§ Mr. Michael Brown
asked the Chancellor of the Exchequer if he will make a statement on the Trustee Savings Bank Bill.
§ Mr. Ian Stewart
Yes. I asked Sir John Read, the chairman of the Trustee Savings Banks Central Board, to consider the implications of the amendments made at Report Stage in another place on 16 April and to respond to them. I am pleased to say that the TSBs have agreed to make a number of significant changes to their plans to take account of comments which have been made in the other place and elsewhere. Sir John Read has set out these262W further commitments in a letter to my right hon. Friend which is reproduced below. For their part, the Government will propose appropriate consequential amendments, as necessary, to the Bill.
The Treasury will not exercise its power to initiate the reorganisation provided for in the Bill by making an order appointing the vesting day until it is satisfied that the TSBs have taken the appropriate steps to implement the undertakings which they have given in Sir John Read's letters of 6 December 1984 (reproduced in the White Paper) and 16 May 1985 (reproduced below).
16 May 1985
Rt. Hon. Nigel Lawson, M.P.
Chancellor of the Exchequer,
London, SW1P 3AG.
1. Since I wrote to you on 6 December 1984, there have been a number of developments in the TSB Group's preparations for the reorganisation and we have agreed to make some changes to our plans in the light of views expressed in Parliament, especially in the House of Lords debate on Report on 16 April 1985. I thought therefore that I should write to you again to put some further points on the record.
2. As you know, the Trustee Savings Banks Central Board and the Trustees of Trustee Savings Bank Scotland are unanimously of the view that TSB Scotland can, should and will continue to function as an independently managed Scottish bank within the Group. We are convinced that the future of TSB Scotland will be better assured as a member of the Group than as an entirely separate company without access to the common facilities and resources of the Group. However, we recognise that the fears which have been expressed on this point reflect genuine concerns felt in Scotland.
3. We are therefore glad that the Government has agreed to amend the Bill so as to put it beyond doubt that the four banking companies to which the Bill refers shall be registered, and so have their registered offices, in the territory in which they operate, i.e. England and Wales, Scotland, Northern Ireland and the Channel Islands respectively. We understand that the concept of "head office", as opposed to "unregistered office", is not defined in statute; but we undertake that the head office of each of these banks will remain in the country in which it is registered. Once the business of the existing TSBs has been vested in these banking companies, a private Act of Parliament would in practice be required before the separate identity of any of these banks could be removed. Indeed, the need for a private Act will offer a new safeguard to regional and national interests, because under the present system in the Trustee Savings Banks Act 1981 TSBs have power to merge simply by the resolution of three-quarters of the Trustees without any kind of Parliamentary or indeed Government approval.
4. In addition, we are happy to give the assurance that, as appropriate, the articles of association of the new Group holding company and of the successor banking companies within the Group will provide for the following points:—
- (i) The Annual General Meeting of TSB Group plc shall be held in Scotland and the registered office of the company shall be based there;
- (ii) Each banking company shall have its own board of directors, with a minimum of ten and a maximum of fourteen. The initial boards will be drawn substantially from trustees of the present banks. Thereafter, with the exception of those members referred to in paragraph (iii) below, each board will appoint its own members, subject to the approval of the parent board, The articles will not provide for the parent board to appoint members of the individual banks' boards. Provision will be made for 75 per cent. of the board members to be normally resident in the country or territory of the bank;
- (iii) Two members of the Board of each UK banking company shall be appointed by the governors of the TSB charitable foundation for its country or territory, subject to the approval of the bank board but not of the Group board. These two members will be expected to ensure that the interests of the country or territory concerned are fully represented in the board's deliberations;
- (iv) The directors of each banking company will be order a responsibility to take into account not only the interests of its shareholders but also the interests of customers and staff, the
263 bank's responsibilities under the Banking Act 1979 and the interests of the country or territory in which the bank is established;
- (v) The Chairman of each bank board shall be appointed to the Group board. In addition, the Chief Executive of TSB England and Wales and the Chief Executive of TSB Scotland shall be appointed to the Group board;
- (vi) The agreements to be entered into between TSB Group plc and each banking company providing that TSB Group plc will refrain from acting to reduce the net worth of the banking companies and setting out dividend policy in relation to them, shall not be changed without the agreement of two-thirds of the directors of the bank concerned.
5. We confirm that Trustee Savings Bank Scotland plc and Trustee Saving Bank Northern Ireland plc will apply to the Bank of England for separate recognition as banks under the Banking Act 1979. The business of TSB England and Wales will be vested in the present Central Trustee Savings Bank Limited which will change its name to Trustee Savings Bank England and Wales plc. As Central Trustee Savings Bank Limited is already a recognised bank, it will not be necessary for it formally to apply in its new name for recognition: We confirm that it will seek to maintain that status. It will of course follow that the board of each bank will be separately responsible for the direction of its banking business and, like all other banks in the UK, will be supervised by the Bank of England. Trustee Savings Bank Channel Islands Limited will apply for authorisation in the Channel Islands under local legislation.
TSB Charitable Foundations
6.I confirmed in my letter of 6 December 1984 that the TSB Group intended to proceed with the endowment of certain charitable foundations. These proposals have also been the subject of debate in Parliament. We are pleased that, in the light of those debates, you have agreed that the Government will propose an amendment providing for the TSB Central Board to arrange the establishment of charitable foundations and the vesting in them of shares in TSB Group plc. We undertake that the Central Board will establish a charitable foundation for each of England and Wales, Scotland, Northern Ireland and the Channel Islands. The Board will ensure that five per cent. of the share capital in TSB Group plc is distributed among these four foundations in proportion to the accumulated reserves of each of the existing TSBs.
7. These charitable foundations will enhance the TSBs' traditional role in contributing to the life of the community by assisting local needs of many different kinds. The foundations will therefore benefit the communities from which the TSBs have in the past drawn their customers. Clearly, the approach which the charities adopt will change from time to time as local needs and circumstances alter.
8. We have felt it appropriate that the foundations should hold "A" ordinary shares in TSB Group plc which entitle them to vote only on matters affecting their own interests. However, we now undertake that (as mentioned at paragraph 4(iii) above) each foundation (except in the case of the Channel Islands) will in addition be given a special share in the banking subsidiary operating in the same country or territory which will entitle it to appoint two directors to the bank board who will be expected to ensure that the interests of the country or territory concerned are represented in the board's deliberations.
9. Finally, I stated in my letter of 6 December 1984 that we plan to bring about the issue of shares to the public in a way which will achieve wide ownership of the new TSB Group among our customers and staff. We have undertaken to give customers and staff priority over a substantial tranche of shares. I can now add that in relation to the balance of shares we will seek to attract as many small investors as possible, whether or not they are at present customers of the TSB Group. For this purpose we are preparing a major communication programme to promote the widest possible ownership of TSB Group plc. We have set ourselves a target of over one million shareholders.
Sir John Read