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Bank Resolution (Recapitalisation) Bill [Lords] 2025-01-22
22 January 2025
Lead MP
The Economic Secretary to the Treasury Emma Reynolds
Con
Debate Type
General Debate
Tags
Economy
Other Contributors: 13
At a Glance
The Economic Secretary to the Treasury Emma Reynolds raised concerns about bank resolution (recapitalisation) bill [lords] 2025-01-22 in the House of Commons. A government minister responded. Other MPs also contributed.
How the Debate Unfolded
MPs spoke in turn to share their views and ask questions. Here's what each person said:
Government Response
The Bill aims to strengthen protections for public funds when a small bank is placed into resolution by introducing a new recapitalisation mechanism, allowing the Bank of England to use funds provided by the banking sector to cover certain costs associated with resolving a failing banking institution. The Government's Bill seeks to protect taxpayers by enhancing resolution powers without overburdening smaller banks. The Minister noted concerns about the scope but argued for flexibility, emphasising proactive engagement with the banking sector and assurances on cost impacts. The Parliamentary Secretary to the Treasury acknowledged broad support for the Bill and highlighted its modest enhancements to the UK's resolution regime. He emphasised that while the current system broadly worked as intended, there is a need to learn from the experience of Silicon Valley Bank UK and use resolution powers even on small firms when necessary. The Government support the amendments made by the Lords, except one raised by the shadow Economic Secretary. The minister emphasised that insolvency remains the default approach for small banks and confirmed flexibility is crucial in handling bank failures.
The Bank Resolution (Recapitalisation) Bill will enhance the UK’s resolution regime by giving the Bank of England a more flexible toolkit to respond to bank failures. The Bill creates a recapitalisation mechanism that ensures certain costs do not fall to taxpayers, strengthening protections for public funds and financial stability while supporting the competitiveness and growth of the UK financial sector.
No extracted contribution text available for this contributor yet.
Adam Jogee
Lab
Newcastle-under-Lyme
Asked for a clearer explanation of the Bill's benefits to constituents. The Minister responded by explaining that it prevents taxpayer liability in small bank failures and ensures better protection for depositors above £85,000 thresholds through resolution mechanisms rather than insolvency.
Ashley Fox
Con
Bridgwater
Welcomed the Bill but questioned whether it adequately minimizes taxpayer liability by prioritising losses to shareholders and bondholders before depositors. The Minister agreed, noting that public funds would only be involved if other measures fail.
Mark Garnier
Con
Wyre Forest
Welcomed the Bill, praising its origins in lessons learned from Silicon Valley Bank's failure and the robustness of UK banking reforms. He highlighted HSBC’s role and the need for additional transparency to ensure confidence in the Bank of England’s independence.
The Economic Secretary presented arguments against the use of a new funding mechanism for larger institutional banks, emphasising potential costs and risks. They cited concerns about recapitalisation requirements being many times higher than the annual cap of the Financial Services Compensation Scheme and the need to ensure that using insolvency procedures remains the default position.
Adam Jogee
Lab
Newcastle-under-Lyme
Jogee welcomed the Economic Secretary and expressed support for the Bill. He inquired about how the Bill would protect workers' payslips and enhance growth, particularly for his constituents in Newcastle-under-Lyme. Jogee emphasised the importance of ensuring that the benefits and skills generated by the City of London reach regions like Staffordshire.
Daisy Cooper
LD
St Albans
Cooper highlighted the challenges faced by constituents due to the cost-of-living crisis and expressed support for the Bill's aim to prevent taxpayer-funded bank bailouts. She acknowledged improvements in reporting and accountability but raised concerns about the scope of the mechanism, particularly regarding its use for larger banks.
Kit Malthouse
Con
North West Hampshire
The right hon. Member for North West Hampshire questioned the certainty and predictability provided by the Bank Resolution Bill, highlighting concerns about how decisions are made during financial crises. He raised issues around short-term funding denials and insolvency procedures, suggesting the need for a code of conduct to protect competition.
Mark Garnier
Con
Worcestershire
The hon. Member for Worcestershire thanked contributors and raised questions on the amendment's support, reassurance from the Bank of England’s code of practice regarding insolvency procedures for failing smaller banks, and balancing continued use of the bank levy against economic growth.
Name
The shadow Economic Secretary raised concerns about reducing the risk of small banks requiring public funding upon failure. There is cross-party support for this, indicating a broad agreement on the necessity of enhancing the resolution framework.
Daisy Cooper
Lab
St Albans
The hon. Member for St Albans focused on proposed size limits for banks and questioned whether a wider growth objective should be inserted for the Bank of England, suggesting flexibility is crucial in bank resolution strategies.
Adam Jogee
Con
Newcastle-under-Lyme
My hon. Friend asked about the impact on ordinary workers and highlighted that a stable banking sector underpins economic stability and supports wage growth across the country, advocating for measures to maintain confidence in the financial system.
Shadow Response
None
Shadow Response
The Opposition broadly support the Bill, highlighting its origins in Silicon Valley Bank’s case. They praised HSBC's role and emphasised the need for transparency to maintain confidence in the system, supporting amendments from peers.
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