Clause 214
Banking Bill
9:00 am
Angela Eagle (Parliamentary Secretary, HM Treasury; Wallasey, Labour)
The purpose of the clause is to put the use of public money in the proposed bank resolution or insolvency arrangements, or in the provision of financial assistance to banks, on a more regular footing. The Treasury has the power, as a matter of common law, to make loans to any person or to give them financial assistance in any form, but it has the money to make those loans or to make good on any commitment it has given only if Parliament, rightly, provides the money in estimates. The annual Appropriation Acts can give full statutory cover for expenditure on estimates, but in line with the Public Accounts Committee concordat of 1932, specific enabling legislation is normally required to enable the finance for a new service to be provided from public funds. That is what the clause provides.
Clause 215, which fits with this clause, enables the Treasury to draw money from the national loans fund to make loans to financial institutions where it needs to do so urgently to protect financial stability. Financial crises can arise at any time and it might not be possible to get an estimate approved quickly enough for the Treasury to make a loan from voted money, most obviously during a recess when Parliament is not sitting.
As originally drafted, clauses 214 and 215 provided for loans or financial assistance to be given only to UK authorised institutions that have permission to accept deposits, in other words UK deposit takers. It was realised in the light of recent events, including those surrounding the Icelandic banks, that such a limitation could make it more difficult to protect the interests of UK consumers or safeguard the interests of UK taxpayers where there is a failure of an overseas institution. The amendments address that limitation which, as we all know, has been shown to be actual rather than potential in the last few days.