§ Mr. Denzil DaviesI beg to move amendment no. 2, in page 2, line 6, at end insert—
'(ff) the institution is an unincorporated institution other than a partnership and is formed under the law of another member State and an event has occurred with respect to it which, in that member State, appears to the Bank to correspond, as near as may be, with any of the events specified in paragraphs (a) to (d) of subsection (2) or paragraphs (a) to (f) of subsection (3) below, or '.
§ Mr. Deputy Speaker (Sir Myer Galpern)With this it will be convenient to take Government amendment nos. 16, 17 and 18.
§ 7.0 p.m.
§ Mr. DaviesThese are technical amendments and they deal with the position of an unincorporated institution which is neither a partnership nor a company in relation to insolvency provisions. In the EEC, there are various organisations which do not fit very well into the partnership or corporate forms that we know in this country. It is necessary to provide for insolvency provisions in relation to them. That is why these amendments have been tabled. They are purely technical and relate mainly to institutions in France and Italy which are not 1204 strictly either limited liability companies or partnerships.
§ Mr. John MooreThe Minister of State will recognise that the technical nature of the amendments does not exclude the degree to which they impinge on many other interrelated points. The right hon. Gentleman was kind enough to send all members of the Committee a crucial letter dated 12 February concerning certain undertakings given in Committee that impinge upon our present discussions.
I should like to raise several points relating to this series of technical amendments. My hon. Friend the Member for Hitchin (Mr. Stewart) raised three particular technical points in Committee. The first related to the difficult problem which might occur due to the interpretation of the word "deposits ". We were concerned about the possibility of an inadvertent triggering of the revocation provisions by a legitimate change in the nature of the bank's mix of business.
It is relevant to put on record the useful comments that the Minister of State made in that letter. He said:
The Bank will take all relevant circumstances into account in deciding whether to proceed with revocation on the grounds that an institution has not carried on a deposit-taking business (as defined) for six months or more, and the provision will be interpreted flexibly.Secondly, my hon. Friend the Member for Hitchin raised the complicated question of the composition of creditors. The Minister thought that this was covered. I 1205 am delighted that in his letter he was able to stress that he wasconfident that there is no need to provide for revocation on the grounds of a composition with creditors in the case of companies. Section 206 of the Companies Act 1948, which I assume you had in mind"—the right hon. Gentleman was referring to my hon. Friend the Member for Hitchin—is generally directed towards reconstructions and amalgamations, where the company is to continue as a going concern.Thirdly, my hon. Friend raised the point about the language in subsections (4) and (5) which could create the possibility of there being a slight gap in the status of the institution. The right hon. Gentleman said that he would re-check this, and in his letter he said:I am confident that the clause as drafted ensures that there will be no gap between the expiry of one authorisation and the grant of another.I thought it important to put those points on record because this is an exceptionally difficult technical question. To that extent, it is important to the banking community outside.We are also considering an area relating to an extension with regard to the EEC. It will be recalled that members of the Committee were concerned about the nature in which confidential information of the bank was provided to other central banks. Under the proposed EEC directive, we thought that we would be forced to accept a commitment to divulge information to member States' central banks. An amendment that was not moved sought to limit it to them and to exclude other, non-member States.
The arguments were covered extensively in Committee, and I shall not seek to labour the point tonight. The thrust of that debate was very simple. We argued that there were very different kinds of legal, political and social systems in many other States, and to that extent we could not assume that following the disclosure of confidential information they would base their action in the same way as we would, especially with regard to risks to institutions and individuals.
To be fair to the Minister, he did not deny these risks, and in his letter of 12 February he said that
essentially they would be very remote contingencies".My difficulty is that in Committee we were told that essentially it would be 1206 wrong to help the EEC by limiting the information we would give to it, because it would be unfair to organisations such as the Federal Reserve Bank of the United States or the central banking authorities in, say, West Germany, which would be hurt by not receiving that amount of information.However, I should like to read one other paragraph from the right hon. Gentleman's letter in which he said:
Nor would it be possible to confine 19(5) to EEC authorities, since it could be argued that the extra degree of confidentiality thereby afforded to customers of third country institutions amounted to favourable treatment of these institutions, which is again precluded by the directive.I imagine that by this stage all hon. Members are as confused as I have become. With respect, I think that the Minister of State's advisers are a little wrong here. Surely the EEC directive must be concerned with seeking to give more information to help the EEC central banking supervisory authorities in the exercise of their supervisory functions. To that extent, any additional information that can be given is positive. Therefore, the provision of less information to non-EEC central banks cannot be regarded as less favourable treatment to the EEC. I accept that there is a lot of confusion here. Perhaps the Minister of State's advisers were a little confused by their acceptance—may be subconsciously—of the sensible arguments that we made in Committee that it was right not to extend the break in confidentiality of information.I hope that the Minister of State will accept that his advisers were wrong in suggesting that this particular extension is precluded under the directive. These are obviously very technical points, and I appreciate the Minister of State's patience. However, this is a useful juncture at which to have a response from him, if it is at all possible.
§ Mr. Denzil DaviesPerhaps I can deal with the hon. Gentleman's last point, because the amendment relates to the EEC. I do not think that there is confusion, although I accept that this is a difficult area.
The argument put forward in Committee, and the main argument that I put forward now, is that if information were passed to the central banks within the 1207 EEC, and not to the central banks outside the EEC, that would be prejudicial to the Federal Reserve Bank and other central banks. It would make it difficult for the Bank of England to get information from them, because this is the one way in which supervision on an international basis takes place.
If we were denied the opportunity, in very limited circumstances, to give this information to other central banks, they would not respond to us if for very good reasons we wanted that kind of information.
As to the EEC directive, we are really talking about the customers of banks in other countries. I am not saying that the point within the EEC directive is a substantial one, but it is a point. It is that if information about customers can be released to central banks within the EEC but not to central banks outside the EEC, it could be said that the customers of banks outside the EEC were in a slightly better position than the customers of banks within the EEC. That is where the direction comes in. I am not saying that it is a very strong point. I agree it is a rather confused and difficult area, but that is the distinction.
§ Mr. MoateI wonder whether the Minister could help me on what is, I imagine, essentially a drafting and technical point. The amendments seek to cover unincorporated institutions formed under the law of another member State. There has been reference to the EEC directive, which, of course, does not need to be referred to in the Bill. Nowhere in the Bill can I see from a fairly quick scrutiny any reference to the European Economic Community, and there is no definition of what is a member State. I wonder whether the Minister is sure that we know that the Bill is correct in referring to a member State without defining the organisation it refers to.
§ Mr. DaviesI take the hon. Gentleman's point that perhaps we have not defined member States, but I do not think that it is necessary. Other Acts refer to member States, and I think the drafting is quite clear. The term "other member States" is fairly common now since we have entered the European Community.
§ Amendment agreed to.