|Banking Bill - continued
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569. The Impact Assessment was published with the draft Bill.
570. As described in the Impact Assessment, the Government expects this Bill to benefit the UK economy by preventing costs associated with financial instability and loss of confidence in the financial system. The majority of the policies that are implemented in this Bill impose minimal costs. Others reduce costs by simplifying existing processes. The only policy that could impose significant costs is the power to allow pre-funding of the Financial Services Compensation Scheme. The possible costs of this proposal are examined in the Impact Assessment. However, the Government will not use this power until the market circumstances made it appropriate to do so - in which case, the statutory instrument to implement it will be subject to a full consultation and impact assessment.
571. The measures in Parts 1-3 of the Bill will make important changes to the legal and insolvency arrangements for banks operating in the UK and give rise to a number of significant human rights considerations. In particular, the rights under Article 1 Protocol 1 (A1P1) (right to property), Article 6 (right to a fair trial) and, to a much lesser extent, Article 8 (right to respect for private and family life) and Article 14 (right not to be discriminated against) European Convention on Human Rights are engaged.
572. Most significantly, an exercise of the stabilisation powers, for example to transfer compulsorily shares in a distressed bank to a private sector purchaser, will constitute an interference in a persons A1P1 right, which specifies that every natural or legal person is entitled to the peaceful enjoyment of his possessions. 5 This right is not absolute. Instead, a State may interfere in that right, particularly when acting for economic and public policy reasons, where that interference is lawful, proportionate and justified in the public interest.
3 Three classes of persons may be considered victims of an exercise of the stabilisation powers: (i) In the case of share transfers, the victims will be the former shareholders in the distressed bank whose shares will be transferred compulsorily (expropriated) from the shareholders. (ii) In the case of property transfers, the victim will be the distressed bank from whom property etc will be expropriated. (iii) Creditors and other third parties may also be victims, for example, if they have their contractual rights interfered with if they have certain contractual rights interfered with.
573. The Government is of the view that the substantive limitations on the exercise of the stabilisation powers and the procedural steps the Authorities are obliged to take before exercising the stabilisation powers will ensure that the stabilisation powers are only used where there are significant and legitimate public interest justifications for doing so (for example, the public interests in protecting financial stability, and the protection of depositors). The Government therefore considers that any interference with Convention rights will be for a legitimate aim. There are in addition a number of safeguards in the Bill to ensure that any interference with Convention rights is proportionate. In particular, provision is made in the Bill for compensation to be paid for compensatable interferences in property rights arising as a result of an exercise of the stabilisation powers. 6
574. The exercise of the powers conferred by Parts 1-3 may also engage Article 6 (for example, the determination of compensation constitutes a determination of a civil right for Article 6 purposes). The Government is content that the procedural safeguards in place satisfy the fair trial requirements of that Article.
575. Parts 4-7 of the Bill also engage A1P1, Article 6, Article 8 and Article 14 ECHR. However, the Government is content that the provisions of the Bill are compatible or can be exercised in a way that is compatible with Convention rights.
ATMs - Automated Teller Machines
Bacs - Bankers Automated Clearing Services
BAO - Bank Administration Order
BCA - Bank Charter Act 1844
BCD - Banking Consolidation Directive
BERR - Department for Business, Enterprise and Regulatory Reform
BIS - Bank for International Settlements
BSPA/ SPA - Banking (Special Provisions) Act 2008
CHAPS - Clearing House Automated Payment System
CDDA - Company Directors Disqualification Act 1986
CPSS - Committee on Payment and Settlement Systems
ECA - European Communities Act 1972
ECB - European Central Bank
ECHR - European Convention on Human Rights
EA - Enterprise Act 2002
FSA - Financial Services Authority
FSCS -Financial Services Compensation Scheme
FSC - Financial Stability Committee
FSMA - Financial Services and Markets Act 2000
HMRC - Her Majestys Revenue and Customs
HMT - Her Majestys Treasury
MPC - Monetary Policy Committee
NLA - National Loans Act
NLF - National Loans Fund
RTGSS - Real Time Gross Settlement System
SFD - Settlement Finality Directive
SRA - Special Resolution Authority
SRR - Special Resolution Regime
TARP - Troubled Asset Recovery Program
The Tripartite/ The Authorities - The Treasury, FSA and Bank of England
The 1845 legislation - Bank Notes (Scotland) Act 1845, the Bankers (Ireland) Act 1845 and the Bankers (Northern Ireland) Act 1928
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|Prepared: 5 December 2008