follow existing insolvency
provisions as closely as possible, as I have previously outlined to the
hon. Member for Gosport. In considering the rules for the BIP or BAP,
the Treasury will draw on the expertise of BERR, the Insolvency Service
and others in the practitioner
community.
Sir
Peter Viggers: It is recognised that it will be necessary
to have insolvency rules to supplement and change the Insolvency Rules
1986, which themselves are a gloss on the Insolvency Act 1986. This is
obviously important. Will the Minister tell us when we can see these
new insolvency rules, because a firm and early timetable would be
reassuring for practitioners?
Ian
Pearson: I do not have a specific time scale in mind. My
understanding is that we have done a lot of work on these rules and
they are almost ready. That should give the hon. Gentleman some
reassurance.
Sir
Peter Viggers: I am much
obliged. Amendment
agreed to.
Amendments
made: No. 161, in clause 112, page 59, line 2, at end
insert— ‘(2A) In subsection
(2)— (a) after
“subsection (1),” insert
“(1A)”; (b) in
paragraph (b), after “Secretary of State” insert
“or the
Treasury”.’. No.
162, in
clause 112, page 59, line 11, at
end insert— ‘(5) In
subsection (5), after “the Secretary of State” insert
“or the
Treasury”. (6) In
paragraph 27 of Schedule 8 to the Insolvency Act 1986 (provisions
capable of inclusion in company insolvency rules), after
“Secretary of State” insert “or the
Treasury”.’.—[Ian
Pearson.] Clause
112, as amended, ordered to stand part of the
Bill.
Clauses
113 and 114 ordered to stand part of the
Bill.
Clause
115Evidence Question
proposed, That the clause stand part of the
Bill.
The
Chairman: With this it will be convenient to consider
Government new clause
19— Evidence.
Ian
Pearson: New clause 19 is a straightforward amendment to
correct an omission in the original drafting. Clause 115 deals with the
use in evidence of statements made in the course of insolvency
proceedings. It simply extends existing provisions of the Insolvency
Act 1986 to the bank insolvency procedure. New clause 19 is a technical
Government amendment that simply replicates the provisions of clause
115 for the bank administration
procedure. Question
put and agreed to.
Clause115
ordered to stand part of the
Bill. Clause116
ordered to stand part of the
Bill.
Clause
117Building
Societies Question
proposed, That the clause stand part of the
Bill.
Sir
Peter Viggers: The clause gives the Treasury the power to
apply the bank insolvency procedure to building societies, with any
necessary modifications. This will be achieved by secondary legislation
using the affirmative procedure. Clause 118 that follows relates to
credit unions. I hesitate to risk your wrath, Mr. Gale, but
could the Minister respond in terms of credit unions as well as
building societies? What is the Government’s intention with
regard to bringing forward secondary legislation by way of affirmative
procedure? Do the Government intend a short time frame or does this
provision give the Government power to introduce the secondary
legislation in due course?
The
Chairman: I think my wrath might be risked on that. Would
the Minister like to respond to
both? 2.30
pm
Ian
Pearson: Yes, Mr. Gale. In line with our
objectives of protecting all depositors and maintaining financial
stability, clause 117 gives the Treasury a power to extend the
provisions of the BIP to building societies and clause 118 gives it the
power, if necessary, to extend it further to credit unions. We
consulted widely on this issue and extending the special resolution
regime to building societies and credit unions is strongly supported by
stakeholders, including the Building Societies Association. The reason
why detailed provision for applying the BIP to building societies has
not been put on the face of the Bill is that insolvency legislation is
complex and building society and credit unions have their own legal
features, which differ greatly from those of
banks. We believe that
time needs to be taken to ensure that procedures are brought forward
that work for building societies and are fit for purpose. The
Government will consult on the necessary regulations, which will be
laid before the House in due course. The hon. Member for Gosport
presses me on when that is likely to be. The best answer I can give is
“soon”. That is not a definite response, but we do not
intend to delay this matter. We want to continue to ensure protection
for depositors, whether they are in banks, building societies or credit
unions. The new insolvency procedures for building societies and credit
unions will be very similar to the provisions in the BIP. That has been
welcomed by
stakeholders. Question
put and agreed
to. Clause
117 ordered to stand part of the
Bill. Clauses
118 and 119 ordered to stand part of the
Bill.
Clause
120Scottish
partnerships Question
proposed, That the clause stand part of the
Bill.
Stewart
Hosie: Obviously the clause will give the Secretary of
State powers to include Scottish partnerships as institutions that
might fail and therefore be required to be covered by the special
regime and so on. However, I am sure that he knows, because I am sure
that the Accountant in Bankruptcy has already advised the Government,
that if a partnership fails it is dealt with by sequestration rather
than liquidation. That does not appear to be anywhere in the Bill.
Notwithstanding the table of modifications or comments on other pieces
of legislation, which was in a previous clause, the clause does not
appear to take cognisance of the sequestration rules and law that apply
in Scotland in relation to partnerships. So can I have confirmation
that that will be changed, or can the Minister simply confirm that this
new insolvency procedure will apply with the necessary modifications as
per the previous table which describes the bits of legislation and how
they will now be interpreted?
Ian
Pearson: Following a helpful brief conversation that I had
with the hon. Gentleman earlier, I have done a limited amount of
checking. We are aware of the points that he makes. It is our intention
that regulations made under clause 120 will reflect the legal terms and
practices that are used in Scotland. We are aware of the situation and
will endeavour to ensure that the legislation is fit for
purpose. Question
put and agreed
to. Clause
120 ordered to stand part of the
Bill. Clause
121 ordered to stand part of the
Bill.
Clause
122Consequential
provision Amendment
made: No. 14, in
clause 122, page 61, line 26,
leave out ‘and an Act of the Scottish
Parliament’.—[Ian
Pearson.] Clause
122, as amended, ordered to stand part of the
Bill. Further
consideration adjourned.—[Mr.
Blizzard.] Adjourned
accordingly at twenty-six minutes to Three o’clock
till Tuesday 18 November at half-past Ten
o’clock.
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