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

Sometimes, in financial crises, swift, decisive action is needed to support one or more institutions. The Bank of England, as the UK’s resolution authority, may be called on to provide financial support to an institution in an emergency. When it does so, it may choose to create a special purpose vehicle separate from the bank’s own balance sheet, for the purposes of good order. Clause 15 will allow the Bank to direct such wholly owned subsidiaries to disregard the disclosure requirements under the Companies Act 2006. The reason for avoiding the disclosure of information is that the provision of liquidity assistance, for example, could need to be covert in order to prevent a witch hunt to discover which institution is being aided in that way.

The use of the power specifically requires that it must be necessary, not just convenient, to meet the financial stability objective. That is quite a rigorous test. The  norm, rightly, is that disclosure should be the default and not simply a matter of whim or volition on the part of the Bank to hide the flows of funds. The test is that the use of the power must be necessary to meet the financial stability objective. The Treasury must be consulted, and can if it wishes compel disclosure, overriding the Bank’s own view.

As Committee members will know, there is a crisis management memorandum of understanding between the Bank and the Treasury. That MOU requires that in any circumstances of emergency assistance, the Chancellor must tell the Chairs of the Treasury Committee and the Public Accounts Committee that action is being taken, notwithstanding the fact that it is not in the public domain. The Chancellor has a responsibility through the MOU to keep Parliament informed. A draft of the MOU is published and is available for scrutiny by Parliament. The MOU for these purposes is between the Bank, the Treasury and the PRA.

I hope that the provisions of the clause will commend themselves to the Committee. As I said, they are for use in exceptional circumstances and are subject to a rigorous test that they are necessary for financial stability.

This is a slightly unusual, eyebrow-raising Clause. Obviously, the Bank of England operates a rather mysterious part of our constitution generally. It is the magic money tree that the Prime Minister said he did not want to use in his infamous speech the other day, and it has been tempting for the Chancellor to shake it occasionally, creating money. The process has left many people scratching their heads about how it works.

Setting that aside, it is important that many of the normal conventions of company law, transparency and accountability apply to the work of the Bank of England. After all, the Chancellor will essentially be vesting all the aspirations of his aspiration nation in the new Governor, Mark Carney, when he arrives, trusting and hoping that he will ride to the rescue of the economy. We must keep an eye on what is happening with monetary policy more broadly. Clause 15 is one of those interesting little clauses that are worth peeking inside.

I do not think there are existing subsidiaries of the Bank of England that are already long standing, although maybe there are. It is often the case that large entities have dormant subsidiaries or other sub-company structures. I am not sure whether there is anything at present other than the Bank of England that is incorporated, or whether it has subsidiaries that might fall within the scope of the Amendment. I understand what the Minister says about the need in a crisis, for commercial sensitivity reasons, not to have instant disclosure and availability of some of our inter-financial interventions, but a strong dose of ex post scrutiny is necessary once the tide has subsided a little, just to go over what the Intervention was.

Will the Minister assure the Committee that although the normal company law scrutiny arrangements will not apply in these exceptional circumstances, there would still be a general expectation on the Bank of England to make a report? I am not sure how many years down the track that should be—perhaps not quite a 30-year rule; but it would be appropriate if two, three or four years later, once the crisis has subsided, we could know about  the liquidity injections and other forms of assistance that might have been hidden beneath the protection of exclusion from company law availability. Those are my main anxieties. In particular, there should be an opportunity for ex post scrutiny further down the track.

The hon. Gentleman makes perfectly reasonable points. The Bank’s arrangements are that when it is called upon to give this assistance, it tends to create a special purpose vehicle as a wholly owned subsidiary of the Bank in order to section it from the rest of the Bank’s activities. Such vehicles would be wound up when no longer needed. They have been needed in the past: for example, the emergency liquidity assistance provided to Royal Bank of Scotland during the last crisis is a good case. Knowledge at the time that such assistance was being provided might have occasioned an even more rapid, and possibly even more disorderly, consequence than the unfortunate one that resulted, and it is possible to imagine such circumstances in the future.

The Clause is restrictive in that it can be used simply for narrow circumstances. It is not available, for example, to hide some of the monetary policy mechanisms that the Bank might use. They have to be disclosed in the normal way.

The point that the hon. Gentleman makes about ex post scrutiny is absolutely right. The Chairs of the Public Accounts Committee and the Treasury Committee will know immediately, but the memorandum of understanding, which is published between the Treasury, the Bank and the PRA, explicitly requires that such information will be laid before Parliament when the Treasury, having consulted the Bank, has decided that the need for confidentiality of the support operation has passed. The requirement is to consider and keep under review when that confidentiality requirement has passed. In some cases it might be a matter of months, but in other cases it might be more than that.

Question put and agreed to.

Clause 15 accordingly ordered to stand part of the Bill.