Banking Bill — Committee (5th Day)

Part of the debate – in the House of Lords at 5:45 pm on 26 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) 5:45, 26 January 2009

I hope to enlighten the noble Baroness on the objectives of the clause. Clause 203 ensures that nothing in Part 5 prevents the Bank of England maintaining its ability to carry out informal, non-statutory oversight in the case of non-recognised payment systems. Secondly, it ensures that in its dealings with recognised interbank payment systems, the Bank is not limited to the provisions in Part 5. The purpose of the clause, therefore, is to ensure that the provision of a statutory role for the Bank of England in oversight of recognised payment systems does not limit its ability to continue to engage with both recognised and non-recognised payment systems on a non-statutory basis, which is the basis on which it works at present. The Bank will need to engage with non-recognised systems—for example, to assist with its assessments of new or potential candidate systems for recognition.

Although there are no weaknesses in the existing arrangements, the authorities have been working since early last year on developing a clearer and more robust framework for the oversight of payment systems. This includes the need to take into account the potential for payment systems' characteristics and importance to change over time, or for wholly new payment systems to develop and take on systemic importance. I seem to have repeated myself on many occasions, but this Bill seeks to deal with a future of potentially rapid changes to our financial systems. Given the importance of payment systems in the financial systems and, therefore, to wider financial stability and consumer protection, it is sensible to formalise the Bank's role as regulator of this sector, but this does not preclude the need for it to also continue its role of informal oversight. That is the basis of the clause.

The noble Baroness raised the issue of the Financial Services and Markets Act. The FSA does not require a similar provision in that Act because it does not exercise informal or non-statutory oversight in the same way as we envisage, under Part 5, that the Bank of England will operate with regard to payments systems. So there is a difference in the roles between the FSA and the Bank of England in those terms, which is why we have this clause. I hope that the noble Baroness accepts the position.