Bank of Ireland ( UK ) plc Bill 1

House of Lords

Minutes of Evidence

taken before the

Unopposed Bill Committee

on the

Bank of Ireland (UK) plc Bill

Tuesday 13 December 2011

Before:

LORD BRABAZON OF TARA, Chairman of Committees, with the assistance of his Counsel, MR ALLAN ROBERTS.

MR ALASTAIR LEWIS of SHARPE PRITCHARD

appeared as Parliamentary Agent for the Bill.

There also appeared:

MS SIOBHAN COSKERY, Senior Lawyer, Bank of Ireland Group.

(11 am)

1. THE CHAIRMAN : Welcome to the Unopposed Bill Committee. I am Lord Brabazon, Chairman of Committees, as you probably know. On my right is Allan Roberts, my Counsel. Could I ask you, Mr Lewis, to introduce the Bill and to describe its main provisions?

2. MR LEWIS : Good morning, my Lord. First, may I introduce Siobhan Coskery, who is sitting to my right? She is a senior lawyer at the Bank of Ireland and will swear the Preamble when we have completed the proceedings today.

3. My Lord, the promoters of this Bill are Bank of Ireland (UK) plc, which is a UK-registered public limited company and a subsidiary of the Governor and Company of the Bank of Ireland. I will refer to the former as the UK company and the latter as Gov and Co. The UK company is a bank which is authorised to take deposits in the United Kingdom and is regulated by the Financial Services Authority.

4. This is a single-purpose Bill. It will enable the UK company to issue banknotes in Northern Ireland in place of Gov and Co from a day to be appointed by the UK company.

5. Dealing with the formalities first, the promoters have carried out, through leading counsel, an assessment of the compatibility of the Bill with the European Convention on Human Rights. The relevant Minister, who is the Economic Secretary to the Treasury, has made a report on ECHR compatibility in which she said that she believed that the promoters had undertaken a full assessment and that she had no reason to dispute the conclusion that the Bill is compatible.

6. No petitions were deposited against the Bill in either House and no other government reports have been made in respect of the Bill.

7. Why is a private Bill needed? Until the Financial Services and Markets Act 2000, Parliament dealt with bank Bills on a regular basis, as you probably remember, mainly for the purpose of merging banks or transferring their undertakings. The 2000 Act now allows for mergers and transfers to be authorised by a court process. Indeed, that process has already been used by Gov and Co to transfer a significant part of its UK banking undertaking to the UK company. As the Preamble states, the relevant court order was made in the High Court in October last year. The 2000 Act does not enable the court to sanction the transfer of the statutory right to issue banknotes, which is why a Bill is required. It has to be a Bill in this Parliament, rather than in the Northern Ireland Assembly, because coinage and currency are a subject matter that is reserved for this place.

8. The Bank of England and the Treasury have been kept fully informed of the Bill’s progress and there has been no objection from either. In fact, at this point it is perhaps appropriate to say that the Bank of England is fully supportive of the measure. It is satisfied with the principle of the Bill because it would result in all banknote issuers in the UK being incorporated in the UK. The Bank of England is content with the drafting of the Bill in the form that you have today.

9. By way of background, apart from the Bank of England itself, there are four banks that have the statutory power to issue banknotes in Northern Ireland. They are Gov and Co, Northern Bank, First Trust Bank and Ulster Bank. The right of those banks to continue to issue notes was contained in Part 6 of the Banking Act 2009.

10. The 2009 Act also modernised and updated the relevant legislation relating to the issuing of banknotes generally in both Northern Ireland and Scotland. Under the 2009 Act, a set of regulations has been made by the Treasury and a set of rules by the Bank of England. These rules and regulations make provision about a number of related matters, such as the way in which the notes are printed, stored and taken out of circulation, the amount of backing assets that must be held by the issuing banks and what happens in the event of one of the issuing banks ceasing to issue notes. Needless to say, the UK company will have to comply with all the relevant rules and regulations if it is to become a bank of issue under the Bill.

11. I now turn to the Bill itself and the clauses.

12. Clause 1 deals with citation and commencement. You will note that the main operative provisions will come into force on the appointed day-namely, a day to be appointed by the UK company. The mechanism for doing that is set out in Clause 3.

13. Clause 2 deals with interpretation. You will see that there is a list of statutory provisions contained in the definition of "note issue enactments". These are the existing enactments which govern the issuing of banknotes in Northern Ireland and which will apply to the UK company if the Bill is passed and implemented.

14. Clause 4 is the main operative provision in the Bill. As you will see in paragraphs (a) and (b) of subsection (1), it provides that from the appointed day Gov and Co will cease to be an authorised bank for the purposes of Part 6 of the Banking Act 2009 and the UK company will become an authorised bank, and hence be able to issue banknotes in Northern Ireland.

15. Subsection (1)(c) makes it clear that the statutory status of the UK company as a bank of issue would be on a par with the other three remaining banks of issue in Northern Ireland-and, indeed, the Scottish issuers-by deeming them to be continuing to be able to rely on the right to issue under Section 213 of the 2009 Act.

16. Subsection (2) provides that anything done or indeed not done by Gov and Co under the note issue enactments before the appointed day shall be treated, after the appointed day, as having been done, or not done, by the UK company.

17. Then there are a number of consequential provisions which ensure that the UK company will be subject to all the relevant legislation.

18. The first, in subsection (3), disapplies Section 10 of the Bank Charter Act 1844. That section, which remains in force, provided that only bankers who were lawfully issuing banknotes on 6 May 1844 could continue to do so. While it is patently arguable that Clause 4 of the Bill trumps this ancient provision, the promoters would rather make it certain.

19. Subsection (4) replaces references to Gov and Co in the Bank Notes (Ireland) Act 1864 with references to the UK company, meaning-again, this is belt and braces-that the personal signature of a representative of the bank is not required on every note and that it can instead be done by machine.

20. Subsection (5) ensures that banknotes of Gov and Co in existence on the appointed day are deemed to be banknotes of the UK company and crucially that the UK company will be the person who promises to pay the bearer. Similarly, subsection (6) would transfer ownership of pre-appointment banknotes to the UK company on the appointed day.

21. Finally on Clause 4, subsection (7) would make it clear that nothing in Clause 4 would affect the validity of any banknotes issued before the appointed day by Gov and Co.

22. Clause 5 would disapply certain parts of the rules and regulations that I mentioned earlier and which apply when a bank ceases to issue banknotes. It seems clear to the promoters that those rules and regulations were intended to apply in cases where a bank voluntarily gives up the right to issue without a replacement or in cases where the bank becomes insolvent, rather than when the right to issue passes from one bank to another, as is happening in our case. But it is not 100% clear in the drafting, so the rules and regulations in question make provision about, for example, advertisement, publicity and notification to the Bank of England. This Bill itself has of course been given publicity in accordance with Standing Orders and, as I have mentioned, the Bank of England has been kept fully informed. The Bill will effectively put the UK company in the shoes of Gov and Co as regards notes issued by Gov and Co that remain in circulation after the appointed day, so the position is different from that envisaged by the rules.

23. Clause 6 provides a saving, ensuring that all relevant banking legislation remains applicable to both banks.

24. Clause 7 provides that the Bill extends to Northern Ireland.

25. My Lord, that was all that I was intending to say in opening and presenting the Bill, so if you have any questions we will attempt to answer them.

26. THE CHAIRMAN : Thank you very much. I think that you answered one of the questions that I might have asked, which is what happens to the existing notes in circulation that were issued by the Bank of Ireland. They are going to continue in circulation and presumably will gradually be replaced by a new design or something of that kind.

27. MR LEWIS : Yes. Will they continue to say "Bank of Ireland" on them, Siobhan?

28. MS COSKERY : I think that they will say "Bank of Ireland (UK) plc", but otherwise the aim is to retain confidence in the market, so you will not notice a huge difference.

29. MR LEWIS : I think that the design of the notes was changed relatively recently so that they all have on them a picture of the Bushmills Distillery, which is to the west of Northern Ireland, I think.

30. MS COSKERY : It is in Antrim.

31. MR LEWIS : I think that the intention is to continue with that picture for the time being.

32. MS COSKERY : That is correct.

33. THE CHAIRMAN : Right. How many notes are in circulation? I think that you mentioned this, but who decides how many can be issued by the bank? Who do they have to get permission from, so to speak?

34. MS COSKERY : I think that it is the Bank of England.

35. MR LEWIS : Yes, I believe that it is the Bank of England. The crucial point is that, if the bank wishes to issue notes, it has to have sufficient backing assets.

36. THE CHAIRMAN : With the Bank of England?

37. MR LEWIS : Indeed-approved by the Bank of England, I think, is probably a better way of saying it. Some of the backing assets comprise sterling, as in Bank of England issued sterling. Some of them are securities approved by the Bank of England. I did a little background research into how they managed to keep an equivalent amount of printed Bank of England sterling to back up the assets not just of my clients but of all the other Scottish and Northern Ireland issuers. Apparently they have special banknotes kept in the Bank of England to the other banks’ orders, which are of huge value. There is a single note for one sum of money-it is something like a £500-million note or some ridiculous figure like that. They are called Titans, I believe.

38. THE CHAIRMAN : So what is the circulation roughly at the moment?

39. MR LEWIS : I am afraid that I do not know off the top of my head.

40. THE CHAIRMAN : Is it millions or tens of millions?

41. MR LEWIS : Yes, it is tens of millions, I think.

42. THE CHAIRMAN : We do not see them over here very often. We see Scottish notes.

43. MR LEWIS : Occasionally we see Scottish notes, but I must admit that I have never seen a Northern Ireland note over here, although there is nothing to prevent them from being used, of course.

44. THE CHAIRMAN : As long as you do not take a taxi or something like that.

45. Okay. Well I think that that is just about all. Thank you very much. As you said, before the 2000 Act you would have required quite a lot more legislation but now it is needed only for the issue of notes.

46. MR LEWIS : That is right.

47. THE CHAIRMAN : So this will be it now, presumably.

48. MR LEWIS : This will be it, although I think that there are a few bits and bobs remaining from the actual business transaction following the court order.

49. THE CHAIRMAN : But there will not be any need for any more private Bills.

50. MR LEWIS : No. Under the Bill, the UK company would have to advertise the fact that it was appointing a day. That notice would go in the London Gazette. The bank is expecting to do that in the first quarter of next year.

51. THE CHAIRMAN : Right. Good. Thank you very much. We will move to the formal part, if we may. Can I ask you to prove the Preamble?

MS SIOBHAN COSKERY, Sworn

Examined by MR LEWIS

51. MR LEWIS : Is your name Siobhan Coskery?

( Ms Coskery ) Yes.

52. MR LEWIS : Are you a senior lawyer at the Bank of Ireland?

( Ms Coskery ) Yes.

53. MR LEWIS : Have you read the Preamble to the Bill?

( Ms Coskery ) Yes.

54. MR LEWIS : Is it true?

( Ms Coskery ) Yes.

55. THE CHAIRMAN : Thank you very much indeed. That, I think, concludes our proceedings. I will report the Bill to the House without amendment.

The Committee adjourned at 11.12 am.