Clause 5
Dormant Bank and Building Society Accounts Bill [Lords]
11:15 am
Ian Pearson (Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour)
I understand the intention of the amendment, which is to probe the Treasury’s use of its power to direct the reclaim fund to comply with the legislation and to ensure greater parliamentary scrutiny. We touched on the issue on Second Reading. I hope that the comments that I can put on the record today will help to give the hon. Member for Fareham and others watching the proceedings some reassurance.
Clause 5 contains a direction-making power, as the hon. Gentleman said. We see it as an ultimate safeguard, which allows the Treasury to take action to ensure that a reclaim fund complies with the requirements to which it will be subject as a result of the Bill. I want to emphasise that the direction will do no more than require the reclaim fund to give effect to, or comply with, the requirements to which it is already subject under the Bill, which will have been approved by Parliament.
Let me be as clear as I can about how I see the power being used. The Financial Services Authority will authorise the reclaim fund and put in place ongoing prudential regulation, to ensure that the reclaim fund has sufficient money to repay customers. That is in keeping with the FSA’s roles of financial regulation and consumer protection. It is not expected to go beyond its statutory objectives and make rules that govern other areas of the reclaim fund’s operations. The Government do not envisage using the direction-making power in the Bill to interfere in any way in the day-to-day running of the reclaim fund and the management of its money. It will be the FSA’s sole responsibility to regulate the reclaim fund for prudential purposes.
The power is an ultimate sanction, which the public would reasonably expect us to have to ensure that the reclaim fund functions in accordance with its articles of association, particularly in those areas that the FSA will not regulate for prudential purposes. That is an important point. Such areas include, in principle, the requirements in schedule 1—for example, the publication of information by the reclaim fund, the use of money to cover reasonable money costs or the requirements elsewhere to transfer surplus money to the Big Lottery Fund.
Again, I emphasise that we do not expect to use this power. These issues are primarily a matter for the company’s directors and members, but the power gives us the ability to act in exceptional circumstances. That is all. It is not a question of using a direction if we just had an honest disagreement about the distribution policy of the reclaim fund. It would be used if there were in our view a fundamental breach of the company’s responsibilities that have been set out in legislation. Only in those circumstances would we want to act without delay in the interests of account holders.