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I, too, welcome you to the Chair, Mr. Illsley. The amendment is also in the name of the hon. Member for Fareham, who will no doubt want to say a few words. The clause, which covers general conditions, is another important part of the Bill. The amendment is in tune with some of the previous amendments discussed, which concern how and when the powers, and the stabilisation powers in particular, are used, and their effect on the enterprise that they are used upon. On the face of it, the amendment may seem semantic, in that we are seeking to delete the words not reasonably likely and replace them with highly unlikely. In the Bill, we are attempting to consider not just current conditions but conditions in the future when this legislation may be used in different circumstances. Hopefully, it will not be used in a general sense, but in the specific case of a particular banking operation. The amendment refers to the timing of the use of such powers, which is crucial.
Our proposed regime should be invoked only when it is clear that all other possibilities for retrieving the situation in which the bank finds itself have been properly explored. Moreover, the board and the advisers must have made every effort to prevent the failure and have been given the necessary period of time to pursue such opportunities. In fact, everything possible must have been done and must have failed before the regime can be invoked. In such a situation, it is not just reasonably likely but highly unlikely that they will meet those threshold conditions.
As I said earlier, such a measure is all about timing. If at all possible, we should try to maintain the integrity of the whole business. We should consider the value of that business and the opportunity for it to continue. We should not take precipitate action that would jeopardise that possibility.
Leaving action too late could jeopardise the possibilities for protecting the depositors, which is the principal thrust of the Bill. None the less, exercising those powers too early could jeopardise the interests of other stakeholders in the business, so the timing is critical. Just as we discussed the opportunity of exercising the powers in a flexible way, so, too, the authorities will want as much flexibility as possible in determining exactly when they introduce the powers.
The amendment is designed to raise the bar to protect, to a certain extent, the bank and its directors in their efforts to maintain the enterprise. We do not want action to be taken too early in the interests of depositors without necessarily taking into account the interests of other stakeholders. We are talking about pre-solvency situations. The enterprise at that stage may be solvent, but it may not reach the threshold conditions. There is a period of time in which there are opportunities to save it.
The Government should seriously consider the amendment, particularly in light of the remarks made by the hon. Member for Fareham during our debate on the last clause. The amendment will provide some measure of confidence to those who are being asked to invest substantial sums in the banks. It is likely that part of any operation to try to meet the threshold conditions will inevitably involve recapitalisation or the raising of additional capital. Going out to seek fresh capital when there is a possibility that the trigger will be pulled because it is not reasonably likely that the bank will meet the threshold conditions is a whole lot different from going cap in hand with a clear indication that it is highly unlikely that the trigger will be pulled. To a certain extent, it will give a view on whether a capital-raising exercise is a possibility. It may even jeopardise the capital-raising exercise, thus defeating the whole purpose of trying to maintain the entity as a whole.
Although, it may seem merely semantic to change the words, they are highly significant. If we are moving the bar, or having the bar set at such a low level as not reasonably likely, it will affect the efforts of any bank under threat of not being able to meet its threshold conditions to retrieve the situation. An awful lot of things may not be reasonably likely at any one stage, but that does not mean that they will not happen. Efforts can be made and negotiations can be undertaken, but once they have been completed and it becomes clear that any rescue measure seems to be beyond redemption, in that sense, it then, of course, becomes highly unlikely. At that stage, it is inevitable that the threshold conditions will not be met, and the powers can be exercised.
As I have said, we should seriously consider those points because, as we noted when we discussed the last set of amendments, confidence in the marketplace, the cost of capital and the ability to maintain a competitive operation within the general marketplace should not be jeopardised. I have referred to the measure being just for depositors and they are, of course, an important part of the legislation, but so too are other aspects of the whole banking business. That includes those who provide the capital for banks and the way in which banks generally operate in the competitive marketplace. With those factors in the mix, we should be careful before exercising the powers and we should ensure that the conditions to be pursued are set at an appropriate level. The bar should not be set too low. In addition, the authorities should not be brought in too early as that could even be to the jeopardy of depositorsalthough not necessarily. However, it could certainly be to the jeopardy of other stakeholders.