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Dormant Bank and Building Society Accounts Bill [Lords]

Clause 5(4) contains a direction-making power as an ultimate safeguard allowing the Treasury to take action to ensure that a reclaim fund complies with its company objects and articles of association. We discussed the clause in Committee, and I am grateful for the contributions that were made then. I emphasise that the direction does no more than require the reclaim fund to give effect to, or comply with, requirements to which it is already subject under the Bill, which place restrictions on its objects and articles of association, and which will have been approved by Parliament. In other words, the fund must comply with the law. Let me explain why I believe the direction to be a necessary part of the Bill, and respond to what has been said by my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) and others. The Financial Services Authority will authorise the reclaim fund, and establish ongoing prudential regulation to ensure that it has enough money to repay customers. That is in keeping with its role as a financial regulator, and with its consumer protection role. However, the FSA is not expected to go beyond its statutory objectives and make rules governing other areas of the fund's operations. The Government do not intend to use the direction-making power to involve themselves in the day-to-day running of the reclaim fund and the management of its money. That will be the sole responsibility of the FSA, which will regulate the reclaim fund for prudential purposes. This power is different: it is an ultimate sanction that the public will rightly expect us to have to ensure that the reclaim fund functions in accordance with our legislation in areas that the FSA will not regulate for prudential purposes. Opposition Members invited me to be specific, so let me give two examples. The first concerns the requirements in schedule 1 relating to the publication of information by the reclaim fund. A private sector company might decide for some reason that it did not want to make public the information whose publication is required by the schedule. Such publication would not be part of ordinary prudential regulation, but would clearly be desirable in the interests of transparency. I have no reason to doubt that a company would want to publish its accounts, but I think it right for us to provide that ultimate safeguard as a back-up. My second example involves the reclaim fund's use of money to cover reasonable running costs. That too might not be covered by an ordinary prudential regulation regime, and might therefore fall outwith the FSA's powers. If we considered that a company was acting unreasonably and in an excessive way, we would think it right to take action. That would not be covered in normal circumstances. I do not think that it is likely to happen, but I think that we should have powers to act in that unlikely event. I stress that the powers would enable us to act in wholly exceptional circumstances, when serious concerns arise about the behaviour of the reclaim fund which are not covered by the prudential regulatory regime, and when we believe that the Government are required to act.