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UK Parliament

Lords considers banking reform

17 December 2013

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The Financial Services (Banking Reform) Bill returned to the Lords for consideration of Commons changes on Monday 16 December.

Members of the Lords discussed professional standards in the financial services industry, and how the bill would deliver the recommendations of the Parliamentary Commission on Banking Standards. Commercial Secretary to the Treasury, Lord Deighton (Conservative), confirmed the bill would bring in a code of conduct, demand improved professional standards and introduce annual certification - meaning banks would need to take into account the training and development of their staff.

Commons changes were agreed to without a vote. The Financial Services (Banking Reform) Bill is now awaiting royal assent. It is scheduled for Wednesday 18 December.

Financial Services (Banking Reform) Bill third reading: Monday 9 December

Members of the Lords discussed the planned cap on interest rates charged by payday loan companies, and the proposal that it be extended to cover all fees and charges, including default charges and rollover fees. An amendment on the timetable, calling for the cap to be implemented by 1 October 2014, rather than the planned 2 January 2015 - ensuring it covers Christmas 2014 - was taken to a vote. Members voted 100 in favour of the proposal and 163 against, so the change was not made.

Anti-money laundering measures and a move to require the Prudential Regulation Authority (PRA) to review proprietary trading by UK banks and PRA-regulated investment companies were also considered.

Financial Services (Banking Reform) Bill report stage day two: Wednesday 27 November

Members of the Lords discussed suggested changes covering the duty of care towards customers in the financial services sector, the leverage ratio and the statutory requirement for regulators and bank auditors to meet. There was one vote in the chamber.

A proposal for a new clause requiring ring-fenced financial institutions to have a duty of care towards customers as it carries out core services - such as the accepting of deposits and providing facilities for withdrawing money or making payments - was taken to a vote. Members voted 204 in favour and 237 against, so the change was not made.

Financial Services (Banking Reform) Bill report stage day one: Tuesday 26 November

Members of the Lords discussed issues including ring-fencing and measures to reform standards and culture in the financial services industry. There were two votes in the chamber.

The first suggestion was the inclusion of the 'reserve power' of full separation if, upon review, the ring-fencing strategy is deemed to be failing. The proposal went to a vote with 220 for and 229 against, so the change was not made.

The second vote concerned the question of professional standards. An amendment called for the bill to capture the need for minimum thresholds of professional competence and continual professional development for those working in the financial services industry. The proposal went to a vote with 222 for and 217 against, so the change was made.

Financial Services (Banking Reform) Bill committee stage day three: Wednesday 23 October

Members of the Lords examined the introduction of a leverage ratio - the ratio between the capital of a bank and the assets on its books - which would be set by the Financial Policy Committee of the Bank of England.

They also discussed the historical challenges faced by the regulatory and supervisory system and considered the possibility of making meetings between regulators and bank auditors a statutory requirement.

Financial Services (Banking Reform) Bill committee stage day two: Tuesday 15 October

Members of the Lords discussed efforts to generate diversity and competition in the financial system - and how progress in this area can be accelerated.

Among the other suggested changes considered were statements of responsibilities for senior management in the banking sector and the potential introduction of a new criminal offence of reckless misconduct in the management of a bank.

Financial Services (Banking Reform) Bill committee stage day one: Tuesday 8 October

Members of the Lords discussed suggested changes relating to the ring-fencing of certain activities in the banking sector. The question of a review of the ring-fencing system, the timetable for such a review, and the extent of its powers was also considered.

Financial Services (Banking Reform) Bill second reading: Wednesday 24 July 

The Commercial Secretary to the Treasury, Lord Deighton (Conservative), opened the debate and identified the three pillars of this legislation, which forms a key part of the government's response to the global financial crisis of 2007-09. Firstly, reform of financial regulation, second, structural reform of the banking industry and lastly, reform of banking standards and culture.

Members went on to discuss the power established in the bill for the creation of a ring-fence in the banking sector. There was a call for more information on where exactly the ring-fence might lie - and how electrified or permeable it might be.

Other issues raised included the question of competition within the banking system, the potential deferment of bonus payments to bankers and the argument for regional banks and more support for credit unions to tackle the problem of payday lending.

Financial Services (Banking Reform) Bill summary

The bill seeks to reform legislation about banking and other financial services including:

  • the Financial Services Compensation Scheme
  • the amounts owed in respect of certain deposits to be treated as a preferential debt on insolvency
  • the accounts of the Bank of England and its wholly owned subsidiaries.

Further information

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