Bank Recovery and Resolution (Amendment) (EU Exit) Regulations 2020

Lord Tunnicliffe Excerpts

Tuesday 10th November 2020 Lords Chamber

[Lord Tunnicliffe (Lab) [V]]

My Lords, I welcome the noble Baroness, Lady Penn, to this exclusive club that hacks through Treasury statutory instruments. I am sure she has been briefed that this is but a formality—the Labour Party will never support a fatal Motion against an affirmative statutory instrument, and the instruments are not amendable so what we do here has no real impact. To some extent, this influences the quality of some of the material that we work with.

With the complexity of these instruments, there is a requirement, frankly, for the Explanatory Memorandums to be of very high quality. In fact, I do not find them so. I find them difficult to comprehend. It is true that the Liberals have an unfair advantage over us by having people such as the noble Baroness, Lady Kramer, who actually know what they are talking about, but the object of the exercise should be that ordinary politicians should be able to understand what we are looking at. I note that the Economic Secretary to the Treasury signed a statement at the end of the instrument saying that

“this Explanatory Memorandum meets the required standard.”

For me, it does not.

What are the four SIs trying to do? Are they trying to make the minimal necessary changes or do they seek to introduce new policy? The European Union (Withdrawal) Act 2018 was created on the basis that its output would be the minimum necessary to cover the transition out of Europe. The other Act prayed in aid in these SIs is the European Communities Act 1972, which of course had draconian powers, but for a specified reason. I am largely convinced that the objective of these SIs is a new policy objective. I have three points to bring out.

It seems that new policy is being introduced in the first SI, the bank resolution one, by the significant sunsetting of the major points set out in section 7.12 of the Explanatory Memorandum. They relate to the distribution of funds, moratorium powers, insolvency priorities and bail-in. I am not clear under which Act this is done, but I cannot see why it is necessary in this SI. These things have an important impact on the balance between the interests of customers and consumers compared with owners. Surely regulation is all about getting that balance right, and surely something that changes policy should be debated more formally. While the Minister referred to stakeholders in her introduction, in practice the stakeholders were all in either the regulation business or the bank business. At no point, as far as I can see, was there any process by which the consumer was represented in those discussions.

I got lost in section 2.10 of the Explanatory Memorandum to the next SI and would value the Minister helping me through it. There is a concept that, after the transition period ends, we will have some reference to EU law, which may be changed from “time to time”. That does not seem to be in line with the concept of sovereignty, which Brexit is supposed to be all about.

Finally, as far as I can see, the financial holding companies SI does nothing more than the minimum necessary for the transition. In studying it, I came across section 7.15 of the Explanatory Memorandum, which is about the removal of members from management boards. That seems quite draconian to me. It allows the PRA to remove individuals from the managing body of institutions,

“if they are found no longer to be of sufficiently good repute, no longer have the right skills, knowledge, experience, honesty or integrity, or are unable to commit sufficient time for the role.”

I have nothing against powerful rules that control bankers, but so much power over individuals, with no apparent mechanism for how judgments will be brought about and with no apparent appeal, does not meet a sense of natural justice.

Finally, I entirely agree with the sentiments set out in section 2.1 of the Explanatory Memorandum to the bearer certificates SI that bearer certificates are a bad thing. We are at one with the Government in seeking their complete elimination.