HL Deb 27 April 1987 vol 486 cc1253-66

4.9 p.m.

Proceedings after Third Reading resumed.

Clause 41 [Investigations on behalf of the Bank]:

Lord Beaverbrook moved Amendment No. 3: Page 34, line 17, after ("every") insert ("person who is or was a").

The noble Lord said: My Lords, this amendment corrects an omission in the Bill as drafted. Clause 41 deals with investigations into the affairs of authorised institutions by inspectors appointed for the task by the Bank of England where it believes 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 cooperate with the inspectors.

However, unlike the same provision in the 1979 Act, the subsection does not apply this duty to people who were directors or managers or otherwise included in the subsection, but are no longer in such a position at the time the investigation takes place. Thus there will be no change to the position under the 1979 Act. It might well be the case that, for example, a former director would have been in office at the relevant time and therefore be able to assist the investigation. It is therefore important that he should be covered by the obligation to co-operate in an investigation. This amendment achieves that result. I beg to move.

4.15 p.m.

Lord Bruce of Donington

My Lords, this amendment, if I may say so, appears at a very late stage in the proceedings on the Bill. We quite understand, and the persons concerned were placed under notice by subsection (5), that: It shall be the duty of every director, controller, manager, employee, agent, banker, auditor or solicitor of a body which is under investigation", to co-operate in certain specific ways; that is: to produce to the persons [appointed as investigators] …within such time and at such place as they may require, all documents relating to the body concerned which are in his custody or power … to attend before the persons so appointed at such time and place as they may require; and … otherwise to give those persons all assistance in connection with the investigation which he is reasonably able to give". The clause itself, as originally stated, quite clearly gave notice to all those who occupied positions at the time. Now there appear to be some later thoughts about it. I invite the noble Lord to take account of the possible consequences.

It means that, regardless of time—it could be a year before the passing of this Bill into law, two years ago, three years ago, four years ago or 10 years ago—all those who have occupied a position specified in the subsection are now put under notice. Why had this escaped the attention of the Government until now? Why was it not in the original clause as drafted? We have had a Committee stage on the Bill. Clause 41 provides that: If it appears to the Bank desirable to do so … [it] may appoint one or more competent persons to investigate". The circumstances under which these various people have a duty are specified in subsection (5). Your Lordships will be aware that later in the clause, particularly subsection (9), if there is any default in co-operation in this respect, the person who is alleged to have committed some default under subsection (9) or who has not been co-operative or whatever it may be, shall be guilty of an offence and liable on summary conviction to imprisonment for a term not exceeding six months or to a fine not exceeding the fifth level on the standard scale or to both". As indeed one would expect, subsection (11) makes it clear that a barrister, advocate or solicitor is not required to produce a document containing a privileged communication made between himself and the authorised institution.

Let us consider this clause, as amended to include the words, person who is or was a". and the position that may arise in practice. The amended clause would now read: It shall be the duty of every person who is or was"— the time is infinite and could reach many years back in time— a director, controller, manager, employee, agent, banker, auditor or solicitor". I am a little concerned, not purely because of my professional interest, about the position of the person who has been an auditor. Of all the people who are specified in this subsection it is the auditor who is most likely to have at his disposal some documentary evidence. The documentary evidence may comprise a whole series of audit reports and audit notes, which are often in very great detail going way back and which in some cases may already be in the archives of the firm of auditors concerned.

Is it really the intention that a power in such broad terms and reaching back over an infinite period of time should be given to require an outside body, not a servant of the Crown, not the Fraud Squad or any body of that kind, to report—incidentally without payment? I corresponded with the noble Lord on this matter of the position of the auditors under the clause. He wrote to me and said that the Bank appoints the investigator and pays his costs, but, in common with all other persons who may be questioned, there is no provision for payment by the Bank of the costs of attendance of reporting accountants or auditors. Whether or not they could reclaim their expenses from the institution under investigation would depend on the terms of their appointment. So far as auditors are concerned, shall we really have a circumstance in which a person or a firm which had been the auditor of a company or of an authorised institution some four or five years previously has to spend hours and hours, perhaps days, in searching through relevant documents without any kind of provision for remuneration for their time, purely on the basis of these requirements of, not, I repeat, the Fraud Squad or any body of that kind, but an investigating accountant acting on behalf of the Bank? I venture to say that that is wholly unreasonable.

Aside from that position, on which I should like the noble Lord to comment, there is still the point of principle that this measure is retrospective in its effect. It takes no account of any confidentiality agreement or contract between former controllers, managers or employees and the authorised institution for which they worked. On the point of principle and aside from the purely accounting aspects of the matter to which I have referred—I must declare that I have no personal interest in that whatsoever—we think it is a bad provision, providing as it does, in effect, for offences retrospectively, and providing for them without any regard to whatever previously subsisting arrangements there may have been.

Following the investigation of the Johnson Matthey case, on which the Bank reported and which must have been in the mind of the Government at the time, this legislation first went to another place, went through Committee there, then came to this place and through Committee and Report stages here. Are we to believe that the remedial steps that have been taken by the Bank since Johnson Matthey are so ineffective that it still apprehends there may be troubles, way back many years, which require unearthing before this legislation is brought forward? That is not exactly a motion of confidence in the amendments to the Bank's supervisory powers instituted, we are given to understand and which I believe to be the case, since the Johnson Matthey debâcle. If the Government and the Bank are quite sure that their revisions of the whole machinery are so effective, why do they now feel it necessary to adopt such a retrospective measure? We on this side of the House will be very interested in the Government's reply.

Lord Beaverbrook

My Lords, I think I should affirm to your Lordships that this Bill is all about the protection of depositors, not about the protection of fees for auditors or reporting accountants. Clause 41 imposes a duty on the directors, controllers, managers and employees of an authorised institution and on any agent, banker, auditor or solicitor, reporting accountant or significant shareholder of an institution to attend before the inspectors and to produce documents and otherwise assist the investigation. The clause as drafted does not, however, impose the same duty on persons who were formerly directors, managers and so on, but are no longer such at the time of the investigation. It could easily be the case that those involved with a troubled institution no longer hold office but nevertheless have much to contribute to an investigation.

The noble Lord, Lord Bruce, asked me whether we are concerned that matters from the past will come to light. That is perfectly possible. I have no crystal ball to see what might arise in the way of problems. I hope that there will be none. Indeed, the 1979 Act contained the same powers. Unfortunately, by simple oversight, these powers were left out of Clause 41 of the Bill.

I hope that I am able to reassure the noble Lord that all the amendment tabled today seeks to do is to put in exactly the same powers that were contained in the 1979 Act.

On Question, amendment agreed to.

Clause 43 [Powers of entry in cases of suspected contraventions]:

Lord Beaverbrook moved Amendment No. 4: Page 37, line 5, after ("to") insert ("laying an").

The noble Lord said: My Lords, with the leave of the House I shall speak to Amendments Nos. 4 and 5 together. These two amendments are technical drafting amendments which improve the clarity of the subsection in its application to Northern Ireland. I am advised that the correct usage is to refer to "laying an information" and "making a complaint". These amendments reflect this usage. I beg to move.

On Question, amendment agreed to.

Lord Beaverbrook moved Amendment No. 5: Page 37, line 6, after ("to") insert (making").

On Question, amendment agreed to.

Clause 79 [Duty to provide information and documents]:

Lord Beaverbrook moved Amendment No. 6: Page 62, line 28, after ("296") insert ("(2)").

The noble Lord said: My Lords, this amendment is not substantive but merely a technical drafting improvement. I beg to move.

On Question, amendment agreed to.

Clause 90 [Disclosure of transactions by authorised institutions with chief executives and managers]:

Lord Beaverbrook moved Amendment No. 7: Page 68, line 37, after ("transaction") insert (", arrangement").

The noble Lord said: My Lords, this amendment corrects an error. The word "arrangement" was accidentally omitted from the Bill in subsection (2) of Clause 90. This needs to be corrected since the clause involves consequential amendment of the Companies Act and the wording should therefore follow that in the Act and in subsection (1) of this clause. I beg to move.

On Question, amendment agreed to.

Lord Beaverbrook moved Amendment No. 8: After Clause 90, insert the following new clause: ("Powers for securing reciprocal facilities for banking and other financial business. For the avoidance of doubt it is hereby declared that a notice under section 183 of the Financial Services Act 1986 (disqualification or restriction of persons connected with overseas countries which do not afford reciprocal facilities for financial business) may be served on any person connected with the country in question who is carrying on or appears to the Secretary of State or the Treasury to intend to carry on in, or in relation to, the United Kingdom business of any of the descriptions specified in subsection (1) of that section whether or not it is of the same description as that affected by the less favourable terms which are the occasion for the service of the notice.").

The noble Lord said: My Lords, with the permission of the House, I shall speak to Amendments Nos. 8, 9 and 11. These amendments relate to a point raised by my noble friend Lord Elton during debate at the Report stage of the Bill. I am grateful to the noble Lord for raising the point at that time. The question that arose was whether the drafting of Section 183 of the Financial Services Act was sufficiently clear. That section deals with the issue of reciprocity. It provides the Government with reserve powers, the purpose being to secure reciprocal access for British firms in overseas markets. It allows for the refusal, restriction or removal of authorisation to carry on banking, investment or insurance business in the United Kingdom if the country of origin of the institution involved does not allow reciprocal access in these areas to British institutions.

The intention is that these powers should operate in such a way that action could be taken against, for example, a banking institution on grounds of lack of access in the investment or insurance fields and vice versa. This cross-functional approach gives the necessary degree of flexibility for the powers to achieve their objective. However, it is now considered that the present wording of the provision is insufficiently clear on this point and the new clause will put the matter beyond doubt.

The related amendment to Clause 109 ensures that as the provision is a clarification of existing legislation it will come into effect immediately following the passage of this Bill. I beg to move.

Lord Elton

My Lords, I rise only to say that while I do not have a copy of the Financial Services Act by me, I trust implicitly in the drafting of my noble friend's advisers. I should like to thank my noble friend for reading my speech. It is always nice when one discovers after one has made an intervention that it can actually have an effect upon those who appear to be impregnable at the time of listening.

Lord Williams of Elvel

My Lords, we welcome this redefinition, if I may so express it, of the powers under Section 183 of the Financial Services Act. I am still unclear as to what reciprocity really means. The noble Lord referred to the "cross-functional approach". I am unclear in practice, as I have always been unclear, exactly what this means. If I may say so, the Government—and I would say this to the noble Lord the Secretary of State if he were here—defended their position extremely well on the control of major financial institutions.

Since our discussion at Second Reading, I do not think the Government have given any comfort to those of us who wish to see the major institutions, particularly the clearing banks, protected from raiders—not necessarily the Japanese or indeed the Americans—beyond this country who, by acquiring major clearing banks, could gain a large slice of the high street banking business. Having re-read this morning our discussions in Committee and on Report, I do not believe that the Government have moved at all. Indeed, the last statement made by the noble Lord the Secretary of State on Report was absolutely consistent with what his right honourable friend Mr. Norman Tebbit said in 1984 in his definition of the criteria for reference under competition policy. I do not think that we have managed to make any impact on the Government's position in spite of all the huff and puff in certain quarters of the House.

I therefore have to accept that this is not a stage at which we would wish to continue the debate, however important we feel it to be. Time will tell whether the competition review in which the Government are at present engaged will provide us with some sort of criterion under which the banking business of the country is protected. We have to see that. Time will tell also whether the reciprocity arrangements, which are extended or redefined by the new clause, are adequate to deal with what some of us believe is a potentially serious threat. However, it is too late in the passage of the Bill—besides, we have discussed it so many times—for us to reopen the issue. Nevertheless, I wish to express some disappointment from these Benches that the Government have failed to move a little in our direction to control the ownership of major financial institutions in the country and to make sure that that control is retained in United Kingdom hands.

4.30 p.m.

Lord Elton

My Lords, before the noble Lord sits down, I should say that in my view the undertaking given by the Secretary of State on Report, unlike the statement on policy given by his right honourable friend earlier, to which the noble Lord referred, left the expectation that the Monopolies and Mergers Commission would be used to defend the national interest in the event of a foreign takeover bid for high street clearing banks; and that move, although not a dramatic one, was a move in the right direction.

Lord Williams of Elvel

My Lords, with the leave of the House, I do not believe that anything the Secretary of State said was different from what Mr. Tebbit said in 1984. Indeed, the Secretary of State went out of his way to say that it was exactly what Mr. Tebbit had said in 1984. We still have to see what the competition review produces. At present it is all up for grabs.

On Question, amendment agreed to.

Clause 109 [Short title and commencement]:

Lord Beaverbrook moved Amendment No. 9: Page 79, line 22, at beginning insert ("Section (Powers for securing reciprocal facilities for banking and other financial business) above shall come into force on the passing of this Act and the other provisions of").

The noble Lord said: My Lords, I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.

Schedule 6 [Minor and consequential amendments]:

Lord Beaverbrook moved Amendment No. 10: Page 92, line 2, at end insert— ("The Finance Act 1986 In Schedule 7 to the Finance Act 1986

  1. (a) in paragraphs 8(1) and 11(1)(c) for the words "a recognised bank or licensed institution (within the meaning of the 1259 Banking Act 1979)" there shall be substituted the words "an institution authorised under the Banking Act 1987";
  2. (b) in paragraph 8(2) for the words "recognised bank or licensed institution" there shall be substituted the words "authorised institution".")

The noble Lord said: My Lords, the amendment remedies an omission in Schedule 6, which deals with consequential amendments of other legislation. It substitutes references to institutions authorised under the Bill for references to recognised banks or licensed institutions under the Banking Act 1979. The latter terminology is of course no longer relevant. I beg to move.

Lord Diamond

My Lords, as is well known to your Lordships' House, we on these Benches at all times are anxious to facilitate government business. It is for that reason that, although we have followed with the greatest care every amendment that has been moved and spoken to for and against this afternoon, we have not thought it appropriate to intervene.

On Question, amendment agreed to.

In the Title:

Lord Beaverbrook moved Amendment No. 11: Line 6, after ("funds;") insert ("clarify the powers conferred by section 183 of the Financial Services Act 1986;").

The noble Lord said: My Lords, I have already spoken to the amendment. I beg to move.

On Question, amendment agreed to.

Lord Beaverbrook

My Lords, I beg to move that this Bill do now pass.

On Second Reading of the Bill my noble friend Lord Young of Graffham said he believed that, in considering the Bill, we would see your Lordships' House working at its best as a revising chamber looking at a serious measure on which Members have considerable expertise. My noble friend is unable to be present today, but if he were here I am sure he would agree that his prediction has been borne out by reality.

The Bill was given a general welcome by your Lordships at that earlier stage, and the need for revised legislation to bring up to date the supervisory framework for banks was fully accepted, as was the context of the Bill being the third major strand of legislation dealing with the regulation of financial institutions. But Second Reading also saw the opening moves in what were to be some closely argued debates on important aspects of the Bill in Committee and on Report. I should like to congratulate all your Lordships on the thorough, well informed and good humoured way in which those debates were conducted. Changes to the Bill have resulted from those debates—perhaps not as many changes as noble Lords opposite would have wished but improvements nevertheless.

Regardless of the outcome, the debates have illuminated the issues in the legislation. Statements for the record have been made, and the purpose of specific provisions, the intention behind them and the way they are to be implemented in practice have been clarified to the considerable benefit of those outside your Lordships' House who will be affected by legislation. I refer in this context to the important debates on the Board of Banking Supervision, on changes in shareholder control, on the monitoring of large exposures and on the role of auditors and accountants in the supervisory process. These were important debates. There are other examples that one could give to illustrate the value of your Lordships' proceedings on the Bill, including the elucidation of many complex technical matters.

It is always invidious on these occasions to mention the contributions to debates of individual noble Lords, but my researches show that this is rarely seen as an insurmountable obstacle. I hope that your Lordships will forgive my doing so briefly now. I should like to mention in particular the contributions made by my noble friends Lord Elton, Lord Boardman and Lord Bruce-Gardyne. From the Cross-Benches the noble Lord, Lord O'Brien, has brought a wealth of experience on the subject to our debates, as of course has the noble and learned Lord, Lord Denning.

Committee stage was also noteworthy, featuring what was regrettably the last occasion on which the right reverend Prelate the Bishop of Birmingham addressed your Lordships. He and other noble Lords made valuable contributions. From the Alliance Benches we have enjoyed a measure of support as well as opposition from the noble Viscount, Lord Chandos, and the noble Lord, Lord Taylor of Gryfe, on some important aspects of the Bill. That support was welcome, and I am grateful to the noble Lords.

I must finally pay tribute to the helpful and constructive approach that the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Williams of Elvel, have together brought to the Bill. Their approach has been straightforward. They gave the Bill their general support but wanted changes, and argued for them in speeches that were both forceful on points of principle and subtle in their appreciation of the detail of the provisions. A number of amendments were designed to improve technical aspects of the Bill. I am happy that we were able to accept some of them. Indeed, I can best describe the expertise in banking and accountancy displayed by the Opposition Front Benches as being enviable. I am grateful to both noble Lords.

The purpose of the Bill is to update and improve the framework of banking supervision and to provide a system for the protection of depositors into the 1990s. This is a worthy aim, and the Bill is better equipped to meet it as a result of your Lordships' scrutiny. I commend the Bill to the House.

Moved, That the Bill do now pass.—(Lord Beaverbrook.)

Lord Bruce of Donington

My Lords, we on this side of the House do not wish to detain your Lordships very long at the concluding stages of the Bill. We should like to say that, to the limited extent that governmental imagination has permitted, certain amendments of a comparatively minor and interpretive kind have been inserted in the Bill.

We do not dissent from the noble Lord's observation that the passage of the Bill through the House once again illustrates the value of this Chamber as a revising Chamber and as an opportunity for the Government to have second thoughts. We know that in certain important instances the Government have had second thoughts. In passing, and while we are all in a very amenable frame of mind, perhaps we on this side ought to offer our congratulations to the noble Lord, Lord Diamond, on having delivered an apologia for his party's non-participation in the proceedings on this Bill.

I do not wish to keep the House long, but there are just three matters on which I should like to touch before we part company with the Bill. We on this side remain profoundly sceptical about its effect in regard to the necessity for various banks and authorised institutions to be subject to some rather greater monitoring on their loan exposures overseas. Nothing that has been reported in the news since the memorable intervention by the right reverend Prelate the Bishop of Birmingham has done anything to diminish our anxiety about the very considerable debt crisis which remains, which overshadows the whole of the international banking system and upon which considerable comment was made in the Financial Times today, dealing with the position of the World Bank in these matters.

These are aspects which in our view demand so far as the United Kingdom is concerned (and we are not an inconsiderable force in financial affairs) power for the Bank, in consultation with the Treasury, to give broad directions covering loan exposures overseas. Although I devoutly hope that no untoward events will happen in the next six months, I venture to think that your Lordships may eventually conclude that it was a pity the Government were not given specific powers within the Bill to intervene over the question of loan exposures and to give policy directions in accordance with the amendments laid before your Lordships by my noble friend Lord Williams of Elvel and myself.

The second point—I am very sorry to have to go back to it and I will not detain your Lordships for very long upon it—concerns the position of auditors. Under this Bill, as indeed under the Financial Services Bill, there has been a tendency to put auditors in the position of being some kind of longstop, whereby if everybody else fails—the supervisors, the directors, the clerks, the controllers and yea even the lawyers—the auditors are to shoulder the entire responsibility.

I refer to this specifically in connection with the amendment I was able to put down and to which your Lordships listened very patiently concerning the applicability to auditors within the ambit of Clause 47 of the Bill in regard to qualified privilege. That is a term which was not invented by me—who would expect a mere accountant to invent a legal term of that kind?—but already in the Government's White Paper on the subject it was recommended that auditors should be given qualified privilege.

We had much argument in the House on the basis that the auditor would only be exposed to the law in regard to defamation and that the insertion of qualified privilege would be of no advantage to him. Unhappily, this is not the case. If an auditor operating under Clause 47 of the Bill finds himself to be part of a tripartite conference—that is to say, his client, the authorised institution, the supervisor and himself as auditor—in which position he starts making observations in breach of his normal duty of confidentiality to his client, then it is not the law of defamation to which he exposes himself. That was a point to which the observations of the noble and learned Lord, Lord Denning, were directed. It is in fact the law relating to negligence which would be involved there.

If in the course of a tripartite conference among the authorised institution, the supervisor and the auditor, the auditor omitted to say something which his client wished he had said or said something which his client did not wish him to say, he exposes himself to an accusation of professional negligence. Whether that action, if it were eventually to be brought, would succeed is entirely beside the point, because from the moment the allegation is made by the client either of some omission on his part at this tripartite conference or in respect of something which the client perhaps did not like, then he comes under an immediate obligation to inform the insurance company covering him for professional indemnity under the contract of insurance uberrime fidei. That would have very adverse consequences indeed upon any firm of auditors in such a position. So I must again—and this will he the last time—express my very great regret that the Government did not follow their proposals in their own White Paper on banking supervision to give auditors qualified privilege in relation to the matters falling under the review of their activities as auditors and not necessarily as reporting accountants, which are totally different, under Clause 47.

Finally, I come to the point of enforcement. Your Lordships will recall that in the earlier stages of the Bill I indicated that many Members in another place expressed considerable anxiety about the enforcement of the provisions of this Bill. These anxieties were not relieved in the course of the exchange which I was privileged to have with the noble and learned Lord who sits on the Woolsack when he was speaking in the House in answer to a Question of mine on the Director of Public Prosecutions' action, or rather inaction, in relation to Minet Holdings plc and PCW Underwriting Agencies Limited.

The noble and learned Lord said among other things that the resources of the DPP very often did not permit the mounting of a prosecution because those who were likely to be the subject of a prosecution were able to deploy vast numbers of counsel in order to argue the case on their behalf. To quote the noble and learned Lord, at col. 439 of Hansard on 2nd March he said: We do not yet have anything like those numbers at our disposal". The noble and learned Lord, moreover, was kind enough—and this must be unique in view of our respective political affiliations—to thank me very much indeed for supporting his demand for new staff in order that the DPP could in numbers and in qualifications be brought far more up to the level necessary to tackle the formidable tasks facing the department.

With the greatest possible respect to the noble and learned Lord, I have to say that I deeply appreciate the warmth with which he received my proposal that the staff of the DPP should be increased; but I also have to point out that in his capacity as a member of the Cabinet in a purely political post, he has very adequate influence to ensure that the office of the DPP and indeed other offices have funds allocated to them. I therefore reiterate my support for the noble and learned Lord and the renewed vigour with which he will undoubtedly use his influence within the Cabinet to obtain adequate Treasury resources for considerable reinforcement of the DPP's office in order that Acts of this kind can be properly enforced.

I indicated previously—and I say it again—that some of these cases are manifestly against the law. Some are manifestly fraudulent; most are very adequately reported and were there inaccuracies the newspapers concerned would be exposed to considerable actions for libel. But there seems to be very great difficulty in mounting prosecutions against the mighty, the people with very adequate financial resources and those who are part of the establishment however reluctantly they may be accepted. We require not only that law and order should be enforced so far as concerns some of the hapless poorer people of the country but also that the law should be invoked against those who have shown, and continue to show themselves, contemptuous of the law itself.

Lord Denning

My Lords, in thanking the Government for bringing forward this Bill, I should like to say just one word about a point on which my noble friend Lord Bruce of Donington quoted me. It is in the nature of the duty of auditors that sometimes they have to break the confidence they owe to their client in order to further the ends of justice. In my observations at various stages of the Bill, I have said—and I think it is quite right—that in law they are adequately protected by what lawyers call "qualified privilege"; they are only liable for actions for defamation if they abuse that privilege by virtue of malice without reasonable cause.

However, in view of what my noble friend has said, it may be that they also need protection against unfounded claims for negligence. That is a point to be borne well in mind. If they are to do their duty properly they ought not to fear being struck in the back by actions for negligence. That is all I have to say.

Lord Elton

My Lords, this stage of the proceedings of any instrument seems to me to partake partly of the nature of a funeral and partly of the nature of a baptism. The Government tell us how we have fared during the life of the Bill which is coming to an end; the rest of us predict how the Act will perform after its birth and try to extort undertakings from godparents. I think that the noble Lord opposite has done exactly that.

First, I join him in thanking my noble friend and through him the Minister for the patience that has been shown and for the points that have been met. Secondly, I should like to recall one matter that I raised at Second Reading, in Committee and on Report, which remains of great interest to the banking sector. It is the question of the difficulties that inevitably arise when one kind of institution is subjected simultaneously to two sets of regulations originating from two different regulatory authorities.

Your Lordships will recall that in an effort to resolve these difficulties the Bank of England recently issued the draft of a possible agreement between itself and securities interests. My noble friend may also have noted, because I pointed it out to him, that a major shortcoming of that draft agreement was that it did not apply to branches of foreign banks operating in this country. The effect of this omission certainly appears to be potentially discriminatory against British banks, which could be both unfair and harmful. I hope that my noble friend can now tell the House that a way has been, or will be, found to remove that anomaly.

I hope that my noble friend will also be able to tell your Lordships that real progress is being made in bridging the gap between the two systems of regulation deriving on the one hand from the Banking Bill and on the other from the Financial Services Act. He will agree that it would be a serious mistake to allow the well-founded system of consolidated supervision and the indivisibility of capital within a banking group to be prejudiced by systems of regulation that are designed primarily for securities businesses not subject to the Bank of England's system of detailed supervision. These matters can only be resolved in talks between the authorities. I hope that my noble friend realises that those talks will continue to be a matter of interest to Members of your Lordships' House as the instruments to exercise the controls approach perfection. It may be necessary to draw his attention and that of his right honourable friend in another place to the matter at a later stage.

I conclude with what I hope is sufficient brevity in thanking again my noble friend for the concessions that he has made and wishing the Act, as it will be, every success.

Lord Taylor of Gryfe

My Lords, the noble Lord, Lord Bruce of Donington, suggested that an apology was due from these Benches for a lack of critical assessment of this Bill. I am tempted not to rehearse the position of the Alliance but to say just a few words about the Bill at this concluding stage.

Perhaps I may say en passant, without introducing a party note, that since there is a conspiracy in British politics to ensure that the Alliance is not well represented in this House—yes, my Lords!—we have limited resources at our disposal to deal with the intricate and complicated legislation that appears here from time to time. I recall, of course, that the legislation followed the Johnson Matthey scandal in which it was demonstrated that the supervisory authority and resources of the Bank of England were inadequate to control the situation which arose in that case. I am thankful that the Bill that is now about to pass contains provisions which make it possible for much tighter supervision of the banking system. I am sure that it will give a great deal of confidence to all those engaged in banking affairs.

During the debate a major issue was raised, notably by the noble Lord, Lord Bruce of Donington, on the very important matter of the balance between the Treasury and the central bank. That is an important issue which I am glad was aired and adequately debated during our discussions on the Bill.

Finally, on the question of reciprocity, we, in the Alliance, are content to support the Government's amendment introduced this afternoon which provides some protection for the British banking system against possible foreign interference. We feel that the reliance on the Monopolies and Mergers Commission to exercise its authority and judgment in these matters is not misplaced, as was evident in the case of the Royal Bank of Scotland takeover.

For all those reasons, although we have not perhaps spoken as often as other parties in the House, we feel that the Bill ought to be supported in general and we are delighted that it shall now pass. I should like to congratulate the Ministers concerned for listening patiently and with understanding to the issues that have been raised and for the responsible way in which they responded. Perhaps I may also congratulate the noble Lords, Lord Williams of Elvel and Lord Bruce of Donington, for their critical examination of this important issue. I am delighted to feel that the Bill will now become an Act.

5 p.m.

Lord Boardman

My Lords, I have a substantial interest in banking. Therefore this Bill has been of particular interest to me and I welcome it very much. I am grateful, like my noble friend and other noble Lords, for the consideration given by my noble friend and by my noble friend the Secretary of State to the amendments tabled.

Some of those amendments may appear rather trivial but their practical impact can be quite substantial. I shall quote just one; it is the clause that was inserted in the Bill in this House that related to electronic funds transfer. That may appear to be of minor significance when looked at cold in the Bill but it has a large practical application to the development of banking, consumer purchases and the like. I am grateful to my noble friend and to my noble friend the Secretary of State for the way in which they have accommodated that amendment.

I hope that they are right in their view on the changes of control. I appreciate and thank them for going as far as they have in dealing with the point on reciprocity and I hope that they are right in believing that this measure gives the Government the degree of say which they should have over such important economic levers. I hope that they are right. I should have preferred them to go a little further.

The noble Lord, Lord Bruce of Donington, referred fairly strongly a few moments ago to the question of overseas loans and third world debt. He regretted that provision was not made in the Bill to give greater control over banks' positions in regard to that debt. It would not have been in any way appropriate to introduce such powers in this Bill. This House has no control over the economies of those countries which have large debts. Nothing we can say in this House will control the flight of capital which flows out of Mexico into real estate in Florida or over those other things which have caused or exacerbated many of the problems there.

However, the Bill has added to the supervisory powers that are available to the Bank of England in seeing that banks keep proper capital ratios and make proper provisions for those debts, whether international, sovereign risk or domestic, to take account of the risks that are involved in order to protect depositors. The banking system is better and safer as a result of this Bill and I join with other noble Lords in expressing my thanks to my noble friends on the Front Bench who dealt with it so kindly and effectively.

On Question, Bill passed, and returned to the Commons with amendments.