Clause 155
Banking Bill
9:00 am
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
The hon. Gentleman makes an important point. Consumers need to understand that. There is a shared responsibility on this matter. The FSA needs to ensure that its website gives information to customers. Banks also have an obligation to their customers to make the matter clear. I will come on to some of the challenges related to that when I talk about objective 3 on the bank versus brand debate. That is the most challenging area.
Interestingly, the US Federal Deposit Insurance Corporation has FDIC logos and information on its website for banks to purchase so that it is clear what people are insured for. Its website helps consumers to understand what is there. There is a shared responsibility and I think that there is an obligation on banks. However, for that information to be communicated clearly requires additional work on the scheme rules. I will come on to issues that individual customers might face under the current rules.
There was some lack of clarity this year from the Treasury on what would happen if a bank in the EEA collapsed. During the Treasury Committee evidence session on 22 July 2008 the then Economic Secretary, the hon. Member for Burnley (Kitty Ussher), was asked what would happen if an EEA bank faced problems. This is one of those curious areas where some protection comes from the home state of the bank and there is a top-up from the FSCS. She said:
“I do not want to be pressed too far on this so as not to unduly alarm anyone”.
When pressed further, she said:
“I simply do not know how it will work in practice”.
That was not a very helpful response from the then Minister. We now know how it works in practice. The collapse of Icesave and Kaupthing demonstrated what happens. At the time, those comments did not give much confidence to consumers.
That point demonstrates how important it is that there is clarity for people about the arrangements that apply to their bank and on how those will work in practice. That is particularly important given that our open economy enables banks from outside the UK to establish branches and be incorporated here.
The second objective of any compensation scheme is the speed of payout. We can ensure up to any limit through a deposit protection scheme, but if a customer cannot get access to their money for three or four months, the level of protection will not give them much confidence.