Financial Services Bill

Lord Flight Excerpts

Wednesday 5th December 2012 Lords Chamber

[Lord Eatwell]

My Lords, I am very grateful to the noble Lord for having clarified some obscurities in the Bill that arose from the use of the generic term “the Bank” to refer sometimes to the court and sometimes to the executive. However, the noble Lord has just said something which has disturbed me. He said that, for clarification, when the term “Bank” is used, this does not necessarily mean the executive; it may mean the court. It seemed to me that he was acknowledging that an uncertainty remained. Perhaps I misheard. I should be very happy if I did, because the sort of clarification that he has set out is very welcome.

[Lord Flight]

My Lords, there is one area in this territory on which I would appreciate some clarity. The principle of returning the oversight of banks to the central Bank, which I think has been widely supported, has, to my mind, always been about the concept that the central Bank ought to be in regular contact with banks, that it ought to know what is going on and that it ought to be able to head off practices that are clearly potentially damaging to the banking system. However, I am not clear how the staff of the Bank and the staff of the PRA will interact. One would have thought that quite often it would be the staff of the Bank who were having regular dialogue with banks and learning what was going on and what might be going wrong, but it is the PRA—to some extent a sort of cuckoo plopped into the middle of the Bank of England—that essentially has the legal tasks. Therefore, we have clarification of the definitions of “Bank” and “court” but below what I call the executive level I am still not entirely clear where the staff of the Bank or the staff of the PRA will be carrying out supervisory activities.

[Lord Sassoon]

My Lords, in response to the question raised by the noble Lord, Lord Eatwell, as I said at the beginning of my remarks, the Court of Directors is the governing body of the Bank, so ultimately it is for the court to decide who takes what decisions and which decisions should be for the Bank. In the legislation, “the Bank” certainly does not mean the Bank executive; it means the Bank of England. Therefore, it is always for the Court of Directors, just as it is for the governing body of any corporate institution, to decide who takes what decisions and, if the governing body does not delegate them, it takes them itself. We are making clear through these amendments that there is a certain small category of decisions—one of which was identified by the noble Lord, Lord Eatwell—that is of such importance that it is appropriate to put down for the avoidance of doubt in the legislation that it is the court not the executive that takes those decisions. That is what those amendments do.