Banking Bill — Committee (5th Day)

Part of the debate – in the House of Lords at 4:45 pm on 26 January 2009.

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Photo of Lord Myners Lord Myners Parliamentary Secretary, HM Treasury 4:45, 26 January 2009

Part 5 involves the Government legislating to formalise the Bank of England's role in the oversight of payment systems. It is a very important section of the Bill in terms of strengthening financial stability and confidence in a financial system.

Part 5 seeks to ensure that the Bank of England has the necessary tools to ensure that payment systems are operated in a manner that minimises risks to financial stability and disruptions to business and consumer interests. In addition to providing an important tool for the maintenance of financial stability, these measures will also provide an important new statutory lever for the Bank of England to use in fulfilling its new statutory objective for financial stability, as provided for in Part 7.

Amendment 163 concerns the Treasury's power, under Clause 181, to make a recognition order in respect of an interbank payment system for the purposes of this part of the Bill. The aim of subsection (3) is to ensure that the Bill does not unintentionally capture internal systems used by the Bank of England to conduct operations in its role as a monetary authority. The amendment seeks to remove this provision, which states that such an order cannot apply to a system operated solely by the Bank of England.

I do not believe that the amendment is necessary. Although the Bank of England may provide facilities that allow transactions in interbank payment systems to be settled across its balance sheet, it is not currently an operator of payment systems within the meaning of the Bill. If the Bank were to become the operator of an interbank payment system in the future, it would conduct its operations in that field in accordance with its overall statutory responsibilities, including its new financial stability objective under Clause 228. Naturally, the Bank would apply the same principles in conducting its own operations as it would expect of others.

The risk of an operator taking insufficient account of overall financial stability considerations, which arises in privately operated interbank payment systems, would therefore not arise in connection with a payment system operated by the Bank of England. The removal of this subsection is thus unnecessary and I ask the noble Baroness to withdraw the amendment.