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I fully appreciate stakeholders concerns about the Bills partial transfer provisions. We have talked to stakeholders about them on many occasions and, as the Committee will be aware, we have held three rounds of formal public consultation, an extensive series of stakeholder workshops and meetings between February and September 2008, and have published draft clauses from the most complex part of the Billthe special resolution regime. The most recent round of consultation was about the safeguards on partial property transfers. The hon. Member for South-West Hertfordshire raised many issues that appear in the consultation document. Those who take an interest in our proceedings will have noted what he said, and we will consider fully all the representations that he has made as we seek to refine the special resolution regime safeguards.
The Committee will be aware by now that clauses 42, 43 and 55 and the secondary legislation contain a number of legislative safeguards to protect bank creditors and counterparties in a partial transfer. The Government recognise particularly the importance that market participants attach to netting arrangements and security interests. For example, legal certainty with respect to a netting agreement is vital for risk management. Therefore, in responding to stakeholder concerns, we are consulting on the details of three key safeguards.
First, clause 43 contains a safeguard to protect the set-off and netting arrangements on which so many bank counterparties rely. Secondly, it provides for a safeguard to protect security interests so that creditors with a fixed or floating charge retain recourse to their collateral. Thirdly, clause 55 contains a safeguard that will provide compensation for creditors left in the residual bank, to ensure that they are made no worse off than if the whole bank had been wound up: in other words, had the authorities not intervened.
The safeguards are important and should give market reassurance so that the potential problems alluded to by the hon. Member for South-West Hertfordshire and others will not arise in practice. In addition, the code of practice will set out the types of circumstance in which the authorities would wish to consider a partial transfer. Building on the work done so far, the Government will continue to work with stakeholders to develop the safeguards and the other secondary legislation.
I welcome the comments made by the hon. Member for South-West Hertfordshire recognising that the Government have been listening and continue to engage in dialogue. As he is aware, we have established a new expert liaison group, which will help prepare the secondary legislation on the special resolution regime. On other occasions, I have referred to the process as one of co-production. We want to get it right. The expert liaison group has already provided valuable input on the detailed nature of the safeguards, and the consultation document reflects some of its initial views, but there are a lot more opportunities for the expert liaison group and stakeholders more widely to contribute.