Clause 174
Banking Bill
12:15 pm
David Gauke (Shadow Minister, Treasury; South West Hertfordshire, Conservative)
We have already touched upon these principles and the contents of the clause in earlier discussions. I note that the clause states that the Bank “may” publish principles. We have not tabled an amendment to say that it “must” do so, but I should be grateful if the Minister would confirm that it is intended that principles will be published and that they will apply to the operators of recognised inter-bank payment systems.
A set of principles is already in place for such payment systems. These have been established by the Bank for International Settlements, specifically the Committee on Payment and Settlement Systems. They are described as the core principles for systemically important payment systems. They have historically been adopted by the Bank of England and other central banks. Mr. Hood, you will be relieved to learn that I have no intention of reading out the principles in full. In broad terms they relate to: legal basis; the participants having a clear understanding of the system’s impact; the management of financial risk; prompt final settlement; settlement in multilateral netting systems; settlement assets; security and operational reliability; efficiency; access criteria and governance. Can the Minister say whether the principles under the clause will essentially be those, and confirm that there is no intention of changing them? The clause states:
“Before publishing principles the Bank must obtain the approval of the Treasury”,
but will consultation on the principles take place more widely with operators? Will they have an opportunity to put their views?
The explanatory notes state that the clause will reflect the core principles. We need to know whether those principles will be those to which I have referred, and that there will be no real change—the point raised by my hon. Friend the Member for Wellingborough when he drew attention to the regulatory impact assessment. I notice that a breach of principles will not constitute a compliance failure for the purposes of clause 182. Without getting into a debate on that clause, can the Minister explain the status of the principles and say why they will not constitute a compliance failure? It is the case for firms generally regulated by the Financial Services Authority under the Financial Services and Markets Act 2000 that there is a set of principles and a set of rules, but that breach of the principles can constitute a regulatory offence. Indeed, most disciplinary action taken by the FSA refers to a large extent to principles. Perhaps the hon. Gentleman can also explain that.
I return to the point that the Bank of England, in its oversight of payment systems until now, does not necessarily require each payment system to comply with every core principle. Given what the Minister said about which systems will constitute recognised systems, I should be grateful for clarification. He might believe that he has provided it, but it would help the Committee if the point were made absolutely clear and it would help us to know whether, for those institutions, although not systemically important, full observance of the core principles is necessary.