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Lord Alexander of Weedon: Before my noble friend--
The Deputy Chairman of Committees (Lord Ampthill): The noble Lord has spoken to the amendment and I must therefore assume that he meant to say that he moved it. Amendment proposed--
Lord Kingsland: I am giving way to the noble Lord, Lord Alexander.
The Deputy Chairman of Committees: The noble Lord cannot give way to the noble Lord, Lord Alexander; he must give way to me, unfortunately. As the noble Lord has spoken at some length to his amendment, an opportunity must be given for others to respond to it. The amendment proposed is at page 216, line 28, insert the words as printed in the supplementary Marshalled List.
Lord Alexander of Weedon: My Lords, after that exchange, I rise with a certain amount of diffidence. Having heard--this has happened to me before--the persuasive way in which my noble friend Lord Kingsland has moved his amendment, I find the arguments, if they could be addressed in a general context as to which authorities should be subject (in the context of appointments to senior positions) to parliamentary control, highly understandable. If any were to be subject to parliamentary control, the noble Lord makes a very strong case that the FSA should be.
Perhaps I may ask the noble Lord, at whatever would be the appropriate stage for him to deal with this, to indicate whether he thinks it would be more appropriate for an appointment of such importance to be considered by a Joint Committee of both Houses of Parliament.
Lord McIntosh of Haringey: The noble Lord, Lord Kingsland, used his opportunity to move the amendment. It had to be moved, and it was moved--even if only by the words of the Deputy Chairman.
Lord Peston: Perhaps I may interrupt my noble friend. I could have sworn that I heard the noble Lord,
Lord Kingsland, move his amendment two hours ago. I understood that he had withdrawn it. I am totally at a loss to know why we are debating it now.
Lord McIntosh of Haringey: It could not have been moved two hours ago. There can only be one amendment before the Committee at a time.
Perhaps the Committee will excuse my brevity if I say that I think the arguments against this amendment in particular were made most effectively by the noble Lord, Lord Alexander, in considering Amendment No. 7. I shall be glad to address the extraneous points raised by the noble Lord, Lord Kingsland, about accountability and parliamentary scrutiny when we come to the appropriate amendments in due course.
Lord Elton: As the opportunity has been provided, will the noble Lord explain to me a little more clearly the status of the body that we are creating? It is described on page 16 of the Explanatory Notes as,
- "an existing company limited by guarantee".
- "The Authority is to continue to be exempt from the requirements of the 1985 Act relating to the use of 'limited' as part of its name"--
Lord McIntosh of Haringey: The Explanatory Notes are correct. It is a company limited by guarantee which is not required to use the word "limited" in its name.
Lord Kingsland: It was my intention in speaking after the noble Lord, Lord Newby, to respond, as the noble Lord did in respect of his amendments, to those noble Lords who spoke to my amendment, and then to withdraw it. The reason I did not complete the procedure was that I felt a frosty wind from behind me and my noble friend Lord Alexander got to his feet. Therefore, before I could say the fatal words, he was up and I was down. I now beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 10 and 11 not moved.]
Lord Saatchi moved Amendment No. 12:
- Page 216, line 32, at end insert--
. The person holding the office of Chief Executive shall be called the "Director General of the Financial Services Authority".").
The noble Lord said: This amendment deals with the concept of renaming the chief executive of the FSA "the director-general of the Financial Services Authority". I need not rehearse the background, as so much has already been said about this. As I said earlier, the Government have argued that a separate chief executive and non-executive chairman would complicate relationships with other bodies and other
Surely the Government cannot have it both ways. If the FSA is a private company, as the Minister has just said it is, it should be subject to normal corporate governance rules. If it is not a private company and is simply a regulator, the man at the top should have the same title as those at the top of all the other regulatory bodies. It really has to be one way or the other. I beg to move.
Lord Borrie: In the light of the withdrawal of the amendment moved by the noble Lord, Lord Newby, this amendment seems quite inappropriate. I should have thought that the noble Lord, Lord Saatchi, would have chosen not to move it. What we have now is the position as described in Schedule 1; namely, a chairman and a governing body where there will be executive and non-executive members who can be called whatever the authority wishes to call them, and I should have thought that it was best left to them. I say that despite the fact that I have a certain affection for the title "director-general". However, I do not think that it is appropriate or necessary to have this amendment in the Bill as it now stands.
Lord Saatchi: If I felt the same way, I should certainly seek to withdraw the amendment right away, but first perhaps I may hear what views there are.
Lord Stewartby: I shall speak only briefly to the amendment because the arguments have been deployed in relation to the previous group. My particular concern regarding the amendment of the noble Lord, Lord Newby, was the introduction of the term "chief executive", because it carries with it the implication that there can be no higher executive authority. If there were to be a director-general, I should be much happier. My main concern is that we should not introduce the term "chief executive". If the roles are separated, I hope that the authority will not use the term "chief executive", with its implication that there is a chairman who is not executive in any sense.
Lord McIntosh of Haringey: I honestly do not see the point of this amendment. It does not imply a splitting of the roles of the chairman and chief executive, which is what we debated for two hours--quite properly and quite rightly. But the question of the actual title, whether it is "chairman" or "director-general", seems to me irrelevant. If there is no implication for the nature of the role, I would say that Pope is doubly right:
Lord Saatchi: I moved the amendment in the context of seeking to deal with the general structure at the top of the FSA. I am sure that this is an issue to which we shall return on Report. At this stage, I beg leave to withdraw the moment.
Amendment, by leave, withdrawn.
"For forms of government let fools contest;
Whate'er is best administered is best"
I hope that the noble Lord will not pursue his amendment. There is no evidence of any dissatisfaction with the existing title. I believe that the amendment would be change for change's sake.
6 p.m.
Lord Sharman moved Amendment No. 13:
- Page 216, line 32, at end insert--
.--(1) In this paragraph "the chairman" means the chairman of the Authority appointed under paragraph 2(1)(a) above.
(2) The chairman shall at least twice in every calendar year consult the Governor of the Bank of England in relation to those matters affecting the general duties of the Authority under this Act.").
The noble Lord said: I must first declare an interest as a paid adviser to a firm which would be regarded as a practitioner under the Bill. In moving Amendment No. 13 I should like to speak also to Amendments Nos. 52 to 57. All the amendments deal with systemic risk. I have been encouraged by a number of references to the need for the Financial Services Authority to deal with catastrophe. I have in mind the observation of the noble Lord, Lord Kingsland, that at the moment the authority would not have that power. The amendment seeks to address the issue.
The migration of supervisory powers from the Bank of England to the FSA poses a number of questions regarding the role and powers of the authority to deal with systemic risk to the financial sector as defined in the Bill. Systemic risk to the financial system could be caused by the failure of a single institution, triggering subsequent failures by domino effect, or through a problem of infrastructure--perhaps the failure of a major clearing bank which affects the UK payments system as a whole.
The issue is whether under the Bill the FSA should have the power to deal with systemic risk. There is at present a lack of clarity. One sees the Bank of England as lender of first resort in that it alone can provide liquidity to the system. But it also remains the lender of last resort in the case of systemic risk since, as the central bank, it is the only institution able to issue money or put value into the system. In the past the Bank's powers of intervention to bale out failing institutions have been used sparingly, the prevailing rule being that a private sector solution is to be preferred in all cases involving individual institutions. But the standard to which that power is deployed also varies over time, as does the definition of "systemic risk".
If we look back awhile, in the case of Johnson Matthey the Bank of England baled it out because, as one of the five gold banks at the time, it was felt that there was a systemic risk. In the case of Barings, the failure was considered more a risk to reputation than a systemic risk and there was no intervention. It is also true that the Bank will intervene only when solvent institutions are in difficulties because of lack of asset
There is an issue with regard to the interaction between the Bank of England, the FSA and overseas authorities in that each body seeks to protect its own constituency or consumers in the event of failure. Regulators have regularly used the college system as a means of communication between regulatory institutions. BCCI is an example of where that arrangement worked reasonably well. However, each failure is different and the circumstances which led to the rescue of one institution at a particular moment may not necessarily be appropriate or repeated subsequently. At the moment, the Bank of England retains certain powers of intervention in the case of systemic risk, but its management functions have been transferred to the Debt Management Office, a government agency under the Bank of England Act 1998, to which reference has already been made.
As I understand it, under the Bill the powers available to the FSA include the power to compel the provision of information, the power to intervene, the power to participate in insolvency, and the general application of moral pressure on institutions. But it is necessary to raise the game, as it were, and increase awareness of the responsibility for systemic risk. I believe that it is wise to add a general duty under Clause 2 to have regard to the circumstances and risks of individual authorised institutions and the impact of circumstances on the financial system as a whole.
The other amendments deal with the process of regular communication between the Governor of the Bank of England and the chairman and chief executive of the FSA to ensure tighter co-ordination of their respective roles. I believe that it is desirable to clarify the position on the face of the Bill. I beg to move.
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