Banking Standards Joint Committee Contents

12  Fees to meet Treasury expenditure

297. Since the onset of financial crisis, the UK authorities have engaged extensively with a range of international bodies such as the Financial Services Board (FSB) and the Basel Committee on Banking Supervision. The responsibility for doing so is shared between the Financial Services Authority, the Bank of England and HM Treasury. Clause 9 of the draft Bill gives the Treasury a power to direct the Prudential Regulation Authority and the Financial Conduct Authority to levy the financial services industry to pay for the future costs of engaging with international bodies such as the FSB. The policy paper accompanying the draft Bill states that "the detail of the organisations which are relevant to this power, and the detail of what expenses can be recovered, will be set out in secondary legislation".[408]

298. The Royal Bank of Scotland and Legal & General expressed disappointment that detailed explanation or an indication of the size of any increase in the levy had not been provided.[409] The Building Societies Association opposed any material levy affecting its members on the grounds that, because international financial stability risks arose typically from large internationally active banks, any levy should fall entirely or primarily on such banks.[410]

299. Clause 9 of the draft Bill refers to "expenses (including any expenses of a capital nature) that are incurred by the Treasury [...] so far as those expenses are in the opinion of the Treasury attributable to functions of the organisation which relate to financial stability or financial services".[411] It could thus be seen as a means of recovering part of the Treasury's running costs relating to the organisation, such as the pay of a civil servant or the costs of flights to its meetings. Such costs, as with such costs in other government departments, would normally fall to be funded from the Consolidated Fund. The Chancellor of the Exchequer and his officials assured the Commission that the provision would be used to fund the direct costs of subscriptions to institutions such as the FSB, rather than to meet the costs of officials assigned to relevant work. John Kingman also indicated that the amounts involved were not great: the UK's subscription to the FSB was currently set at less than £100,000 a year, although it was likely to increase.[412] The Chancellor of the Exchequer added that "since other regulators in the UK levy for the cost of some of their international activity, including on the same institutions, we think it is perfectly reasonable for the Treasury's subscriptions to some of these organisations to also be paid for by the industry".[413]

300. The Commission accepts the principle that those creating the risks that need to be regulated should bear the costs of regulation, including costs of cooperating with international authorities. If provisions based on Clause 9 are included in the Bill, the Commission considers it essential that the Clause be amended to limit the levy to recovery of subscriptions rather than unspecified expenses, so that the provision cannot be used by a future Government to recover part of the Treasury's running costs, such as the salaries of civil servants involved in this work.

408   HM Treasury, Sound banking: delivering reform, Cm 8453, October 2012, paras 2.61 and 2.62 Back

409   Ev w100; Ev w145 Back

410   Banking reform : delivering stability and supporting a sustainable economy, response by the Building Societies Association (BSA) Back

411   Draft Financial Services (Banking Reform) Bill, Clause 9, new section 410A(2) Back

412   Qq 1138, 1139 Back

413   Q1137 Back

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Prepared 21 December 2012