Clause 168
Banking Bill
11:15 am
Ian Pearson (Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
I am happy to try to provide clarification for the hon. Gentleman. As the hon. Member for South-West Hertfordshire said, the clause defines the use of the term “inter-bank payment system” throughout part 5. He referred specifically to subsection (1), which defines the term “inter-bank payment system” for the purposes of the Bill and refers to the arrangements that enable the transfer of money. Subsection (4) confirms that that includes credit between participating financial institutions, which are defined in subsection (3) as banks and building societies. Let me be clear that the Bill will give us the flexibility to recognise new systems in the future, and we think it appropriate that we should be able to do so. Let me also be clear that that does not include internal bank systems or correspondent banking arrangements.
The hon. Gentleman also raised the issue of subsection (5), which will ensure that systems operating wholly or mainly in relation to persons or places outside the UK can be classed as inter-bank payment systems for the purposes of part 5. I shall give a little more detail on that because a few hon. Members questioned how the legislation would work. Recognised inter-bank payment systems that are wholly or partly based outside the UK might be systemically important for the UK financial system. Where that is the case, part 5 provides for the Treasury to recognise them and for the Bank of England to oversee them to the extent that that is possible. In most circumstances, that oversight would be delivered through the Bank of England’s participation in international co-operative agreements with other central banks, because that is the nature of things.
Clearly, we cannot regulate for the American banking system, as the hon. Member for Wellingborough hinted, but we can ensure that the Bank of England can participate in those international co-operative agreements and make the points that it needs to in order to discharge its responsibilities.