Draft Bank Levy (Double Taxation Relief) (SIngle Resolution Fund Levy) Regulations 2016

George Kerevan Excerpts

Thursday 8th December 2016 General Committees

[George Kerevan (East Lothian) (SNP)]

I will not ask for much more, as the hon. Member for Bootle has asked some of the important questions. I have a general point for the Minister that flows from some of them. These regulatory changes have been framed in a period that is about to become redundant. Post-Brexit, we are likely not to be in the single market, and banks will therefore create a whole range of new vehicles and entities with which to conduct business, both from Europe to here and from here to Europe. I press on the Minister the need to keep the regulations under review in the next few years to make sure that there are no loopholes that may be taken advantage of—benignly or otherwise—by the industry, leading to a loss of revenues to the Exchequer. That is important—this is not cut and dried.

Given that the single resolution mechanism will continue in some form or other and that we will have a relationship with it, much in the regulations is premised on use of the existing bank levy. With the bank levy being phased out in favour of the surcharge, will the Minister comment on how that shift in our taxation will affect the regulations?

Thirdly, it is important to underline, without straying too far from the business in hand, that the single resolution mechanism is not, from my point of view or that of many others who have looked at it, fit for purpose. In addition to the setting aside of money for resolution, the main resolution mechanism is bailing in by banks that are in financial trouble. There are clear signs that the bailing-in mechanism by which existing debtors have their debts turned into the bank’s shares, and thus have to take some hit in what is owed, is leading to people not lending to banks, and is having a negative impact on the nature of bank capital.

I think we might find that the single resolution mechanism is not fit for purpose if a multitude of banks go into some financial crisis simultaneously. Underlying that is a mechanism that we have created that might not actually work when push comes to shove.