Clause 176
Banking Bill
12:30 pm
Ian Pearson (Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
May I remark on the importance of system rules before addressing those points? System rules are a fundamental part of how payment systems operate. Among other things, they cover a payment system’s legal structure, how risks are shared or managed and how default arrangements work. For example, the Bank of England may wish to ensure that a system has rules in place to manage the default of a participant effectively. The Bank’s powers on rules in the clause will be an important element of its oversight role for payment systems.
Rules fundamentally underpin the operation of any payment system. They are a crucial determinant of its efficiency and stability. Ensuring that an operator of a recognised inter-bank payment system has the appropriate rules in place on specific aspects of the payment system will ensure that it is not operated in a way that threatens the stability of financial markets or other business interests across the UK. It is important that our inter-banking system has effective rules in place and that the Bank of England has powers regarding those rules.
In response to the questions, we usually expect the Bank to operate in a co-operative way and discuss the system rules for an operator. It might be that in exceptional circumstances the Bank has to act quickly. The legislation therefore ensures that there is flexibility to take account of that. The hon. Member for Dundee, East asked whether the Bank’s approval will be required in all cases of rule change. Again, the word “may” is involved. Let me make myself clear: the Bank of England may require the operator of a payment system to seek approval before changing its rules, but that will not necessarily happen in all circumstances. System rules are important and it is right that the Bank has a strong oversight responsibility in that area. That is why we are giving these powers a statutory basis.