Financial Services (Banking Reform) Bill

Debate between Lord Eatwell and Lord Brennan

Monday 9th December 2013 Lords Chamber

[Lord Brennan (Lab)]

My Lords, the present amendments fortify Part 4 by creating a comprehensive structure for conduct, standards, licensing and so on. Third Reading is an appropriate time for the Minister to clarify how in this structure directors, including the chairman of a bank, bear responsibility for the fulfilment of Part 4 as regards conduct and standards. Amendment 9 talks about:

“Vetting by relevant authorised persons of candidates for approval”.

The relevant authorised person is the bank. The bank ultimately sets its standards at directorial level, and directors carry a responsibility for it under statute and common law. Therefore I invite the Minister to clarify what, under this system, is the position of the directors and the chairman in terms of the enforcement of this framework for good standards.

[Lord Eatwell]

My Lords, I am glad to see that the introduction of Clause 15 on Report has at last seen the Government take the recommendations of the Parliamentary Commission on Banking Standards seriously in this matter and introduce these amendments that capture most, though not all, of the recommendations. What we have left, as the noble Lord, Lord Turnbull, has pointed out, is something of a tripartite muddle because we now have three different regimes affecting persons working within banks. I am afraid that this is characteristic of so many parts of this Bill and will need to be sorted out in future.

I would like to ask some questions about Clause 17 which, as was pointed out, brings branches into part of this aspect of regulation. As the House will be aware, in recent months the Prime Minister has significantly weakened Britain’s regulatory protections of its banking system by encouraging the establishment of branches in this country. Previously, the regulatory authorities had strongly discouraged this because they are not then regulated by British regulators but by their home regulator. The Prime Minister has chosen to weaken this protection particularly by encouraging the establishment of Chinese branch banks, which will be regulated by the Chinese authorities.

However, what is particularly interesting about Clause 17 is that it brings some branches possibly within some British regulatory ambit. I say possibly because according to this clause the Treasury may by order provide that authorised persons falling within any of the descriptions are relevant authorised persons. Relevant authorised persons, for those who have not participated in these debates before, are actually banks. The Treasury can choose which branches will be brought into the ambit. It is enormously important that the branches should be. The noble Lord, Lord Newby, was absolutely right in this respect. I hope the Prime Minister will not undermine this legislation by instructing the Treasury to exclude particular branches, perhaps those emanating from Chinese banks, from this regulation.