Clause 203
Banking Bill
6:30 pm
Angela Eagle (Parliamentary Secretary, HM Treasury; Wallasey, Labour)
The amendments are a technical clarification of references to insolvency in clauses 203 and 206 of part 6. The need for the amendments was not appreciated until a comparatively late stage, and I regret the inconvenience to the Committee in having to table Government amendments. As I have said, the provisions of part 6 are primarily concerned with ensuring that noteholders of commercial issuing banks are protected in the event that the issuing bank gets into difficulties. Clause 203(5) specifies:
“Banknote regulations may make provision about the treatment of backing assets in relation to insolvency processes”.
Clause 206(1) states:
“Banknote regulations may make provision in connection with the application to an authorised bank of ...the special resolution regime (under Parts 1 to 3), or...an insolvency process”.
The insolvency process is defined in clause 203. It is the policy intention for the Bill to enable banknote regulations to make a provision in relation to the law of insolvency and the law of an insolvency process—for example, in relation to the treatment of backing assets. As hon. Members will be aware, that is necessary because not all insolvency processes start on insolvency.
The state of affairs where a bank can no longer afford to pay its debts is defined in section 123 of the Insolvency Act 1986. As currently drafted, the provisions only allow banknote regulations to make provisions in relation to insolvency processes, so the amendments are necessary to ensure that banknote regulations can make provision for insolvency or an insolvency process. Amendments Nos. 23 and 24 mean that insolvency can be taken to include a reference to insolvency process, which may include liquidation, administration, receivership and so on. The provisions are of integral importance to part 6 to ensure that provision can be made to ring-fence backing assets in order to back those notes in the event of insolvency or an insolvency process.