HL Deb 28 November 1991 vol 532 cc1477-9

8.18 p.m.

Viscount Astor rose to move that the draft regulations laid before the House on 16th October be approved [1st Report from the Joint Committee].

The noble Viscount said: My Lords, in moving these draft regulations, I shall also speak to the Bank Accounts Directive (Miscellaneous Banks) Regulations 1991. The purpose of these regulations is short and simple: to implement the EC Bank Accounts Directive. The directive, on the other hand, is neither short nor simple. Neither, inevitably, are the regulations. The directive complements the fourth and seventh company law directives, which established for companies other than banks and insurance companies the accounting requirements for individual and consolidated accounts. They were implemented in this country by the Companies Acts of 1981 and 1989 respectively. The bank accounts directive applies most of the general provisions of the fourth and seventh directives to banks. It also specifies comprehensive balance sheet and profit and loss account formats; it defines what items should be included under each statement heading; it specifies certain additional disclosures to be made by way of notes to the accounts; it establishes special valuation rules to be applied in stating certain balance sheet and profit and loss account items; it specifies certain adaptations in respect of the requirement to prepare consolidated accounts; and it lays down rules in relation to the publication and auditing of accounts.

The implementation of the directive will update the accounting requirements for banks and bring them into line with those which apply to the generality of companies. Compliance with the regulations will be required in respect of accounting periods beginning on or after 23rd December 1992.

As noble Lords will have noticed, there are two sets of regulations and it may be helpful if I briefly outline the scope of each. First, there is the set which uses the powers under Section 257(1) and (2) of the Companies Act 1985. That is the one which will apply to nearly all UK banks. The second set is needed to deal with banks which are not companies to which the Companies Acts apply. In all cases, authorised UK banks will continue to be subject to the provisions of the Banking Act 1987.

The directive is not only complex, but it contains numerous member state options. To ensure that all relevant factors were identified and fully considered before the regulations were drafted, the Department of Trade and Industry issued a consultation document in July 1989. That invited views on a number of points, including how the member state options should be exercised and whether it would be appropriate to include additional disclosure requirements in the regulations going beyond those in the directive and in Schedule 4 to the Companies Act 1985. The consultation document was circulated to some 600 interested firms, organisations and individuals, and to all UK authorised banks. Copies were placed in the Libraries of both Houses and were also available on request.

In July 1990 a further consultation document was issued, inviting comments on the draft regulations. That was copied to all those who responded to the earlier document. Again, copies were placed in both Libraries and were available on request. The existence of both documents was publicised by Parliamentary Questions and press notices. A final consultation document containing revised draft regulations was issued in August 1991. In addition, the Department of Trade and Industry had a number of meetings with representatives of the British Bankers' Association, which made a positive contribution to the process of implementing the directive.

Those who replied to the consultative documents included the Institute of Chartered Accountants in England and Wales, and a number of banks and accountancy firms. All the comments received were carefully analysed by the department, in consultation with the Bank of England, the Treasury and the Building Societies Commission. The draft regulations have the support of the banking industry.

I have spoken about the purpose, scope and content of the regulations. I believe their value and importance are self-evident. I commend the regulations to the House.

Moved, That the draft regulations laid before the House on 16th October be approved [1st Report from the Joint Committee].—(Viscount Astor.)

Lord Williams of Elvel

My Lords, the House is grateful to the noble Viscount for moving the Motion and discussing the orders. We have no problems with them. Indeed, the Government seem to have gone further than the directive in not allowing the creation of a hidden reserve—that the directive does allow—of up to 4 per cent. or below of cost or market value, loans and advances, debt security shares and variable yield securities. We approve of that. I have always argued that inner reserves for banks under the old 1948 Act should not be allowed. I am glad to see that that is not to be permitted.

We also approve of the Government going a little further than the directive in prohibiting the creation of a fund for general banking risks of a curious nature. The layout and method of foreign currency translation, publication and auditing in our view track the directive. We are therefore quite happy with them.

On Question, Motion agreed to.