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 Lord Davies of Oldham Lord Davies of Oldham Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords) 3:45 pm, 20th January 2009

We consider that Clause 70 provides the authorities with the necessary flexibility to remove a general continuity obligation that has arisen. I agree with the noble Baroness that in some circumstances—there may not be very many—it may be appropriate for this to occur. This will happen when adequate arrangements have been put in place under special continuity powers or ordinary contractual arrangements. Therefore, the obligation will be terminated against a background where a considerable measure of agreement about the future has been reached. Nevertheless, we need to provide for the continuity obligation to be terminated.

However, it is the Government's view that compensation should not be required if a general continuity obligation is terminated, because the service provider will no longer be under an obligation to provide the service. I should make it clear that if a continuity obligation is terminated, there is absolutely nothing to prevent a service provider from coming to a normal commercial arrangement with the bank for the service that it wishes to provide. However, we do not think it appropriate that compensation should be due if the obligation is terminated and the service is no longer continued. The implications of that would be in effect to provide a subsidy to the provider. This would scarcely make a great deal of sense if, for example, the bank could obtain the service at a lower price from another provider. While I wish to defend the need for a provision in the Bill to terminate a general continuity obligation, I agree with the noble Baroness that this may not occur too often. However, when it does occur, a case cannot be made out for effectively giving a subsidy to the provider when the bank could potentially obtain the service elsewhere. That is the basis of the provision.