The hon. Gentleman made some typically reasonable points and managed in the end to argue in favour of the Government's position as set out in the amendments, particularly why we resisted a sunset clause of the type that was considered in the other place, and why we reached the decisions that we did.
With the leave of the House, I shall make three brief points in response. First, history will judge very harshly the collapse of Lehman Brothers and the failure of the United States to intervene. It is obviously difficult to consider counterfactual scenarios and what might have happened had Lehman Brothers not been allowed to collapse, but it seems clear that that collapse precipitated a catastrophic crisis in confidence in the banking system and created a huge number of problems that have reverberated around the world and still affect the UK. The Lehman Brothers insolvency in the UK, as the hon. Gentleman rightly pointed out, is extremely complex and will take considerable time to resolve. We all wish that we were not in that position.
My second point is in response to the hon. Gentleman's comments about applying the Bill to non-deposit takers. As he knows, the special resolution regime has been designed for deposit takers. It is an SRR objective to protect depositors and now to ensure the continuity of the banking service. The amendments deal only with clarifying the insolvency procedures for UK investment banks. Branches will be subject to home state insolvency.
The hon. Gentleman asked whether we were discussing that with our European partners. We are in discussion with the European Commission, as is the Financial Services Authority, on issues relating to branches and to their regulation. I believe that the actions that have taken place over recent months have demonstrated that significant improvements are needed to the regime of home state regulation if it is to be effective in the future and if it is to give depositors confidence that a branch operating in the UK and regulated in a home state inside or outside the EU or the EEA can be regulated robustly in the home state.
My third and final point is about subsection (4) of the new clause inserted by Lords amendment 87. The hon. Gentleman is right to say that the Government will make regulations, if necessary, as a result of the expert review that is taking place. The sunset clause exists to provide certainty to the market that the regulation-making power will lapse if not used. The wider proposals for sunset regulations would not work because they would, as has been clearly demonstrated, lead to far greater uncertainty. The proposed review has been welcomed by the markets and those who consider these matters. Again, we think that it strikes the right balance because changes to the insolvency regime are likely to be needed with respect to investment banks. However, we are not yet in a position to be definitive in legislation.
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