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Clause 232

Banking Bill – in a Public Bill Committee at 3:30 pm on 30th October 2008.

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Regulations

Question proposed, That the clause stand part of the Bill.

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

I should like to take a little time to explain that. The clause enables the Government to make future regulations relating to financial collateral, which is a key underpinning of modern financial markets. It is a way to allow collateral takers to borrow at more advantageous rates than otherwise and is a key risk management tool in credit risk. That is why it is relevant.

The power is retrospective as regards the current scope of the regime. This is a contingency measure in the light of a potential legal challenge to the power to make existing regulations. It is a retrospective power that could not be used outside the current scope of regulations other than to provide for matters following from a situation where the existing regulations were to be quashed. This is a relevant piece of activity which relates directly to financial collateral which underpins modern financial markets, so it is an important aspect of what we are discussing today.

Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury)

As I understand the numbering system used by the EU, the directive is from 2002. Why has it taken the Government until 2008 to get round to thinking about introducing a power under it?

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

I cannot answer that question as I have not been involved in this area since 2002. I can tell the hon. Gentleman, however, that clause 232 provides the power to make future regulations relating to financial collateral. That is an important aspect of underpinning markets and has to do with stability and current UK financial collateral regimes. A threatened court case does have some implications, but this is a key updating part of underpinning assumptions. A question about whether the understanding behind those assumptions was ultra vires was taken to court. It would have been  very threatening had that been found to be the case, but this puts the issue beyond doubt.

Question put and agreed to.

Clause 232 ordered to stand part of the Bill.

Clause 233 ordered to stand part of the Bill.

Further consideration adjourned.—[Mr. Blizzard.]

Adjourned accordingly at nineteen minutes to Four o’clock till Tuesday 4 November at half-past Ten o’clock.