Written evidence to be reported to the House
Banking Bill
4:40 pm
Angela Knight: No. I am sorry, but I do not think that they have. There has been some movement towards recognising some of the issues, but in clauses 42 and 43 we get close to the nub of the problem. Consequent upon those clauses, all the legal netting agreements that banks have are not necessarily going to be honoured. That is the important thing. A range of netting agreements is referred to, but there are more out there. Unless there is a proper agreement that legally binding netting contracts can stand, the concerns remain that effectively contracts will be qualified. You will not then be able to net off. There will not be the certainty of it. In normal business times that means that you will not be able to net off for the purposes of capital. While the degree to which that affects banks will depend upon what business they are doing, about 70 to 80 per cent. of the relevant business is affected. It is a big effect. Even if we get it right in clauses 42 and 43, clause 65 as it stands makes it possible to change everything retrospectively anyway. So those two clauses and clause 65 need to be addressed; otherwise a permanent prejudice will be left.