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Schedule 1

Volume 115: debated on Thursday 7 May 1987

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The Board Of Banking Supervision

Lords amendment: No. 57, in page 79, line 29, at end insert

"provided always that there shall be a majority of independent members on the Board."

I beg to move, That this House doth agree with the Lords in the said amendment.

It has always been the Government's intention that the independent members of the Board of Banking Supervision should be in a majority, and that is accepted by the Bank of England. The provision that is set out in paragraph 3 of the schedule gives a degree of flexibility to change the total number of board members if it proved desirable to do so in future. That is subject to the baseline of six independents and three ex-officio members, which is set out in clause 2. That flexibility was never intended to undermine the policy of retaining a majority of independent members. In the other place an Opposition amendment was tabled, which was accepted by the Government, to make clear on the face of the Bill that there would always be a majority of independent members of the Board of Banking Supervision, notwithstanding any future changes in the number of board members.

I am happy to report back to the House that the provision has been included in the amendments to the Bill. As I have said, it was our intention, on the ground of policy, that that should be so. Having it spelt out in the Bill will make that doubly clear.

I welcome the opportunity to support this amendment. Modest though it is, it is regarded by most people who have followed this Bill as implicit in the previous provisions. I ask my hon. Friend whether, during the passage of this Bill or when it left the House after the Third Reading, there have been any further discussions to which he has been privy within the Bank of England or with the Governor about the role, composition and activities of the Board of Banking Supervision. My hon. Friend will recall that the composition of the independent ex officio board, the way in which the members' activities will evolve and the influence they could bring to bear on the Governor were matters of deep concern to the Members who took an interest in the passage of this Bill. One would like to feel that the tenor of what we said about the opportunity that has arisen to evolve their practices has had some impact since the matter was debated previously. Can my hon. Friend add anything to that?

I am happy to acknowledge that there were valuable debates in Committee, on Report and on Second Reading about the role of the independent members of the Board of Banking Supervision. My hon. Friend has asked me whether further thought has been given to this. Certainly it has. As he will know, we have introduced amendments to provide that my right hon. Friend the Chancellor and the Governor of the Bank of England will have joint responsibility, which each of them recognises, to ensure that people appointed to the Board of Banking Supervision are effectively able to carry out the job which the Bill entrusts to them. Further thought has been given and will continue to be given to this as the supervisory framework of financial institutions emerges and becomes clearer.

The passage of time—every month that goes past brings more experience — shows that, although the process of supervision of financial institutions is complex, it will have to be very closely co-ordinated between supervisers in banking and other parts of the financial sector.

The Board of Banking Supervision will not come into force as a legal entity until the provisions of the Bill are enacted and become operative later this year. In the meantime, it has been found useful that the Board of Banking Supervision, in escrow as it were, is operating, bringing experience and making a critical assessment of what is needed in the changing circumstances of the financial sector for the benefit of the supervisors in the Bank of England.

I assure my hon. Friend that the debates on the Bill have been noted, both by the Bank of England as the supervisory authority and by my right hon. Friend the Chancellor who is responsible for the legislation under which it is established and who will, under the amended provisions of the Bill, have joint responsibility with the Governor for making such appointments.

Question put and agreed to.