Financial Services (Banking Reform) Bill — Report (1st Day) (Continued)

Part of the debate – in the House of Lords at 9:00 pm on 26th November 2013.

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Photo of Lord Brennan Lord Brennan Labour 9:00 pm, 26th November 2013

My Lords, listening to the exposition of the Minister leads an experienced lawyer to think that those were the kinds of arguments that would make for an entertaining tutorial at university and deprive the participants of any career at the criminal Bar, because they simply would not know what they were talking about in terms of what a judge and jury would expect by way of argument. I am sorry to put it so bluntly, but it really is a clash with the Interpretation Act that would lead to ribald laughter in most criminal chambers. I am being serious about this. It is the kind of argument that you would expect to get from a bright lawyer with no criminal law experience. The Government must face up to this. I do not understand why they cannot take advice from a competent independent Treasury counsel on the scope of the offence in order to make sure that they can prosecute, or at least hope to prosecute. Creating such an offence in-house is, I think, highly suspect.

I will go through this point by point. First, why should not the statute say decision and/or decisions—one of the two? Secondly, why, as the noble Lord has suggested, do we have to get ourselves into the circumstance of having to identify the key decision? It may be extremely difficult to do that because it may be a refined banking judgment where a series of acts or decisions which led to failure may be cumulative and not the result of the key decision. Thirdly, how the word “cause” in the criminal law can be construed to be “significantly contributed to” is not, I think, something that figures in the criminal law books.

I turn next to corporate manslaughter. The argument has to be met. The fact that you get the same words in another statute is of no importance until you consider the context in which the words are being used. Far below that, in the industrial safety context, is the matter of common sense. In terms of banking behaviour, it is an extremely complex exercise to expect a jury to carry out, and an unnecessary one. The answer given in response to the amendments did not include any explanation of why this statute is taking itself down a different route from R v G. Wilful blindness is a specific criminal law phrase designed to embrace the people who deliberately close their eyes to something. It does not embrace innocent incompetence. The very word wilful imports the culpability of it.

My last point, in agreement with my noble friend Lord Eatwell, who is known as an academic, is that the legislature would be shooting itself in the foot if it created a criminal offence which the public came to treat as having no effect, bordering on the ridiculous. That would be a major political mistake. Those on the government Bench who take such matters into account should pay more attention to that than to the legal advice they are getting. I beg leave to withdraw the amendment.

Amendment 84 withdrawn.

Amendment 85 not moved.

Amendments 86 and 87

Moved by Lord Deighton

86: Clause 27, page 40, line 1, leave out “B” and insert “F”

87: Clause 27, page 40, line 2, leave out “bank” and insert “institution”

Amendments 86 and 87 agreed.

Amendments 88 to 95 not moved.

Amendment 96

Moved by Lord Deighton

96: Clause 27, page 40, line 7, leave out “bank” and insert “institution”

Amendment 96 agreed.

Amendments 97 to 102 not moved.

Amendments 103 and 104

Moved by Lord Deighton

103: Clause 27, page 40, line 11, leave out “bank” and insert “institution”

104: Clause 27, page 40, line 12, leave out from beginning to “group” in line 13 and insert “A “group institution”, in relation to a financial institution (“F”), means F or any other financial institution that is a member of F’s”

Amendments 103 and 104 agreed.

Amendment 105 not moved.

Clause 28: Section 27: interpretation

Amendments 106 to 117

Moved by Lord Deighton

106: Clause 28, page 40, line 32, leave out subsections (2) and (3) and insert—

“(2) “Financial institution” means a UK institution which—

(a) meets condition A or B, and

(b) is not an insurer or a credit union.

(2A) Condition A is that it has permission under Part 4A of FSMA 2000 to carry on the regulated activity of accepting deposits.

(2B) Condition B is that—

(a) it is for the purposes of FSMA 2000 an investment firm (see section 424A of that Act),

(b) it has permission under Part 4A of that Act to carry on the regulated activity of dealing in investments as principal, and

(c) when carried on by it, that activity is a PRA-regulated activity.”

107: Clause 28, page 40, line 37, leave out “subsections (2) and (3)” and insert “subsection (2)”

108: Clause 28, page 41, line 1, leave out subsection (5) and insert—

“(5) Subsections (2A), (2B) and (4)(b) are to be read in accordance with sections 22 and 22A of FSMA 2000, taken with Schedule 2 to that Act and any order under section 22.”

109: Clause 28, page 41, line 3, leave out “bank” and insert “financial institution”

110: Clause 28, page 41, line 4, leave out from “into” to “in” and insert “by the institution, or by a contractor of the institution,”

111: Clause 28, page 41, line 5, leave out “bank” and insert “institution”

112: Clause 28, page 41, line 5, leave out from “performs” to end of line 6 and insert “a senior management function.

(6A) A “senior management function” is a function designated as such—”

113: Clause 28, page 41, line 10, leave out “bank (“B”)” and insert “financial institution (“F”)”

114: Clause 28, page 41, line 11, leave out “B” and insert “F”

115: Clause 28, page 41, line 13, leave out “B” and insert “F”

116: Clause 28, page 41, line 14, leave out “B” and insert “F”

117: Clause 28, page 41, line 15, leave out “B” and insert “F”

Amendments 106 to 117 agreed.

Amendment 118 not moved.

Amendments 119 and 120

Moved by Lord Deighton

119: Clause 28, page 41, line 23, leave out “B and B’s” and insert “F and F’s”

120: Clause 28, page 41, line 24, leave out “B’s” and insert “F’s”

Amendments 119 and 120 agreed.

Amendment 121

Moved by Lord Sharkey

121: Before Clause 30, insert the following new Clause—

“Part 4ARegulation of High Cost Credit

Regulation of high-cost credit agreements

(1) The FCA shall, within 6 months of the passing of this Act, include among the regulations governing high-cost, short-term credit agreements provisions to—

(a) restrict such loans to one outstanding loan per customer at any given time;

(b) provide for a 24-hour cooling off period between loans in which no new loan may be entered into less than 24 hours after the settlement in full of a previous loan;

(c) establish at the lender’s cost a real time database of loans outstanding to be used in the enforcement of paragraphs (a) and (b);

(d) restrict the amount of any loan to a maximum face value of £300, exclusive of permissible fees;

(e) restrict any transaction fees and charges of any kind to a maximum of 10% of the face value of the loan plus a £3 verification fee;

(f) restrict the term of any loan to between 7 and 31 days;

(g) allow the borrower to extend the loan term for an additional 60 days beyond the due date without any additional charges of any kind;

(h) require borrowers who avail themselves of the extension in paragraph (g) to undergo credit counselling with a designated professional counsellor or organisation and to abide by the plan established to retire the debt.

(2) For the purposes of this section—

“high-cost credit agreement” means a regulated credit agreement as defined by section 137C of the Financial Services and Markets Act 2000 (as inserted by the Financial Services Act 2012) that provides for—

(a) the payment by the borrower of charges of a description from time to time specified by the FCA; or

(b) the payment by the borrower over the duration of the agreement of charges that, taken with the charges paid under one or more other agreements which are treated by the FCA’s rules as being connected with it, exceed, or are capable of exceeding, an amount specified by the FCA;

“charges” means charges payable, by way of interest or otherwise, in connection with the provision of credit under the regulated credit agreement, whether or not the agreement itself makes provision for them and whether or not the person to whom they are payable is a party to the regulated credit agreement or an authorised person; “authorised person” has the same meaning as in the Financial Services and Markets Act 2000.”