Select Committee on Treasury Fifth Report


PROCEEDINGS OF THE COMMITTEE RELATING TO THE REPORT

TUESDAY 6 MARCH 2001

Members present:

Mr Giles Radice, in the Chair


Mr Jim CousinsMr James Plaskitt
Mr Edward DaveyMr David Ruffley
Mr David KidneySir Teddy Taylor
Judy Mallaber

* * * *

Draft Report (Banking and the Consumer), proposed by the Chairman, brought up and read.

Ordered, That the Chairman's draft Report be read a second time, paragraph by paragraph.

Paragraph 1 read, as follows:

"In November 1998, the Government announced that they had commissioned Mr Don Cruickshank to undertake a review of the levels of innovation, competition and efficiency in the banking industry, and the resulting report was published on 20 March 2000. We decided that it would be appropriate to inquire into issues arising out of the Cruickshank Report, and took evidence from three of the "big four" banks, and from Mr Cruickshank, in April 2000. Following replies to the Report from the Government and the Financial Services Authority, we took further evidence in January 2001 from representatives of consumer groups, organisations running money transmission systems, the British Bankers' Association (BBA) and two internet-based banks, and the Royal Bank of Scotland, and finally from Miss Melanie Johnson MP, Economic Secretary to the Treasury. During our visit to the United States last October, we took the opportunity to discuss banking regulation, and we have also received some written evidence on the subject. To everyone who has helped with this inquiry, we express our thanks."

Amendment proposed, in line 12, after the word "subject", to insert the words "In making this Report, we are putting forward some suggestions about how the service to the public may be improved. However, before setting out these points which we consider to be of significance, we would wish to make it clear that we consider that the British banking system is one which in general operates the highest standards of integrity and that it has played a major part in achieving for the United Kingdom a reputation which is appreciated by the international financial community."—(Sir Teddy Taylor.)

Amendment proposed to the proposed Amendment, in line 3, to leave out from the word "improved" to the second word "the" in line 6, and insert the words "In general we consider that the British banking system operates at a high standard of integrity and has a good reputation in".—(Mr James Plaskitt.)

Question put, That the Amendment to the proposed Amendment be made.

The Committee divided.


Ayes, 4Noes, 3
Mr Jim CousinsMr Edward Davey
Mr David KidneyMr David Ruffley
Judy MallaberSir Teddy Taylor
Mr James Plaskitt

Proposed Amendment, as amended, made.

Paragraph, as amended, agreed to.

Paragraph 2 read and agreed to.

Paragraphs 3 and 4 read, amended and agreed to.

Paragraph 5 read and agreed to.

Paragraphs 6 to 8 read, amended and agreed to.

Paragraphs 9 to 11 read and agreed to.

Paragraph 12 read, amended and agreed to.

Paragraph 13 read and agreed to.

Paragraph 14 read, as follows:

"The Consumers' Association and the NCC welcomed recent changes to the code, which came into effect on 1 January 2001, including a greater emphasis on enforcement, but still had "a little scepticism" about whether it would be carried out in practice: "they now have to prove it and if they do not prove it, then it will be clear that self-regulation has failed in this area". We agree that the revised Banking Code must be implemented fully and fairly by all banks. If this does not happen, we believe that the case for statutory regulation will become overwhelming."

Amendments made.

Question put, That the paragraph, as amended, stand part of the Report.

The Committee divided.


Ayes, 6Noes, 1
Mr Jim CousinsSir Teddy Taylor
Mr Edward Davey
Mr David Kidney
Judy Mallaber
Mr James Plaskitt
Mr David Ruffley




Paragraphs 15 and 16 read and agreed to.

Paragraph 17 read, as follows:

"When banks pay lower rates of interest on older accounts, they hope that their customers will not notice. We regard this practice as unacceptable. The Banking Code Standards Board should enforce the Code's provisions about superseded accounts rigorously."

Amendment made.

Question put, That the paragraph, as amended, stand part of the Report.

The Committee divided.


Ayes, 6Noes, 1
Mr Jim CousinsSir Teddy Taylor
Mr Edward Davey
Mr David Kidney
Judy Mallaber
Mr James Plaskitt
Mr David Ruffley




Paragraphs 18 and 19 read and agreed to.

Paragraphs 20 to 22 read, amended and agreed to.

Paragraph 23 read and agreed to.

Paragraph 24 read, amended and agreed to.

Paragraphs 25 to 28 read and agreed to.

Paragraph 29 read, as follows:

The Government issued a consultation paper in December 2000 on the subject; the main differences from the Cruickshank proposals were that the regulator would be the Office of Fair Trading (OFT), rather than a new body, and it would regulate by reference to a series of rules rather than by issuing class licences (i.e. a licence for each type of network, rather than for each member). The Minister explained that the Government had decided that it was "probably better to give the powers to an existing body" with expertise in the area. The Consumers' Association said that the arguments for having a separate regulator or using the OFT were not clear cut and said: "we want something that works". The decision to make OFT the regulator was supported by MasterCard/Europay and the Royal Bank of Scotland.

Amendment proposed, in line 9, at the end, to add the words "However, we were not convinced by either the arguments from the witnesses or those in the Government's consultation paper that OFT is the ideal regulator. We therefore recommend that the Government revisit the original 'PayCom' proposal for a separate regulator, which would provide the dynamic benefits envisaged by Cruickshank."—(Mr Edward Davey.)

Question put, That the Amendment be made.

The Committee divided.


Ayes, 3Noes, 3
Mr Edward DaveyMr Jim Cousins
Mr David RuffleyMr David Kidney
Sir Teddy TaylorMr James Plaskitt

Whereupon the Chairman declared himself with the Noes.

Paragraph agreed to.

Paragraphs 30 to 45 read and agreed to.

Resolved, That the Report, as amended, be the Fifth Report of the Committee to the House.

Ordered, That the Chairman do make the Report to the House.

Ordered, That the provisions of Standing Order No. 134 (select committees (reports)) be applied to the Report.

Several papers were ordered to be appended to the Minutes of Evidence.

Ordered, That the Appendices to the Minutes of Evidence taken before the Committee be reported to the House.

Several papers were ordered to be reported to the House.

[Adjourned till Tuesday next at half-past Ten o'clock.




 
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