Financial Services (Banking Reform) Bill
Debate between Lord Blackwell and Lord Flight(11 years, 1 month ago)
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Lord Flight
My Lords, I can see something like a bail-in scheme working satisfactorily with regard to a bank the size of the Co-op Bank, for example, and indeed the proposals to bondholders are effectively a do-it-yourself bail-in scheme. However, in the unlikely event that it was necessary, if a bank as large as Lloyds Bank were in trouble, I find it difficult to believe that the situation could be resolved by a bail-in scheme. This is in part for the reasons that others have given, that the knock-on effects to the rest of the banking system are too large. So while the bail-in system makes great sense, I do not think it can be a sort of universal solvent to the possible need for taxpayer money to be used when huge banks are in trouble, or for so long as we have huge banks.
Lord Blackwell (Con)
My Lords, in asking Parliament to approve these powers, I wonder if my noble friend could set out what protection he believes is built into this legislation for the inappropriate use of these powers. I understand why having a regime in place that allows a speedy resolution to be enacted is desirable. If that is to come about, it needs to happen very quickly and efficiently when the circumstances call for it. The draft legislation sets out the conditions under which those powers might be exercised. The new Section 8A of Schedule 2 talks about appropriate conditions protecting,
“the stability of the financial systems … the maintenance of public confidence … the protection of depositors … the protection of client assets”,
but those conditions are obviously subject to judgment and interpretation, and it would be helpful to understand those parties who might be affected by the exercise of those powers, not least of course shareholders and bondholders, and whether there is any protection for them against the inappropriate use of those powers without getting into some lengthy and time-delaying process of judicial review.