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Clause 11

Part of Banking Bill – in a Public Bill Committee at 1:15 pm on 6th November 2008.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury 1:15 pm, 6th November 2008

My understanding of the legislation is that the Bank of England, which will be pursuing the stabilisation option, can retrieve its costs from the bridge bank. I am not aware that there are likely to be substantial Treasury costs involved, but if I have information about that, I will get back to the hon. Gentleman.

Let me take up the other points raised in the debate about the bridge bank being managed on a conservative basis. The bridge bank will carry out the banking business transferred to it, which is likely to be predominantly deposit taking. It could take on new business, but it is  not at all intended that it compete aggressively in the marketplace. Our intention is to return a bridge bank to the private sector swiftly, if that is consistent with the special resolution objective and meanwhile operate the bridge bank conservatively.

I do not believe that the bridge bank would have an unfair advantage over private sector banks or that it would distort competition. It would be inappropriate for a bridge bank to compete unfairly on the back of public sector support and we do not intend that to happen. EU state aid rules and other relevant competition rules would prohibit it in any case.

In conclusion, I believe that having the provisions as a tool will be an important part of what we need to put in place for the future. It would not be sufficient to have only the ability to take a bank into temporary public ownership or to transfer it to a private sector purchaser. This is an essential tool but, as with all these tools, we hope it will not have to be used. Given the circumstances in respect of bridge banks and the issue of partial transfers, it is right that we consult widely with the industry about the potential ramifications and that we take due consideration of the views expressed to us in response, which the hon. Members for Southport and for Fareham have already mentioned. I am confident that as a result of that consultation we can produce secondary legislation that will give safeguards on partial property transfers. Our early discussions with the industry have been positive.