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Clause 145

Banking Bill – in a Public Bill Committee at 11:30 am on 18th November 2008.

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Building societies

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

Photo of David Gauke David Gauke Shadow Minister (Treasury)

The clause states:

“The Treasury may by order provide for this Part to apply to building societies . . . as it applies to banks”.

In what circumstances would the Government consider it necessary to do so? Why, as a precautionary matter, do the Government not seek to set up a building society administrative procedure? Why not grasp the nettle?

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury

The approach to building societies set out in the clause is consistent with that taken in clause 117 for applying the bank insolvency procedure to building societies.

Detailed procedures for applying the provisions of the bank administration procedure to building societies have not been put in the Bill, principally because insolvency legislation is complex, and building societies have unique legal and commercial features that differ from those of banks. It will therefore be necessary to spend time ensuring that procedures are introduced that work for building societies and are fit for purpose.

However, it is envisaged that the new procedures for building societies will in practice be similar to the provision of the bank administration procedure, and a building society administration procedure would be used only in connection with a partial transfer of a failing building society’s business. The Government will consult on the necessary regulations, which will be laid before the House in due course. The legislation will be subject to the affirmative resolution procedure, allowing full parliamentary scrutiny.

Building on the strength and effectiveness of the existing insolvency regime, the procedures for building societies will also closely follow existing UK insolvency law and practice, and will be familiar to building societies and their professional advisers. I do not think that I need say more. I have explained why the procedures are not in the Bill, and have indicated the Government’s strong willingness to work with building societies and to consult on the regulations that will be presented to the House in due course.

Question put and agreed to.

Clause 145 ordered to stand part of the Bill.

Clause146 ordered to stand part of the Bill.