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

This is a technical amendment to put it beyond doubt that the immunity in clause 1(4) extends to those members of the Bank's staff who are seconded to the Bank rather than being its permanent employees. Although not directly employed by the Bank, they act essentially as employees, and it is important that they are able to act firmly and confidentially in their supervisory duties.

As this is the first of the Lords amendments, I shall say a general word about the coming into force of the Bill's provisions. We intend that the bulk of the Bill's main provisions will come into force on 1 October this year. However, there will be an exception in the case of the large exposures reporting regime, for which a target of 1 January 1988 has been set to give the banks time to prepare their systems for compliance with the requirements. We propose, too, that the provisions on the disclosure of information should be implemented two months after the Bill receives Royal Assent to enable the Bank of England to co-operate more fully with other supervisory authorities as soon as practicable.

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

This is a drafting amendment which simply removes some unnecessary words to make for consistency with similar references elsewhere in the Bill.

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

With this, it will be convenient to take Lords amendment No. 4.

The amendments correct the procedural provisions for the giving of notices of objection by the Bank of England. As drafted, the clause did not take account of the period allowed for representations to be made by a person who has acquired a controlling shareholding without clearance and is subsequently served with a preliminary notice of objection by the Bank of England. The Bank might therefore run short of time to consider the case, given that the final notice must be served with an overall time limit of three months. The purpose of the amendments is to take account of that passage of time and also to clarify the Bank's authority to require information and documents in such cases.

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

With this, it will be convenient to take Lords amendment No. 7.

The amendments are designed to ensure that copies of notices of restriction made under clause 26 are sent to all those affected by the notice, which may include a number of people acting as associates. Earlier drafts of the Bill did riot adequately deal with such cases and the amendments are designed to meet that question.

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

This is a technical and drafting amendment and represents a correction consequential on the introduction in this House of clause 23. The decision to object on grounds of reciprocity is a matter for the Government and is not subject to appeal to the tribunal constituted under the Bill. The existing reference to allowing time for an appeal in clause 26(4) does not, therefore, apply to action under clause 23.

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

The amendment relates to clause 37 which deals with notification of significant shareholdings which was a measure introduced during the Bill's passage on which we had extensive debate. The clause requires shareholdings of between 5 and 15 per cent. in an authorised institution to be notified to the supervisors. Such "significant shareholders", as they are defined, are then subject to the powers to require information and to mount investigations, which appear later in the Bill. However, in the same way as the Bill's requirements for shareholder controllers apply only to United Kingdom incorporated banks, which is clearly the matter of concern, the provisions of the clause were also intended to apply only to significant shareholders in United Kingdom incorporated banks. The amendment is designed to achieve that effect.

I do not wish to disagree with the amendment, but it provides a useful hook on which to hang some points of public interest. One concerns the link of the Bank of England to the £26 million Morgan Grenfell sale. According to press reports, the bankers refused to comply with a request to name a major shareholder. Given that the bank is now committed to more open disclosure of nominee shareholders to prevent abuses of the takeover code, I should like the Minister to comment on these interesting mystery shareholder stakes wherein someone has used a nominee company owned by the Bank of England to build up a stake, apparently of nearly 5 per cent., in Morgan Grenfell during the past few months. One should know exactly how and why this is happening.

To strengthen the Minister's hand and his resolve—of course, I am relying on press reports and do not necessarily have the latest information— I remind him that the Government no longer owe anything to Morgan Grenfell. More recent press reports make it clear that Morgan Grenfell will no longer countenance political payments without the prior agreement of shareholders. Last year, it funded the Tories to the tune of £25,000. No doubt, Central Office will be particularly interested in that report. Even when the former Chancellor, the right hon. Member for Glasgow, Hillhead (Mr. Jenkins), sat on Morgan Grenfell's board, the annual payment to Conservative funds was "stolidly maintained", to quote from a press report. That only confirms the deepest suspicions of Labour Members that the right hon. Gentleman and his party are much more closely aligned with Conservative Members than with anyone else. I think that the Minister is now in a position to come clean about Morgan Grenfell and the Bank of England and exactly what is going on. I am sure that the House—it is not exactly full—will be delighted to hear what the Minister has to say.

As we are rattling along fairly well, I should like to make a few comments because I was a member of the Standing Committee and important questions have arisen in relation to significant shareholdings. Recently, I heard from the acceptance houses committee, a most distinguished body, which would like to make certain comments. I should be grateful if my hon. Friend the Minister will give me a reply, if not immediately, then shortly after, and in writing, if necessary.

Discussion in the other place drew attention to a number of defects that were thought to exist in the Bill and could have great significance in certain circumstances. The Bill has received a great deal of support from the banking industry and there has been a great deal of helpful consultation throughout its passage.

One concern is the action that the Bank of England may take when an unwelcome shareholder announces that he has 5 per cent. of the voting capital in an authorised institution. When such a shareholder increases his holding to 15 per cent., he has to seek the approval of the Bank of England before going further. If the Bank does not consider him fit and proper, it can take quite drastic action under the Bill to prevent him from doing damage to the bank in which he holds shares.

Unfortunately, the Bill does not make it clear that the Bank of England can do anything before the 15 per cent. point is reached, even if it has already formed the view that the shareholder is not fit and proper. It seems somewhat illogical that an undesirable shareholder should be allowed to play around between 5 and 15 per cent. without interference by the central bank charged with the maintenance of the stability of the banking system. However, a number of assurances have been given in another place by Ministers that the Bank of England would not be powerless in such circumstances and would be able to warn an undesirable off the course. The important point is that there should be a proper warning system to ensure that the results that I am sure we all want —including the Government—are produced.

There is another difficulty in that the Bill does little to resolve the interaction between itself and the Financial Services Act 1986. I served on the Standing Committee on the Financial Services Bill and have viewed this matter with some interest over the past 18 months or so. The main point is that, since the passage of that legislation, it has become clear that two sets of regulations will apply in certain circumstances, which I have described, coming from two different regulatory authorities. That will cause considerable burdens for the banking system. It is hoped that the securities regulators are able to accept the Bank of England as——

Order. I am sorry to interrupt the hon. Member. I allowed the hon. Member for Thurrock (Dr. McDonald) to go fairly wide, but the hon. Member for Stafford (Mr. Cash) is going very much wider than the Lords amendment. We are dealing with Lords amendments and remarks must be addressed to them. I am sure that the hon. Member will bring his remarks into order.

The point that I wish to make—I think that I can make it briefly—is that the Bill could have contained a provision to enable the banking supervision used by the Bank of England to be equivalent to the system used by the securities regulators. It would be helpful to know how the current talks are progressing. We want to be sure that the banking system as envisaged by the amendment tabled in the Lords ensures that banking supervision operates in a way that would not be needlessly undermined by different securities regulators. I think that my hon. Friend the Minister knows the point that I am making. It has been made a number of times, so there is no need to dwell on the subject.

The hon. Member for Thurrock (Dr. McDonald), drew attention to some comments that had appeared in the press about a shareholding in Morgan Grenfell and asked about the implications of that and of nominee shareholdings. My hon. Friend the Member for Stafford (Mr. Cash), also on significant shareholdings in banks, pointed to the situation which applies where an individual or company owns between 5 and 15 per cent. of the share capital of the bank.

I will begin by dealing with the point that was made by the hon. Member for Thurrock about a report in the press. I suspect that that report is the same one as I saw on 29 April, which was not entirely accurate, so it may help, therefore, if I explain the provisions with regard to holdings in companies and banks in particular.

As to nominee shareholdings, under the Companies Act a company has a right to know the identity of its shareholders who are registered through nominee companies. There is an exception to that in section 216(5) which applies to certain categories of shareholders, notably Governments and Heads of State. It provides that a person is not obliged to comply with a notice to reveal identity if he is exempted under that section. That only applies up to the figure of 5 per cent., which is the same figure as applies for the purposes of the Banking Bill in relation to significant shareholders.

Until recently 5 per cent. was the figure required for disclosure in the case of a hid for a company under the rules of the Takeover Panel. That figure has been reduced to 1 per cent., but it applies under those circumstances only once a bid has been announced. For this purpose it is not relevant to the case that the hon. Member for Thurrock has raised.

The nominee position runs out when a shareholding reaches 5 per cent., so at that point there is no further protection on anonymity and, at the same time, any holding of 5 per cent. or more would trigger the provisions that we have included in the Banking Bill. The Bank of England, as supervisor, would have to be notified of a holding to be able to keep a check on significant shareholdings in authorised institutions.

My hon. Friend the Member for Stafford repeated some comments that he had made in the earlier stages of the progress of the Bill. He said that there was little of effect that could be done if a shareholding lay between 5 and 15 per cent. In practice. that is not a fair description of the position. because any undesirable shareholders, to be able to own and take advantage of a shareholding of 15 per cent. or more, would have to satisfy, at that stage, the Bank of England as supervisor that they were fit and proper to be controlling shareholders of an authorised banking institution. That would mean that their conduct as a shareholder of an amount of the capital of that bank that is lower than 15 per cent. but above 5 per cent. would be directly relevant. We have included provisions in the Bill for the Bank of England to be able to obtain relevant information from such a significant shareholder.

To use a phrase that I used earlier in the proceedings of the Bill, the strengthening of the 15 per cent. hurdle, which we accomplished by making it apply not just at the time of acquisition of the 15 per cent. but continuously thereafter, casts its shadow back to the time before the shareholder reaches the figure of 15 per cent. That gives an effective preliminary opportunity for the Bank of England to monitor the conduct and behaviour of a shareholder who may aspire to become a controlling shareholder.

It would be wrong to set a figure lower than 15 per cent. for the strong measures that are in the Bill. After all, they enable voting rights, or even ownership, to be divested, which are very powerful measures. If one had a figure significantly lower than 15 per cent. one could only accompany it by rather weaker measures, and I would not be in favour of that.

Will my hon. Friend look into the question that has been raised that the securities regulators do not seem to be able to accept the Bank of England's method of consolidated supervision under which the capital of the banking conglomerate stands behind its engagements. It appears that it is insisting on a surfeit allocation of capital to each separate business that is undertaken. Talks are occuring on this question. but perhaps my hon. Friend will drop me a note about it.

I will certainly look into that. It is a separate point from the one that we have been discussing, but since it has been raised I will comment on it.

I know that there is the question of capital adequacy calculations under the different supervisory regimes, but I am anxious that a sensible solution should be found to this. Any institutions which are affected or potentially affected by the different regimes and are concerned about it should not hesitate to make their views known and put their comments to the supervisors concerned. I hope that by so doing they will enable a reasonable and workable basis to be found between the two.

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

With this it will be convenient to take Lords amendments Nos. 10, 12 to 17 and 55.

These amendments slightly widen the power under clause 39 for obtaining information by including "a related company" among the connected companies from which information and documents can be obtained. A "related company" is defined in the Companies Act as a company in which the authorised institutions hold 20 per cent. or more of the nominal value of the shares in the company.

The amendments widen the reach of the powers of investigators appointed under clause 41 to include companies in which the authorised institution or its shareholder controllers have a 20 per cent. or more stake, rather than just 50 per cent. as is the case in the Bill as it stands. These amendments were originally put forward by my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) on Third Reading.

The amendments reflect suggestions that have been made by the Institute of Chartered Accountants in England and Wales. The Government undertook to consider them and subsequently concluded that a widening along the lines of these amendments would be desirable. Therefore, such amendments were able to be included in the proceedings of the Bill in another place.

The Minister will know that we welcomed these amendments when they were moved in the other place, but we note that they go pretty wide. It is proper that an investigation should be thoroughly carried out and should include related companies as well. The Minister will know that companies may, for one reason or another, find themselves over 20 per cent. owned by an authorised institution, perhaps as a result of underwriting.

The amendment is a wide one, but nevertheless the Opposition accepted these amendments in the other place and realised that investigations must be able to be carried out as thoroughly as possible.

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

It alters subsection (9) of the clause by empowering the Bank of England to require the provision of documents as well as information from a director, controller of manager to assist it to determine whether that person is fit and proper. This brings the subsection in the clause into line with the other provisions in the Bill relating to the obtaining of information and to investigations, all of which include powers to require the furnishing of documents.

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

With this it will be convenient to take Lords amendment No. 19.

The amendments correct omissions from the Bill as originally drafted. They relate to clause 41, which deals with investigations into the affairs of authorised institutions by inspectors appointed for the task by the Bank of England when it believes that an investigation is necessary in the interests of depositors. Subsection (5) imposes a duty on the directors, managers and controllers of an institution under investigation and on others closely connected with its business to co-operate with the inspectors. The analogous provision, section 17 of the 1979 Act, applied that duty also to people who were in such positions as well as to those who continued to be in such positions but were no longer at the time that the investigation took place. The drafting of the replacement provision in clause 41 did not include that, and we have taken this opportunity of correcting it.

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

With this it will be convenient to take Lords amendments Nos. 21, 37 and 52.

The amendments are technical drafting ones that improve the Bill in its application to Northern Ireland. I am advised that in clause 43, to which the amendments relate, the correct usage is to refer to laying information and making a complaint. Amendments Nos. 20 and 21 reflect that usage. In clause 79, the reference to Article 296 of the Companies (Northern Ireland) Order 1986 should, to be more exact, be Article 296(2). In clause 89, the reference to that order should have included the word "arrangement". Amendments Nos. 37 and 52 respectively correct those points of drafting.

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

Amendment No. 22 relates to clause 45 and requires an authorised institution to keep at each of its offices in the United Kingdom at which it holds itself out as accepting deposits not only its audited accounts but the auditors' report on the accounts. The amendment was suggested by the Opposition in Committee in another place, and I am glad to confirm that it is an acceptable improvement to the Bill.

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

Amendment No.23 fulfills an undertaking that I gave on Report. At the time, I agreed that, if the Government wished to introduce rules specifying the circumstances in which the auditors of authorised institutions should communicate information to supervisors, as the hon. Member for Thurrock (Dr. McDonald) suggested, it would be more appropriately dealt with by affirmative resolution of both Houses of Parliament. Again, I am happy to agree to that. I am glad that the provision has been able to be included in the Bill.

My remarks will be even briefer on amendment No. 23. I thank the Economic Secretary for ensuring that the amendment that I proposed in Committee has been put forward in the other place and is now part of the Bill.

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

With this it will be convenient to take Lords amendments Nos. 25, 26, and 28 to 34.

The amendments relate to clauses 58 and 60, dealing with technical aspects of the administrator procedure. That procedure was introduced by the Insolvency Act 1985. It has recently come into force for the generality of companies, but as yet does not apply to banks. It will do so in due course when secondary legislation under the Insolvency Act is laid.

The Bill, with a view to that order being made in due course, provides for the deposit protection arrangements to apply in respect of deposits with an institution, subject to an administration order. The amendments relate to the way in which calculations are made with regard to deposits and the amount of compensation payable in an administered institution. The amendments were accepted unopposed in another place. They are a useful piece of forward planning in relation to the application of the Insolvency Act provisions and the administration procedure in the case of banks.

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

It is designed to remedy a gap in the circumstances in which the deposit protection fund is brought into play when a Scottish partnership is wound up. It ensures that the deposit protection fund is triggered when an institution that is a Scottish partnership is wound up by the court on the petition of the Bank of England under clause 90. At present, the drafting is defective in that respect. The position of partnerships in the rest of the United Kingdom is already covered, but for the sake of completeness it is wise to make provision for what I hope will be an exceedingly rare occasion, if it ever arises at all.

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

I should inform the House that the amendment involves privilege.

After that ominous warning I must tell the House that the amendment was proposed, for the sake of clarification, by the Opposition in another place. It is designed to make clear that contributions to the deposit protection fund could be deducted from taxable profits. Although I was advised that clause 66 did not need amendment, there is no harm in the amendment. If it could conceivably assist in the avoidance of doubt, I am happy for it to be included in the Bill.

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

Under the Bill, an overseas bank proposing to establish a representative office in the United Kingdom is required to give not less than two months' notice to the Bank of England. As the Bill stood, an overseas bank would not clearly be required to give such notice if it entered into an arrangement with an agent that had already established premises here for the purpose of conducting representative activities through that agent. Therefore, the amendment closes a potential loophole in the requirement to report establishment of a representative office. It is not a loophole which, under current circumstances, is likely to be exploited, but it is wise to close it now because it may well be that, in future, further arrangements will need to be made with regard to representative offices, and it would be unfortunate if the Act, as it would then be, did not cover that point.

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

With this it will be convenient to take amendments Nos. 39, 40, 41, 42 and 43.

Amendments Nos. 38, 39, 42 and 43 extend the purposes for which the Bank of England can disclose supervisory information to the Secretary of State for the purpose of investigations under the Companies Act 1985. As presently drafted, clause 84(1) allows disclosure by the Bank to the Secretary of State only to assist him with some of his powers under part XIV of the Companies Act, which deals with investigation of companies and their affairs. While it is unlikely that disclosure will be necessary in many of the remaining cases, it is not impossible. The amendments therefore replace the references to specific sections of part XIV of the Companies Act and the equivalent Northern Ireland order, with reference to the whole of part XIV and its Northern Ireland equivalent.

Amendment No. 40 adds to the list of supervisory persons to whom the information may be disclosed a person appointed by the Secretary of State to obtain a company's books or papers under section 44 of the Insurance Companies Act 1982.

Amendment No. 41 arises as a consequence of the approach adopted by the draftsmen in the Building Societies Act 1986.

As a whole, these are a rather miscellaneous list of technical tidyings-up of clause 84 on disclosure to other supervisors, and while I would not try to exaggerate their importance, they tidy up an important clause in the Bill.

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

With this it will be convenient to take Lords amendments Nos. 45 to 50.

These are minor, technical, drafting amendments that deal with cross-references to the Companies Act and the Financial Services Act 1986.

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

The amendment involves a new clause that is designed to clarify the existing law as it affects banking transactions carried out with the latest technology. Without the amendment, there would have been some uncertainty about the position under the Consumer Credit Act of electronic transactions on a current account by means of a plastic card. It can be difficult for the law to keep pace with such changes, and the amendment, which is designed to remove a possible constraint on the development of an important project in electronic banking — electronic funds transfer at point of sale— was and is welcome, and I am glad that it has been incorporated in the Bill. It is one item to which the banks attach considerable importance in planning their developments in the area, and for that reason it has been taken ahead of other matters that have been referred to the review of banking services law in general.

I do not wish to oppose the amendment. Nevertheless, it is somewhat surprising to find legal obstacles to the introduction of EFTPOS being dealt with at this stage of the Bill, and, as the hon. Gentleman has just said, in advance of a full review of banking services. He will no doubt be aware that consumer associations and consumers in general may have certain anxieties about the way in which such systems may operate, and may be concerned about whether their interests are properly protected. I want to put on record the fact that the Opposition, while not opposing the amendment, express doubts about the wisdom of removing legal obstacles without ensuring that sufficient consumer protection has been built into the legislation. I should be interested to know what thought has been given to that matter.

I understand that the banks wish to move ahead with EFTPOS, and that this is an opportunity to remove any possible legal obstacles, doubts or misgivings, but the Government have not paid sufficent regard to consumer protection in this case.

I note what the hon. Lady has said. I am glad that she did not oppose the provision, which was discussed in the Government's original White Paper and has therefore had a wider currency than other matters relating to the law as it affects the relationship between banks and their customers.

As far as I am aware, there is no decisive reason on grounds of consumer protection why we should not go ahead with the provision now, particularly because if we do not plans for the arrangements would be put back, possibly for an indefinite period. The review of the banking services law will examine the whole area and now that the provision has been incorporated in the Bill the banks will be able to take that into account in considering other related matters concerning the transfer of funds and the interests of consumers. However, I take the hon. Lady's point.

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

With this we shall discuss Lords amendment No. 56.

The amendments relate to a point raised by my noble Friend Lord Elton during debate on Report in another place. The question which then arose was whether the drafting of section 183 of the Financial Services Act 1986 was sufficiently clear. That section deals with reciprocity and provides the Government with reserve powers, the purpose being to secure reciprocal access for British firms in overseas markets. It allows for the refusal, the restriction or the removal of authorisation to carry on banking, investment or insurance business in the United Kingdom if the country of origin of the institution concerned does not allow reciprocal access in those areas to British institutions.

The intention has always been that these powers should operate in such a way that action could be taken against, for example, a banking institution on the grounds of lack of access to investment or insurance markets, or vice versa. This is known as a cross-functional approach, and it gives the necessary degree of flexibility for the powers to achieve their objective.

It was considered that the present wording of the provision is ambiguous and that it is insufficiently clear whether cross functionality would apply if challenged, and the new clause was introduced to put the matter beyond doubt. The related amendment to clause 108, No. 56, ensures that as the new clause is a clarification of existing legislation it will come into effect immediately following the Bill's enactment.

I am glad to note that the new clause begins

"For the avoidance of doubt".

This is a matter upon which there should be no doubt, and the provision goes to the centre of gravity of the "playing field". I refer to the way in which reciprocity between nations—I have in mind specially Japan and the United States — operates in the international securities and banking markets. It is essential that we have such a provision, and I greatly welcome it. I think that my hon. Friend the Economic Secretary to the Treasury will recall that I tabled a series of amendments in Committee, which provoked a certain amount of comment in the press and elsewhere at the time which argued strongly for adequate reciprocity. I am delighted that the Government have taken the steps that they have and that my hon. and learned Friend the Under-Secretary of State for Trade and Industry went recently to Japan to discuss these very matters with those responsible in that country.

There is also the general question of the GATT round and the manner in which bilateral arrangements and agreements are entered into. We cannot work on the basis that the Japanese, or other countries that have enormous capitalisation at their disposal, are in a position to do a Monty Python on our banking system. It is essential that the amendment should be agreed to. I welcome the fact that my right hon. Friend has adopted it.

I welcome the remarks of my hon. Friend the Member for Stafford (Mr. Cash). It is important that we have in place provisions that will be seen to be able to work if they need to be brought into play. If there were any legal doubt that they could be implemented, they would fail in much of their purpose, which is to encourage the countries in which British financial institutions may want to operate to offer the same access to our banks and insurance companies, for example, as we offer them by way of a welcome to the City. Doubt had been cast upon that and we want to make it clear that we have relevant provisions in the Bill and in the Financial Services Act, and that such provisions, if they had to be brought into force, would be effective and would enable us to take appropriate action.

As I have said during earlier stages in our consideration of the Bill, we hope that we shall not have to implement these provisions. Our purpose is to open up foreign financial markets rather than to close the City, or British financial markets, to foreign institutions. It is clearly right that the relevant provisions in our legislation by way of reserve powers should be effective if ever they have to be used. Although the new clause is designed for the avoidance of doubt, it adds strength to our commitment and will make it clear to all outside that we want to have provisions of this sort and that we want them to be right, so that if they have to be used they will be effective in practice.

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

The amendment is designed to tidy up the definition of an associate for the purposes of identifying controllers and significant shareholders. It follows on changes made on Report in this place, especially the introduction of a requirement for notification to the Bank of England by persons who become significant shareholders—that is to say, shareholders with 5 per cent. but less than 15 per cent. of the voting power of an institution in the United Kingdom or of another institution of which it is a subsidiary.

This addition to the Bill has resulted in the Bank of England being required to pay more attention to persons who may be acting in concert for the purpose of acquiring shares, even though they may not be seeking to control the institution through the joint exercise of voting power. The effect of the amendment is to include within the definition of associate for the purpose of grouping persons who are, in effect, concert parties, those who agree or arrange to buy shares together or to dispose of them together. The subsection had already provided that associates included those who exercised their voting power together, and that provision is retained.

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.

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

It remedies an omission dealing with consequential amendments to other legislation. It substitutes references to institutions authorised under the Bill for references to recognise banks or licensed institutions. That was the terminology used in the Banking Act 1979, which this Bill will supersede. The latter definitions will no longer be relevant once this Bill becomes operative.

With this we will discuss amendment No. 60.

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

Amendments 59 and 60 relate to schedules 6 and 7. They have the effect of deleting clause 54(5) of the Building Societies Act 1986 which, together with subsection (4), made provision for disclosure of banking supervisory information to the Building Societies Commission by the Bank of England pending the coming into force of the relevant provisions of this Bill. As soon as this Bill is enacted and comes into Force, those provisions of the Building Societies Act 1986 will be superseded, and amendments 59 and 60 deal with that.