46.This section, together with sections 15 to 18, provides the mechanism for the Treasury to appoint a person to hold an independent inquiry into the circumstances surrounding regulatory events which give rise to serious questions or public concern about the regulatory framework or the effectiveness of regulation in practice.  They provide a statutory basis for launching the type of inquiry which has been conducted in the past into the failures of the Bank of Credit & Commerce International (“BCCI”) in 1991 and Barings in 1995.  The Bingham Inquiry into BCCI was conducted on a non-statutory basis and therefore had no powers to require witnesses to attend or give evidence.  The Barings Inquiry was conducted by the Board of Banking Supervision, an advisory body within the Bank of England using powers under the Banking Act.
47.The types of events into which an inquiry may be held are set out in this section.  There are two cases.  The first case, set out in subsection (2), relates to events concerning persons carrying on regulated activities or collective investment schemes.  To trigger the power, it must appear to the Treasury that two conditions are met.  The first of these is that the events posed, or could have posed, a grave risk to the financial system, or caused, or could have caused, significant damage to the interests of consumers. The second condition is that a serious failure in the regulatory system, or in the operation of that system, might have caused or exacerbated the risk or damage, or potential risk or damage.
48.The second case, set out in subsection (3), relates to the listing function under Part VI.  Here the Treasury must be concerned with the damage, or potential damage, that might have been caused by a serious failure in the listing regime or its operation.
49.Subsection (4) provides that in either case the Treasury may initiate an inquiry only where they consider that it is in the public interest to do so.
Commentary on Sections Part I: the Regulator Section 14: Cases in which the Treasury may arrange independent inquiries