Financial Services Bill

Debate between Baroness Kramer and Lord Myners

Tuesday 10th July 2012 Lords Chamber

[Baroness Kramer]

My Lords, I am very much in favour of scrutiny by this House. I cannot pretend to be an expert either on the different varieties of orders or on the different measurements and tools that the FPC might introduce, but I would be concerned about a mechanism in this House that enabled tools to be amended. Although we have some experts, the capacity to understand the internal workings of a tool with sufficient precision to be able to introduce an amendment to a ratio strikes me as not the particular skill of a legislature or this House. We can raise questions about it or require that it be dismissed because the Government have not sufficiently made their case, but to amend it is not a skill with which we are particularly equipped.

For that reason, and with great respect to the House, it seems to me that the capacity for amendment is inappropriate in this case. The capacity to force the Government to make their case and to judge on that case is entirely appropriate, but not the capacity to substitute; that worries me.

[Lord Myners]

My Lords, I have considerable sympathy with the amendment. I declare my interest as a former member of the court from 2004 to 2008. I fully support the creation of the Financial Policy Committee—I think that it will become the most important committee in the Bank—but I am deeply anxious about the governance of the Bank and the lack of appropriate oversight from the court, the oversight committee as envisaged or, indeed, Parliament.

The Minister is in many ways the architect of this restructuring of regulation, as part of a project which he led for the Opposition, having ceased to work in the Treasury. I understand his thinking in evolving the proposals, but events have moved on. In the light of what we now know about the Bank of England, we must ask whether it is still right to put so much authority in the hands of the Bank without appropriate accountability.

When I was a member of the court, I sat in on a meeting of the Financial Stability Committee. That would have been in 2006 or 2007. At that meeting, one of the governors proposed that as a mechanism to cope with the crisis, the Bank should buy half a dozen or a dozen bicycles in order that members of the Bank could move swiftly and anonymously around the City. That tells us a huge amount about where the Bank sits in terms of its understanding of the complexity of financial markets. Some of the things that we have seen over the past few weeks have simply raised more questions about the wisdom of putting so much power in the hands of the Bank.

We are also about to have a piece of legislation to implement the recommendations of the Independent Commission on Banking. Having been intimately involved in the Government’s response to the banking crisis from 2008 onwards, I would point out that the losses incurred in the British banking system—at HBOS, Lloyds and Royal Bank of Scotland—largely occurred within the ring-fence. The losses of $5 billion which we have seen recently reported in London from JP Morgan took place within the ring-fence as envisaged by the Vickers report. The noble Baroness, Lady Kramer, looks somewhat sceptical about that. Those losses occurred within the treasury operations, or the investment office, of JP Morgan, and as such lay within the ring-fence rather than outside it. In being sympathetic to this amendment, and hoping that at the very least the Minister will go away and reflect on that, I think that the Minister will have to rethink some of the fundamental building blocks of this legislation—in particular the great powers and responsibilities that we are placing in the hands of the Bank of England—before we reach its next stage. These are powers and responsibilities that the Bank of England has historically not had and, in my judgment, is still not equipped to exercise.

If we are to do this then, at the very minimum, we must ensure that the Bank and its various agencies, including the Financial Policy Committee, are properly accountable to a court which is clear about its functions and clear about who it reports to. As a former member of the court I know that it was never clear who we reported to. It must also be clear about its parliamentary accountability.

Economy: Credit Easing Policy

Debate between Baroness Kramer and Lord Myners

Thursday 26th April 2012 Lords Chamber

[Lord Myners]

My Lords—

[Baroness Kramer]

My Lords—

Al-Qaida (Asset-Freezing) Regulations 2011

Debate between Baroness Kramer and Lord Myners

Wednesday 9th November 2011 Grand Committee

[Baroness Kramer]

My Lords, I have no objection to the regulations and I will take only a few moments of the Committee's time to seek clarification on a couple of points. From the perspective of my colleagues, it is clearly necessary to tackle not only terror but the funding of terror. This legislation is part of that overall approach. We are pleased to see the strengthening of due process and the sunset clauses that are part of the regulations.

I will ask a couple of very small questions. Will the Minister clarify that no practical implications of any significance will follow from separating the al-Qaeda regulations from those applying to the Taliban? Is this just a measure to fall into line with EU and UN resolutions? In moving from the umbrella of one set of regulations to the umbrella of another, will the process be seamless? Is there any possibility of a slip between the two? Obviously, we would not wish to see such an opportunity exploited.

My second question is perhaps of more interest to the wider community. Will the Minister give us some reassurance that these regulations will not put an additional burden on ordinary people? He will be very aware that the combination of anti-money laundering and anti-terror legislation has put a significant burden of cost on both individuals and businesses, not least when it comes to the long delays in fund transfers that the banks explain by saying that it is necessary for them to go through security procedures and checks, during which time the banks seem to hold on to the money and benefit from the interest rather than either party to the transaction. One must live with measures such as that, but we would all find it unfortunate to see any increase in the burden. I would appreciate reassurance on those points, but we support the regulations.

[Lord Myners]

My Lords, like the noble Baroness, Lady Kramer, I have no issues of principle with this legislation. However, I would like the Minister's help on a couple of issues. The Explanatory Memorandum states that policy in the area of sanctions needs to be effective, proportionate and dissuasive. I would like the Minister to address Regulation 14(1)(a) and (b) and say whether the levels at which the penalties are set can truly be described as “dissuasive”. Given the consequences of terrorist action, the proposed penalties appear to be quite modest. I would also like the Minister to explain the level 5 standard referred to in Regulation 14(2).

I would also like to know—this is a very important issue—why a proposed breach of Regulation 8(3) by a financial institution does not incur a criminal penalty. Why are financial institutions exempted from criminal penalties while individuals are subject to them?

I turn to Regulation 9(4)(b). Can the Minister explain the criteria employed by HMT in determining an appropriate publicity strategy, and how the licences will be publicised under the regulations—specifically, where and when?

Under Regulation 20(1), how many licences are currently issued under Regulation 7 of the Al-Qaida and Taliban (Asset-Freezing) Regulations 2010, and how many have been issued under the 2010 regulations since they were passed by Parliament?

Finally, it would be helpful if the Minister would confirm that legal aid will be made available to individuals who are subject to freezing orders. The consequences of these freezing orders are draconian and chilling. It is incumbent upon us to ensure that anyone threatened with the consequences of having their assets frozen has access to appropriate legal advice. Will the Minister confirm that that will continue to qualify for legal aid?