Only a few days to go: We’re raising £25,000 to keep TheyWorkForYou running and make sure people across the UK can hold their elected representatives to account.

Donate to our crowdfunder

Clause 132

Part of Banking Bill – in a Public Bill Committee at 11:00 am on 18th November 2008.

Alert me about debates like this

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 11:00 am, 18th November 2008

This group of amendments tidies up clause 132 and also puts in place arrangements for the appointment of a provisional bank administrator. The amendments are similar to provisions previously discussed under amendment No. 158 for the provisional bank liquidator for the bank insolvency procedure, and they serve a similar purpose.

Amendments Nos. 163 and 164 are straightforward tidying-up provisions to include the phrases “or administrators” and “or liquidators” where required in the application and modification of existing provisions of the Insolvency Act 1986 to the bank administration procedure. That is necessary because clause 132 modifies various provisions of the Act in their application to the bank administration procedure. Those provisions refer to the powers of liquidators, as well as to the process of liquidation. The amendments simply reflect that.

Amendment No. 165 is another tidying-up provision, which corrects a conflict in the drafting. Clause 132, table 1, applies schedule B1(65)(3) of the Insolvency Act, and table 2 applies section 168(4) of the Act, both of which allow for the payment of dividends to creditors. However, section 168(4) allows a dividend to be paid to unsecured creditors at the discretion of the liquidator, while schedule B1(65)(3) requires an administrator to seek permission from the court before paying a dividend to unsecured creditors. It should not be necessary for the bank administrator to seek the permission of the court, since that would incur additional expenses for the creditors. Amendment No. 165 therefore removes the reference to paragraph 65(3). That sensible approach benefits creditors.

Amendment No. 166 is probably the most significant amendment in the group. It provides for the appointment by the court of a provisional bank administrator, following an application for a bank administration order. During the brief hiatus between the application for a bank administration order and the court hearing to make the order, it might be necessary for the residual bank to continue to provide services to the private sector purchaser or bridge bank. The appointment of a provisional bank administrator will facilitate that process and will also protect assets for the benefit of creditors in that initial brief period.

Following the making of the bank administration application, an interim moratorium will be in put in place to preserve the assets of the residual company. The court will also be able to appoint a provisional bank administrator where necessary, granting him or her powers to protect assets and manage the residual company in accordance with objective 1 of the bank administration procedure, which is to provide services to the bridge bank or private sector purchaser. The provisional bank administrator will not be entitled to pursue either strand of objective 2, and will not be allowed to make subsequent transfers, which means that the powers of a provisional bank administrator will be suitably restricted. Those are the equivalent powers that we were talking about in relation to the bank insolvency procedure. A typical activity that the provisional bank administrator might undertake would be facilitating access to e-mail or computer systems.

In effect, the role of the provisional bank administrator is simply to keep things ticking over for a few hours until the full court hearing for the making of a bank administration order. It is an important provision, which will minimise disruption and protect assets for the benefit of creditors, prior to the making of a bank administration order.

The provisional bank administrator’s appointment will lapse when a bank administrator is appointed, although there is nothing to stop him or her then being appointed as the bank administrator. In all cases, the provisional bank liquidator must be a qualified insolvency practitioner who consents to take on the role. Amendment No. 166 is a necessary provision, which protects the assets of the residual bank and allows for the provision of services to the private sector purchaser or bridge bank.