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Banking Bill — Committee (4th Day)

Part of the debate – in the House of Lords at 3:45 pm on 20th January 2009.

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Photo of Baroness Noakes Baroness Noakes Shadow Minister, Treasury 3:45 pm, 20th January 2009

The amendment sticks with the continuity obligations. It would add a new subsection to Clause 70, which allows the Bank of England or the Treasury to terminate a continuity obligation by giving notice. I ask first why this clause is necessary. If the correct arm's-length terms have been determined under Clauses 64 or 67, they should have dealt with the discontinuance of the obligations. That would be a normal part of any arrangements for the provision of ongoing services and what commercial contracts for the provision of services would be expected to contain.

Contracts such as IT service contracts contain notice periods and, where appropriate, predetermined compensation terms related to the notice, especially where short notice periods are involved. Let us take the provision of IT services, which we have discussed and which is probably the classic example under these obligations. The residual bank or group company will have staffing matched to the services that it is required to deliver under the continuity obligations. If, say, half of those services are no longer required because the transferee has made its own arrangements, which I think everybody thinks is the right way to go, there will be staff to get rid of and perhaps property to dispose of or other costs related to that discontinued activity. Those things will all involve costs. If short notice is given, those costs could be significant.

My Amendment 115 would mean that, when notice is given, the Bank or the Treasury ensures that the residual bank is compensated for the consequential costs of termination. Obviously, the longer the notice, the less the cost is likely to be, but even then there could well be a cost. I invite the Minister to say whether or how the Clause 70 termination powers are constrained—by operation of the other provisions of the Bill or otherwise—so that the result is fair for the residual bank and, indeed, for other group companies that might be involved in this service provision, and whether the Government expect the arm's-length terms covering termination provisions to cover the circumstances that I have described. If that is not covered by the existing expectation of the way in which the clauses allow terms to be set, I urge him to consider carefully my amendment to Clause 70, or something similar. I beg to move.