POWER TO OBTAIN INFORMATION AND REQUIRE PRODUCTION OF DOCUMENTS (Hansard, 19 February 1987)

§ Mr. Jeremy Hanley (Richmond and Barnes)
I beg to move amendment No. 26, in page 29, line 44, at end insert 'or related company of either or both of these'.

§ Mr. Deputy Speaker (Mr. Ernest Armstrong)
With this it will be convenient to take the following amendments: No. 27 in page 29, line 45, at end insert 'or its related company'.
No. 28, in line 46, at end insert 'or its related company'.
No. 29, in line 50, leave out '50' and insert '20'.
No. 30, in line 50, at end insert— '(e) a related company of that institution'. No. 33, in clause 38, page 31, line 24, at end insert 'or related company of other or both of these'. No. 34, in line 25, at end insert 'or its related company'.
No. 35, in line 26, at end insert 'or its related company'.
1118 No. 36, in line 30, leave out '50' and insert '20'.
No. 37, in line 30 at end insert— '(e) a related company of that institution'. No. 60, in clause 103, at end insert '"related company" has the same meaning as in Schedule 4 to the Companies Act 1985;'.

§ Mr. Hanley
I am grateful for the fact that all the amendments in my name have been grouped together.
Clause 36 grants the Bank of England power to obtain information and to require the production of documents from authorised institutions. Subsection (6) extends that power to enable the Bank of England to investigate holding companies or subsidiaries of authorised institutions and subsidiaries of holding companies. Paragraph (d) refers to bodies corporate in which a shareholder controller can exercise more than 50 per cent. of the voting power at a general meeting.
I should like to declare an interest as the parliamentary adviser to the Institute of Chartered Accountants in England and Wales. The institute strongly believes that it would be a great help to the Bank of England to extend its right to obtain information so that it covers related companies as defined in schedule 4 to the Companies Act 1985. In clause 36 this would be of help to the Bank of England, and in clause 38 to the person whom the Bank of England appoints as being one or more competent persons to investigate and report to the Bank". The matter was discussed in Committee by the hon. Member for Thurrock (Dr. McDonald) and by my hon. Friend the Member for Chichester (Mr. Nelson), and I pay tribute to my hon. Friend the Member for Chichester for moving, on my behalf, other amendments that were helpful in Committee.
The Institute of Chartered Accountants in England and Wales feels that this clause would be of benefit because a related company, which is defined in the Companies Act 1985 as any body corporate … in which that company holds on a long-term basis a qualifying capital interest"— that is, 20 per cent.— for the purpose of securing a contribution to that company's own activities by the exercise of any control or influence arising from that interest". would then be brought into account. Therefore the hank or the investigators could take into account a body which has an element of control over the authorised institution itself.
It seems strange to me and to the Institute of Chartered Accountants that, in granting this power to the Bank of England to obtain information, and in clause 38 granting the power to a qualified person to investigate on their behalf, the power is limited effectively to subsidiaries for holding companies. If, for instance, the investigation that was taking place revealed many transactions with a related company that would warrant further investigation, that could not be undertaken. Furthermore, as the investigators have to report back to the bank on the nature, conduct or state of the institution's business or any particular aspect of it and on matters of control, those companies in which there is an element of control—and this has been defined in the Companies Act 1985 as 20 per cent. — should be investigated.
I ask my hon. Friend the Economic Secretary to tell us why, in the Bill as drafted, the limit of 50 per cent. was put into clauses 36 and 38, and why a recognised organisation 1119 such as a related company has been excluded. As it has an element of control over the bank that is being investigated, surely it should be available to the investigators for their detailed attention.

§ Mr. Ian Stewart
I understand the thinking behind the amendment of my hon. Friend the Member for Richmond and Barnes (Mr. Hanley). The powers in clauses 36 and 38 already cast a fairly wide net. It is inevitable that powers of that sort will have some limit. At present the provisions follow the basic relationship of parent company and subsidiary. On occasion, it might be necessary for the supervisor to obtain information concerning other related companies. That is usually achieved through the authorised institution itself. In principle, I am reluctant to over-extend the statutory powers in these provisions. However, without commitment, I will reflect further on this question in the light of what my hon. Friend has said, because it is a complicated and rather technical area.

§ Mr. Hanley
I am grateful for my hon. Friend's statement that he will continue to look at the matter. I repeat that in clause 38(1)(b) the competent person called upon to investigate and report to the bank must report on "the ownership or control of the institution".
As I have already said, a related company is defined as one that has a control or influence arising from the size of the shareholding and the activities of members of the board. Therefore, although I read with interest in the report of the Standing Committee that my hon. Friend the Minister said: The amendment takes into account other bodies connected with him and extends the information-gathering power a bit too wide." — [Official Report, Standing Committee E, 22 January 1987; c. 221.] I should have thought that "a bit too wide" would have been less than 20 per cent. However, between 20 and 50 per cent., as the hon. Member for Thurrock (Dr. McDonald) mentioned, would not perhaps be taking it too wide, but would be taking it down to the minimum level of effective control. Therefore, having heard what my hon. Friend has said, I hope that he will consider the matter again before the Bill proceeds to another place. In the meantime, I beg to ask leave to withdraw the amendment.