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Clause 140

Banking Bill – in a Public Bill Committee at 11:15 am on 18th November 2008.

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Successful rescue

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

Photo of David Gauke David Gauke Shadow Minister (Treasury)

The clause relates to the successful rescue of a bank and it applies if the bank administrator has pursued objective 2(a), which is the rescue of a residual bank as a going concern, and believes that it has been achieved. It also sets out various procedural matters. It appears that the decision as to whether a successful rescue of a residual bank has been achieved is left to the bank administrator and he will say, “We’ve made the decision. That’s it.” But what happens if the FSA or the Bank of England take a different view? Will the FSA and the Bank of England as a matter of course examine the rescue bank and if they feel that the threshold conditions have not yet been achieved, can they influence the bank administrator?

On the subject of successful rescue and the point at which a residual bank has been rescued, we have an example of how the system works in the case of Bradford & Bingley—as we have mentioned on a number of occasions—although I do not want to go into the case of the Icelandic banks. What progress is being made on Bradford & Bingley and does the Minister ever envisage that it could be rescued as a going concern? Does the Treasury expect that to happen and, if so, when?

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

I do not particularly want to be drawn on Bradford & Bingley, which does not really have much to do with what the clause seeks to achieve. Clauses 140 and 141 provide for different ways of bringing a bank administration to an end. The approach is consistent with the ways in which an ordinary administration can be brought to a close—the hon. Gentleman will be familiar with them. Clause 140 is a straightforward technical clause providing a simple way to bring a bank administration to an end where both objective 1—support for a private sector purchaser or bridge bank—and objective 2(a)—rescue of the residual  bank as a going concern—have been achieved. In those circumstances, the bank administrator can bring a bank administration to an end by following the process for formal administration set out in paragraph 80 of schedule B1 to the Insolvency Act 1986.

That means that the bank administration is brought to an end when the bank administrator files an appropriate notice with the court and Companies House. To ensure that creditors are aware that the administration is complete, a copy of that notice must be sent to all the company’s creditors and made available to them on request. As the residual bank will have been rescued as a going concern, the FSA must also be notified accordingly.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

The Minister said that the clause had nothing to do with Bradford & Bingley but he then described exactly the situation that the Bradford & Bingley residual bank is in. Have I missed something? Does the Minister not want to comment on it because of commercial confidentiality? Surely it is exactly the situation that Bradford & Bingley is in.

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

I do not want to be drawn into parallels with Bradford & Bingley. We are talking about new legislation. The Bill, as I have already indicated, parallels very closely the Insolvency Act 1986 provisions when there has been a successful rescue.

The hon. Member for South-West Hertfordshire asked about rescue situations. We need to be clear that the Bank of England would already have issued an objective 1 achievement notice and the bank administrator must be satisfied that the residual company has been rescued. However, as I have pointed out, the procedures are similar to those set out in paragraph 80 of schedule B1 to the Insolvency Act 1986. Clause 140 provides an appropriate way to bring a bank administration to an end where support for a commercial purchaser or bridge bank is no longer necessary and the residual bank has also been rescued as a going concern.

Question put and agreed to.

Clause 140 ordered to stand part of the Bill.

Clause 141 ordered to stand part of the Bill.