Wednesday 27 March 2019
Supervision of Co-operative Bank 2008-13: Independent Review
On 6 March 2018 I laid a direction before Parliament using the powers conferred by sections 77(1) and (2) and 78(5) and (6) of the Financial Services Act 2012 (“the Act”), to require that the Prudential Regulation Authority (“the PRA”) should undertake an investigation into supervision of the Co-operative Bank plc between 2008 and 2013. The direction required that the PRA appoint an independent person to undertake the review and that the review should be completed within one year. The PRA appointed Mr Mark Zelmer, a former Deputy Superintendent of the Office of Superintendent of Financial Institutions, Canada, and previously a senior official at the Bank of Canada, to undertake the review.
The PRA presented the completed report setting out the findings of the review to HM Treasury on 4 March 2019. In accordance with section 82(6) of the Act I have today laid the report before Parliament. Copies of the report are available in the Vote Office and Printed Paper Office and as required by section 82(2) of the Act the report will also be published on the Government website.
The report makes detailed recommendations for the PRA and the Bank of England (“the BoE”) relating to supervisory policy and practice. The PRA and the BoE welcome the Report’s recommendations and have today published a document responding to them.
The Financial Conduct Authority has also welcomed the report. While the report contains no formal recommendations for HM Treasury, Mr Zelmer observes that in future relevant authorities should continue to engage early and regularly on firm-specific issues where necessary. The Treasury agrees with this observation, while ensuring that we continue to respect the independence of the regulators.
I would like to thank Mr Zelmer for his work in undertaking the review and producing this report.
Foreign and Commonwealth Office
Hong Kong: Six-monthly Report
The latest six-monthly report on the implementation of the Sino-British Joint Declaration on Hong Kong was published today. It covers the period from 1 July to 31 December 2018. The report has been placed in the Library of the House. A copy is also available on the Foreign and Commonwealth Office website: www.gov.uk/government/organisations/foreign-commonwealth-office.
I commend the report to the House.
Westminster Foundation for Democracy: Tailored Review
I am announcing today the publication of the recent tailored review of the Westminster Foundation of Democracy (WFD), an arm’s-length body of the Foreign and Commonwealth Office (FCO).
WFD was established in 1992, with a focus on strengthening democracy in Africa, Asia, eastern Europe and central Asia, the middle east and Latin America. Since 1992, it has played an important part in delivering UK expertise on democracy and democratic institutions.
The principal aims of tailored reviews are to ensure public bodies remain fit for purpose, are well governed and properly accountable for what they do.
In conducting this tailored review, officials engaged with stakeholders in the UK and overseas, including across UK Government, civil society, as well as with WFD’s staff and management.
The review reported in December 2018. A plan to implement the recommendations has been developed and agreed between the FCO and WFD, and will be taken forward by officials. The review found that “given the scale of the challenges facing democracies, the review team believe that WFD’s purpose remains as relevant and necessary today as when it was established in 1992”. The review also contains a number of recommendations to strengthen WFD’s corporate governance and its relationship with the FCO.
Copies of the review will be placed in the Libraries of both Houses.
The attachment can be viewed online at:
Contingency Liability: Financial Assurance
On 23 August 2018, the Department for International Development (DFID) published its technical notice entitled “Delivering humanitarian aid programmes if there’s no-deal Brexit deal”. The notice committed DFID to funding the post-March outputs of European Civil Protection and Humanitarian Aid Operations (ECHO) programmes contracted to UK organisations, if ECHO terminates funding in the event of no deal.
The technical notice was issued to enable UK organisations to bid for ECHO funding prior to our exit, where they were bidding as lead or sole implementers. UK organisations argued that they were losing bidding opportunities due to ECHO’S requirement that they prove at application stage that they could fund the post- March 2019 outputs of the programme in the event of a no-deal. The UK Government’s commitment enabled UK organisations to demonstrate in their applications that programmes would be funded in a no-deal scenario. UK aid spending in this case will prevent both loss of funding to UK organisations, and severe disruption to humanitarian programmes.
At present, the House is due to be in recess from 4 April. Therefore, it is not possible to offer the standard scrutiny period of 14 sitting days due to the potential urgency of the situation. However, if a Member signifies an objection by giving notice of a parliamentary question or otherwise raising the matter in Parliament before Parliament rises for the Easter recess, final approval to proceed with incurring the liability will be withheld pending an examination of the objection. In addition, if a Member raises an objection with me by correspondence after the Easter recess has begun but before 10 April, final approval to proceed will likewise be withheld pending an examination of the objection. The consequences of withholding the liability would be the halting or even cancellation of programmes delivering vital aid programmes to the world’s vulnerable, and the failure to uphold our commitment to UK humanitarian and development organisations.
Parliament was informed of this commitment on 23 August, when a letter from the Secretary of State drawing attention to the technical notice was deposited in both House Libraries.
In March 2019 I agreed to extend the financial assurance to cover any direct bid ECHO, European Development Fund, Development Co-operation Instrument and EU Aid Volunteers ODA funding to UK organisations where that funding will be cut by the EU in the event of no deal. This includes contracts and grants awarded prior to August 23. My Foreign Office colleague will make a separate announcement regarding heading four instruments under his remit.
The exact size of the contingency liability is still unknown, as UK organisations continue to bid for ECHO programming and we continue to await the EU approval processes. The size of the liability is therefore subject to change, though our current estimate is approximately £90 million, based on a reduced number of bids this year. The likelihood that the liability will be called is directly proportional to the likelihood of no deal.
The Treasury has approved this proposal.