David Gauke (Shadow Minister, Treasury; South West Hertfordshire, Conservative)

Briefly, the clause states that in exercising powers under this part of the Bill, the Bank of England shall have regard to

“any action that the FSA has taken or could take”.

This comes back to a theme that has run through the morning of the relationship between the various regulatory bodies. I can see that the purpose of the clause is to avoid any duplication. Are there any similar obligations on the FSA to have regard to any action taken by the Bank in respect of payment systems? I am also slightly curious about the phrase,

“any action that the FSA has taken or could take”,

as it is somewhat broad. I can see what the clause is trying to get at, but one could argue that it is vague.

Can the Minister reassure us that there will be good communication between the FSA and the Bank in this area? Could he identify structurally how that will be done? This is particularly an issue for recognised clearing  houses and investment exchanges where the FSA has a major role. Who is in charge with regard to those institutions? I think it is essentially the FSA, but will the Minister confirm that that is the case? For those payment systems that are not either a recognised clearing house or a recognised investment exchange, does he expect that the Bank be in charge and what role will the FSA have in those circumstances?

Peter Bone (Wellingborough, Conservative)

The clause touches on the tripartite arrangements, which are not unique. There are other areas where there is more than one agency responsible for a set of affairs, but usually there is a clear memorandum of working between the organisations, setting out which organisation is paramount in an area where things overlap. I am still not clear whether one organisation will come out on top when there is duplication. The clause deals with the relationship between the Bank and the FSA. We have been unable to see these memorandums of working, so will the Minister tell us whether there will be duplication? If there is, will the Bank, the Treasury or the FSA come out on top?

Ian Pearson (Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)

As I explained earlier, the Bank of England clearly has the lead responsibility when it comes to the regulation of inter-bank payment systems. In the case of payment systems within recognised clearing houses and investment exchanges, which are regulated by the FSA, the Bank will again have responsibility for the regulation of the inter-bank payment systems. Certainly in all the consultations in this area, there was overwhelming recognition that there should be a single regulator when it comes to inter-bank payment systems. To avoid duplication between the responsibilities of the FSA in the regulation of recognised clearing houses and recognised investment exchanges and the role of the Bank in overseeing inter-bank payment systems, there will be a memorandum of understanding between the Bank and the FSA. It will ensure that there is effective co-ordination and minimum duplication of regulations.

Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)

I dealt with the Investment Exchanges and Clearing Houses Act 2006 when it went through Parliament. In that Act, the FSA clearly has the responsibility for approving rule changes put forward by the clearing houses and investment exchanges. Would it not be better for that legislation to be modified through this Bill, rather than relying on a memorandum of understanding?

Ian Pearson (Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)

The Bill is clear—the Bank of England is responsible for the oversight of inter-bank payment systems. If it becomes necessary to take enforcement action, the Bank of England and the FSA will want to agree on which one of them is best placed to do so. It is important to recognise that we are setting out in different parts of the Bill the clear responsibilities of the tripartite authorities. It is right that the Treasury leads on, and has responsibility for, recognition, and that the Bank of England has lead responsibility on inter-bank payment systems.

Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)

I am grateful to the Minister for being explicit about inter-bank payment systems. We support the Bank of England taking the lead. Why is there a statutory obligation on the Bank of England to have  regard to the FSA, but, as far as we can see, no comparable obligation on the FSA to have regard to the Bank?

Ian Pearson (Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)

It is my understanding that the clause was designed to ensure that the role of the FSA was explicitly recognised, given its responsibilities on recognised clearing houses and investment exchanges. I am not sure that a reciprocal power is necessary, because there are other measures within architecture of the Bill to ensure that the tripartite authorities talk to one another. However, I will reflect on that point further and, if necessary, return to it at a later stage.