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Clause 39

Part of Banking Bill – in a Public Bill Committee at 12:15 pm on 11th November 2008.

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Photo of David Gauke David Gauke Shadow Minister (Treasury) 12:15 pm, 11th November 2008

The Minister was right to mention safeguards in this context. I hope that we will turn to them shortly, although I note that according to the discussion paper that the Government produced last week, they are at an  earlier stage of development than others, and draft secondary legislation has not yet been prepared. We are therefore unable to debate the detail of reverse and supplemental transfers today. We will return to that subject later.

The Minister gave hypothetical examples of how the provisions in the Government amendments and new clauses would be of assistance. That was a great help. However, as the Treasury’s consultation paper makes clear, the amendments are driven by

“the light of recent experience”.

We may talk about hypothetical examples, but partial property transfers have already happened. We have seen it with Bradford & Bingley and with Kaupthing and Heritable. The Government are therefore able to benefit from the experience of those processes to find weaknesses within the system and seek to improve it.

It seems that the amendments, which have come relatively late in the process, derive from the experience of Bradford & Bingley and the Icelandic banks. The Minister will correct me if I am wrong, but that is the impression given by the Treasury document, which on two occasions says that in the light of recent experience, the Government consider it appropriate to increase flexibility.

We are not against flexibility in these circumstances. We have some sympathy with what the Government are seeking to do and the Minister made a reasonable case for the provisions. However, they seem to be a consequence of something happening in the Bradford & Bingley and Icelandic bank cases, so it might help the Committee if the Minister could explain the particular problems that arose in those cases and why the clauses would be helpful. He gave examples which sounded hypothetical, but are they in fact rooted in the experience of the past few weeks?