Lords Grand Committee
Wednesday 1st July 2026
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16:21
16:21
Speaker 2
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Speaker 2
I wrote a few key areas before we begin. First, we are starting today with the debate on an adjourned group. Only those noble Lords present at the start of the group last week should contribute. We have a list to help manage that. I am expecting, based on last week's debate, that debate goes straight to frontbench contributions. Second, on the general rules, I remind our noble Lords again that they should declare any relevant financial interest the first time they speak at each stage of the bill.
This means that in committee, relevant financial interests should be declared during the first group in which the noble Lord contributes. The declaration does not need to be repeated or debate on later groups. At this stage, declaration should be specific and brief. Members should briefly indicate the nature of their financial interest and not simply refer to their entry in the Register of Lords interests. I also want to remind the committee again of the guidance in the companion on paragraph 8.82 that when withdrawing an amendment, when withdrawing amendment, noble Lords should be brief, need not entry in the Register of Lords interests.
I also want to remind the Committee again of the guidance in the companion on paragraph 8.82 that when withdrawing an amendment when withdrawing amendment, noble Lords should be brief, need not respond to all the points made during the debate and should not revisit points made when moving the amendment. Entry in the Register of Lords interests. I also want to remind the committee again of the guidance in the companion on paragraph 8.82 that when withdrawing an amendment, when withdrawing amendment, noble Lords should be brief, need not respond to all the points made during the debate and should not revisit points made when moving the amendment.
A number of contributions when withdrawing amendments on previous days are being lengthy and would encourage, and I would encourage all participants to keep their remarks short. In the spirit of the companion.
This means that in committee, relevant financial interests should be declared during the first group in which the noble Lord contributes. The declaration does not need to be repeated or debate on later groups. At this stage, declaration should be specific and brief. Members should briefly indicate the nature of their financial interest and not simply refer to their entry in the Register of Lords interests. I also want to remind the committee again of the guidance in the companion on paragraph 8.82 that when withdrawing an amendment, when withdrawing amendment, noble Lords should be brief, need not entry in the Register of Lords interests.
I also want to remind the Committee again of the guidance in the companion on paragraph 8.82 that when withdrawing an amendment when withdrawing amendment, noble Lords should be brief, need not respond to all the points made during the debate and should not revisit points made when moving the amendment. Entry in the Register of Lords interests. I also want to remind the committee again of the guidance in the companion on paragraph 8.82 that when withdrawing an amendment, when withdrawing amendment, noble Lords should be brief, need not respond to all the points made during the debate and should not revisit points made when moving the amendment.
A number of contributions when withdrawing amendments on previous days are being lengthy and would encourage, and I would encourage all participants to keep their remarks short. In the spirit of the companion.
16:23
16:23
16:23
16:23
Speaker 3
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Speaker 3
Mr. speaker, is the first of the winders. I'm sure everyone is. Reread the Hansard and transcript and fully on top of the debate that took place on Monday, that. So I will attempt to keep my marks brief. I have to say I'm also very, very tempted to engage with the challenge that we had from Lord bridges in this group of amendments to discuss in depth the issue of international rules, on the one hand, versus growth and competition objectives on the other.
But I do recognise, I would say to Lord Wilson as the whip that we are in grand committee. So I will try and limit the comments that I make following on to that area. But it is important to say that my party look, we're looking at this group for. My party believes in better together. Rather than beggar thy neighbour and international rules provide trust, confidence and certainty, which are absolutely a key to long term and sustainable growth. And this country plays a key role in shaping international rules in sectors that we care about, including finance.
The Bank of England, incredibly highly respected, as are our other regulators, extensive participation in key bodies such as the Finance Financial Stability Board, the Basel Committee on Banking Supervision and indeed Baroness Noakes gave a long list of the various different committees in which regulators are engaged. I think she thought it might make them go native that, but I also consider that it's an important opportunity in an area of their influence. We still remain a player in making those rules, and that's despite Brexit now. National rules do need to provide flexibility, but they mean absolutely nothing if we only pick what suits us in the moment.
I do not think that the world is thriving in the beggar thy neighbour. World of Trump in the United States of Russia and of China. So the committee will not be surprised that I do not. Sympathetic to amendment 99, which reduces international standards to a. Have regard that a. As for the other amendments in this sector, I have no problem with the reporting amendments, but with amendments 102 and 104 a. I am rather cautious because they could easily be read as an instruction to waiver on the primary objective for the Bank of England of financial stability.
And I do think that that focus on financial stability is one. We have to be very careful not to abandon. Some people find volatility very attractive, but it's certainly a way in which the financial sector is frequently made much of its money. But the cost to ordinary people of both boom and bust and continuous volatility has been exceedingly high. The cost of businesses that need some measure indeed need a significant measure of certainty is extremely high. And therefore, my Lords, that, that's a.
We will not be particularly supporting these amendments, though, as I say, the reporting amendments do make some sense to me.
But I do recognise, I would say to Lord Wilson as the whip that we are in grand committee. So I will try and limit the comments that I make following on to that area. But it is important to say that my party look, we're looking at this group for. My party believes in better together. Rather than beggar thy neighbour and international rules provide trust, confidence and certainty, which are absolutely a key to long term and sustainable growth. And this country plays a key role in shaping international rules in sectors that we care about, including finance.
The Bank of England, incredibly highly respected, as are our other regulators, extensive participation in key bodies such as the Finance Financial Stability Board, the Basel Committee on Banking Supervision and indeed Baroness Noakes gave a long list of the various different committees in which regulators are engaged. I think she thought it might make them go native that, but I also consider that it's an important opportunity in an area of their influence. We still remain a player in making those rules, and that's despite Brexit now. National rules do need to provide flexibility, but they mean absolutely nothing if we only pick what suits us in the moment.
I do not think that the world is thriving in the beggar thy neighbour. World of Trump in the United States of Russia and of China. So the committee will not be surprised that I do not. Sympathetic to amendment 99, which reduces international standards to a. Have regard that a. As for the other amendments in this sector, I have no problem with the reporting amendments, but with amendments 102 and 104 a. I am rather cautious because they could easily be read as an instruction to waiver on the primary objective for the Bank of England of financial stability.
And I do think that that focus on financial stability is one. We have to be very careful not to abandon. Some people find volatility very attractive, but it's certainly a way in which the financial sector is frequently made much of its money. But the cost to ordinary people of both boom and bust and continuous volatility has been exceedingly high. The cost of businesses that need some measure indeed need a significant measure of certainty is extremely high. And therefore, my Lords, that, that's a.
We will not be particularly supporting these amendments, though, as I say, the reporting amendments do make some sense to me.
16:26
Speaker 4
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Speaker 4
For me, the group speaks to the essential balance which underpins the purpose and function of effective financial regulation. Of course, regulation will promote safety, stability and confidence in the system, but regulation must also support growth, competitiveness and innovation, and it must help ensure that the UK remains one of the world's leading financial centres. We've often spoken about the contribution that financial institutions and financial services firms make to the UK economy. They provide employment, tax, revenue, investment, lending, infrastructure and global influence. But this group is about making sure we put our money where our mouth is.
If we say that competitiveness and growth matter, then those principles must be reflected in the way Regulators act, report and make their decisions. And that's why amendment 99, to which I've added my name is important. It would shift the requirement from aligning with international standards to considering international standards. That's an important distinction. International standards matter, and in many cases, the UK will rightly wish to follow them. But we should not place ourselves in a position where we become passive rule takers when it is not in our national interest to do so.
We can see some rules, like the unbundling of research in MiFID two having totally the wrong effect. In this instance, regulating research so heavily that less research is produced. As I know from relatives that work in analysis. I don't think that's an interest, but it's it's evidence. And that's particularly for small firms. Another example could be the EU's sustainable Finance Disclosure regulations, which are now under review because they're too complex and burdensome. The whole point of having an independent post-Brexit regulatory framework is that the UK should be able to design rules that work for our markets, for our firms and for our economy.
The UK's position in financial services is not secured by right. Other jurisdictions are moving quickly and we know the compliance costs are generally higher in the UK. So unless we offer a regulatory environment that is clearer, more cohesive, more predictable and more conducive to growth, firms capital and innovation are likely to go overseas. The opposite of what we, and I believe the government want. We're already seeing this risk in areas such as digital finance firms and digital assets, payments and new financial infrastructure.
Need clarity and confidence. Confidence and confidence where they do not find it in the UK they look elsewhere. The Employment Rights Act is also having a chilling effect. Hundred 101 are also important because they strengthen accountability around the competitiveness and growth objective. It's not enough for regulators simply to say they have considered competitiveness. Parliament needs to see how that objective has been applied. What evidence has been used?What impacts have been assessed, for example, on SMEs?A key feature of my noble friend Lord Hunt of Wirral's amendment and how regulatory decisions have affected firms and markets over time.
Amendment 102, which I've also supported, would extend the secondary competitiveness and growth objective to the Bank of England's financial market. Infrastructure functions. The same should apply to amendment 104 A on payment system systems. If we want a dynamic payments ecosystem, then competitiveness must be considered across the whole regulatory architecture. My Lords, together these amendments are about making the competitiveness and growth objective more flexible, more transparent and more system wide. They do not undermine safety. They do not tell regulators to ignore risk.
They simply say that growth and competitiveness must be placed at the front of the regulatory mind. I therefore be grateful if the minister could address two points. First, do the government agree that the UK should have the flexibility to depart from international standards, where doing so would better serve UK competitiveness and growth without undermining safety or stability?To pick up a point made by the noble lady, Lady Cramer. Second, do they agree that the competitiveness and growth objectives should apply more widely across the Bank of England's financial market?Infrastructure and payment systems functions?I look forward to hearing the Minister's response and, if need be, returning to this vital area.
At report.
If we say that competitiveness and growth matter, then those principles must be reflected in the way Regulators act, report and make their decisions. And that's why amendment 99, to which I've added my name is important. It would shift the requirement from aligning with international standards to considering international standards. That's an important distinction. International standards matter, and in many cases, the UK will rightly wish to follow them. But we should not place ourselves in a position where we become passive rule takers when it is not in our national interest to do so.
We can see some rules, like the unbundling of research in MiFID two having totally the wrong effect. In this instance, regulating research so heavily that less research is produced. As I know from relatives that work in analysis. I don't think that's an interest, but it's it's evidence. And that's particularly for small firms. Another example could be the EU's sustainable Finance Disclosure regulations, which are now under review because they're too complex and burdensome. The whole point of having an independent post-Brexit regulatory framework is that the UK should be able to design rules that work for our markets, for our firms and for our economy.
The UK's position in financial services is not secured by right. Other jurisdictions are moving quickly and we know the compliance costs are generally higher in the UK. So unless we offer a regulatory environment that is clearer, more cohesive, more predictable and more conducive to growth, firms capital and innovation are likely to go overseas. The opposite of what we, and I believe the government want. We're already seeing this risk in areas such as digital finance firms and digital assets, payments and new financial infrastructure.
Need clarity and confidence. Confidence and confidence where they do not find it in the UK they look elsewhere. The Employment Rights Act is also having a chilling effect. Hundred 101 are also important because they strengthen accountability around the competitiveness and growth objective. It's not enough for regulators simply to say they have considered competitiveness. Parliament needs to see how that objective has been applied. What evidence has been used?What impacts have been assessed, for example, on SMEs?A key feature of my noble friend Lord Hunt of Wirral's amendment and how regulatory decisions have affected firms and markets over time.
Amendment 102, which I've also supported, would extend the secondary competitiveness and growth objective to the Bank of England's financial market. Infrastructure functions. The same should apply to amendment 104 A on payment system systems. If we want a dynamic payments ecosystem, then competitiveness must be considered across the whole regulatory architecture. My Lords, together these amendments are about making the competitiveness and growth objective more flexible, more transparent and more system wide. They do not undermine safety. They do not tell regulators to ignore risk.
They simply say that growth and competitiveness must be placed at the front of the regulatory mind. I therefore be grateful if the minister could address two points. First, do the government agree that the UK should have the flexibility to depart from international standards, where doing so would better serve UK competitiveness and growth without undermining safety or stability?To pick up a point made by the noble lady, Lady Cramer. Second, do they agree that the competitiveness and growth objectives should apply more widely across the Bank of England's financial market?Infrastructure and payment systems functions?I look forward to hearing the Minister's response and, if need be, returning to this vital area.
At report.
16:31
Speaker 5
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Speaker 5
My Lords, the government shares the views of many in this debate, particularly on the importance of ensuring secondary growth and competitiveness. Objectives are comprehensively embedded in the work of the regulators. That is why the bill legislates to extend the requirement for regulators to produce annual reports on their actions, to advance competitiveness and growth objectives. Amendment 99 would amend the secondary objectives so that would that when carrying it out, the regulators need only consider international standards rather than aligning with them. I recognise the desire to ensure that there are no unnecessary constraints on the secondary objective.
However, the government cannot accept this amendment. Aligning with international standards is central to the government's approach to supporting the international competitiveness of the UK. As a global financial centre. These international standards underpin global financial resilience and support international trade stability, predictability and high regulatory standards are the cornerstone of the UK's reputation as a global financial centre, weakening the requirement to align would risk undermining the attractiveness of the UK as a place to do business. It is worth noting, though, that the UK is no passive recipient of international standards.
We help to shape them. The governor of the Bank of England is the current chair of the Financial Stability Board, and the UK authorities play leading roles in international bodies. I want to reassure my Lords that international standards generally operate on a comply or explain basis. No standard trumps the objectives of the FCA or the PRA, where it is right for the UK to go further, or where the nuances of our market require a different approach. The FCA and the PLA retain full flexibility to do so.
Turn to amendments 100 and 101, which would require the growth and competitiveness reports to be laid in Parliament and prescribe their contents. These amendments clearly demonstrate the importance of this House places on Growth and competitiveness reports. Again, the government is absolutely in agreement about that. Since they were introduced in 2023, their value to stakeholders in parliament and industry has been clearly demonstrated, which is why the bill extends the original temporary requirement and will require the regulators to keep producing that, to keep producing them on an annual basis.
But these amendments are not necessary. They are overly prescriptive and overlap with the existing reporting mechanisms. For example, the regulators already provide ample public reporting on the authorisations metrics, which are published regularly and allow for year on year comparisons. And the regulators already publish metrics along with their competitiveness and growth. Reports. Turn to amendment 102. The amendment would give the Bank of England a secondary objective to facilitate international competitiveness and growth in its regulation of central counterparties and central securities depositories.
The government recognises the importance of a dynamic and competitive UK clearing settlement market. However, and. Csds have a unique role in managing risk at the centre of global financial markets, and the value they provide is based on reliability and sound risk management. The UK's success as a global centre for financial market infrastructure depends on its reputation for resilience and regulation must reflect their role as critical globally shared infrastructure. The government, therefore does not believe that it would be appropriate for the regulatory framework for these firms to focus on international competitiveness or growth in the same way as other firms, and that the secondary objective for the bank to facilitate innovation is the right one.
However, the Chancellor also made it clear in her remit letter last year to the Bank that it should consider how it can best support the government's growth mission when pursuing its objectives. And lastly, I turn to amendment 104 A, which seeks to introduce new secondary objectives for the Bank of England in relation to payment systems. I am grateful for the noble Lord for raising this issue. The government recognises that, where appropriate, secondary objectives can help a regulator to advance its primary objective in a balanced way.
Payment systems are critical economic infrastructure, and the government agrees that, alongside security and resilience, regulation in this area should be should support competition, innovation and growth. However, the government considers that the bill already provides a framework that supports the aims of this amendment, following its taking on the responsibilities of Payment Systems Regulation, the FCA will retain the substance of the psoas objectives. This means it will be responsible for promoting competition and innovation in payment systems and protecting the innovation and interests of protecting the interests of service users.
The bill also applies the FCA's secondary, competitive and growth objective to its general payment system functions, and includes provision to ensure that the bank and FCA coordinate effectively. I therefore ask the noble Baroness to withdraw her amendment.
However, the government cannot accept this amendment. Aligning with international standards is central to the government's approach to supporting the international competitiveness of the UK. As a global financial centre. These international standards underpin global financial resilience and support international trade stability, predictability and high regulatory standards are the cornerstone of the UK's reputation as a global financial centre, weakening the requirement to align would risk undermining the attractiveness of the UK as a place to do business. It is worth noting, though, that the UK is no passive recipient of international standards.
We help to shape them. The governor of the Bank of England is the current chair of the Financial Stability Board, and the UK authorities play leading roles in international bodies. I want to reassure my Lords that international standards generally operate on a comply or explain basis. No standard trumps the objectives of the FCA or the PRA, where it is right for the UK to go further, or where the nuances of our market require a different approach. The FCA and the PLA retain full flexibility to do so.
Turn to amendments 100 and 101, which would require the growth and competitiveness reports to be laid in Parliament and prescribe their contents. These amendments clearly demonstrate the importance of this House places on Growth and competitiveness reports. Again, the government is absolutely in agreement about that. Since they were introduced in 2023, their value to stakeholders in parliament and industry has been clearly demonstrated, which is why the bill extends the original temporary requirement and will require the regulators to keep producing that, to keep producing them on an annual basis.
But these amendments are not necessary. They are overly prescriptive and overlap with the existing reporting mechanisms. For example, the regulators already provide ample public reporting on the authorisations metrics, which are published regularly and allow for year on year comparisons. And the regulators already publish metrics along with their competitiveness and growth. Reports. Turn to amendment 102. The amendment would give the Bank of England a secondary objective to facilitate international competitiveness and growth in its regulation of central counterparties and central securities depositories.
The government recognises the importance of a dynamic and competitive UK clearing settlement market. However, and. Csds have a unique role in managing risk at the centre of global financial markets, and the value they provide is based on reliability and sound risk management. The UK's success as a global centre for financial market infrastructure depends on its reputation for resilience and regulation must reflect their role as critical globally shared infrastructure. The government, therefore does not believe that it would be appropriate for the regulatory framework for these firms to focus on international competitiveness or growth in the same way as other firms, and that the secondary objective for the bank to facilitate innovation is the right one.
However, the Chancellor also made it clear in her remit letter last year to the Bank that it should consider how it can best support the government's growth mission when pursuing its objectives. And lastly, I turn to amendment 104 A, which seeks to introduce new secondary objectives for the Bank of England in relation to payment systems. I am grateful for the noble Lord for raising this issue. The government recognises that, where appropriate, secondary objectives can help a regulator to advance its primary objective in a balanced way.
Payment systems are critical economic infrastructure, and the government agrees that, alongside security and resilience, regulation in this area should be should support competition, innovation and growth. However, the government considers that the bill already provides a framework that supports the aims of this amendment, following its taking on the responsibilities of Payment Systems Regulation, the FCA will retain the substance of the psoas objectives. This means it will be responsible for promoting competition and innovation in payment systems and protecting the innovation and interests of protecting the interests of service users.
The bill also applies the FCA's secondary, competitive and growth objective to its general payment system functions, and includes provision to ensure that the bank and FCA coordinate effectively. I therefore ask the noble Baroness to withdraw her amendment.
16:36
Speaker 6
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Speaker 6
Spoken over today and the previous day, these amendments are all about secondary, competitive and growth objective, and I think we share the same desire, which is to have an effective secondary competitive growth objective. And my amendment in particular, my amendment was designed to ensure that the minister says the regulators have flexibility to do what is right, whatever the international standards says. I do not think that is captured by forcing alignment to standards. But I will think again about that. Before report, I was disappointed in his other replies as well, because it seems to me that the government are not taking opportunities to ram home the importance of growth and competitiveness, which is something we fully support.
But I will withdraw my amendment now and consider what I shall bring back at report.
But I will withdraw my amendment now and consider what I shall bring back at report.
16:36
16:36
Speaker 8
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Speaker 8
Delayed at the beginning. At the start of this this meeting. I'm here now. Um, is it your lordships?Is it your lordships?Pleasure?The amendment is withdrawn. It is by leave withdrawn. Amendment 100, Baroness Noakes. Moved. Amendment 101. Lord Hunter will not moved. Amendment 101. A already debated Lord Holmes of Richmond, not moved. Uh. Oh, yes.
If the question is that clause 20 stand part of the bill as many of the many of that opinion say content. The contrary not content. The contents have it. Amendment 102. Baroness Noakes. Amendments. Amendment 103 already debated. Baroness Northover. Not moved. An amendment 104 already debated. Lord Holmes of Richmond, amendment 100 and 104. Lord Holmes of Richmond. The question is that clause that the.
So. Clause 21. Amendment 105. Baroness Neville-rolfe.
If the question is that clause 20 stand part of the bill as many of the many of that opinion say content. The contrary not content. The contents have it. Amendment 102. Baroness Noakes. Amendments. Amendment 103 already debated. Baroness Northover. Not moved. An amendment 104 already debated. Lord Holmes of Richmond, amendment 100 and 104. Lord Holmes of Richmond. The question is that clause that the.
So. Clause 21. Amendment 105. Baroness Neville-rolfe.
16:40
Speaker 4
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Speaker 4
My Lords, I rise enthusiastically to move. Amendment 105 in my name. We've got to get that football going. And that of my noble friend Lord Altrincham, and to speak to the remaining amendments in this group. I'm grateful to my noble friend Lord Holmes. His amendments, which seek to achieve broadly the same objective as ours. I'm also grateful to my noble friend, Lord Howard, of rising from 151, which raises an important question about whether experience and well regarded individuals with a strong track record should be able to benefit from a more streamlined authorisation process.
Fundamentally, the amendments in this group all seek to make regulatory approvals faster, clearer and less prone to delay. We've heard throughout our consideration of this bill that delays in authorisations, approvals and permissions are a brake on growth. They affect firms ability to enter the market, to expand and to appoint senior people and to innovate and to compete. The government recognises the problem. Clause 21 reduces a number of statutory determination periods, including for part four, A permission applications, senior manager, approvals and other regulatory decisions.
And that is welcome. But the question is whether the bill goes far enough and whether the powers it creates are sufficiently disciplined. Our concern. One concern raised with us by firms is that the authorisations process can feel driven by deadline, rather than by workflow. The issue is not only whether the FCA or PRA technically meets the statutory deadline. It's whether substantive work begins early enough in the process. If a case is not allocated promptly, if an initial review takes place only late in the period, or if information requests are made close to the deadline, then the firm bears unnecessary costs and uncertainty.
Even if the regulator ultimately meets the formal target. My first set of amendments 105 one, ten, 113 and 114, would ensure that the Treasury's Treasury's power to alter these time limits can only be used to reduce them. If the purpose of this bill, and indeed of the government's wider financial services strategy, is to make the regulatory system more streamlined and fit for purpose, then success must be measured in part by reductions in the time taken to make decisions. I hope the Minister will be sympathetic to that principle.
The Treasury should be able to shorten regulatory approval periods where experience shows that this can be done safely, and it should not be able to lengthen them without returning to Parliament with a clear and specific justification. The amendments tabled by my noble friend Lord Holmes take a similar approach, but go further by proposing an automatic ratcheting down mechanism where regulators have met the applicable time period for a defined period, the Treasury would be required to reduce the time limit further. That is a sensible principle of continued improvement.
Continuous improvement. If regulators consistently demonstrate that they can meet a deadline, then we should be willing to ask whether that deadline can become more ambitious. I turn to amendment 109, which concerns the FCA's ability to stop the clock during the senior managers approvals process. We've heard from industry that the power to stop the clock can be used repeatedly during an approvals process that is extremely frustrating for firms. It makes workforce planning more difficult. It can leave firms waiting for months without any real sense of when a decision will be made.
Stop. The clock powers can render the headline statutory deadline almost meaningless. Amendment 109 would therefore allow the FCA to use the formal stop the clock mechanism only once in relation to a Senior Manager approval application. When it does so, the FCA will be required, so far as reasonably practicable, to specify all the information it requires. At that point, the FCA could still ask for further information later, but that later request would not stop the statutory clock delays. Approvals, as I've said, can affect business decisions.
They can affect market entry, expansion, restructuring and succession planning, and they can discourage talented individuals from taking up roles in the UK if they fear the process will be slow, uncertain or opaque, and even put at risk. And they could even. This could even put at risk our reputation as a leading financial centre. I also welcome amendment 151 from my noble friend Lord Howard of Rising. It asks whether there should be a more streamlined or expedited part for a authorisation process where the applicant is managed or directed by individuals with an established FCA, or indeed PRA, I assume, approved track record and good regulatory standing.
A review could help identify where duplication exists and where good regulatory history can be taken into account in a practical way, I'd be. Awful if the Minister could address three points. First, what does the government see as a reasonable timeframe for the approval of new products and new services, and for the approval of senior managers?Those of us used to more dynamic sectors think the new targets are insufficiently challenging. But let's hear what they are. Second, do the government accept the principle that the Treasury's power to change approval time limits should be used only to reduce them, not to increase them?If the government do not accept that, in what circumstances do they envisage the Treasury using this power to lengthen regulatory approval periods?And third, what safeguards exist to ensure that the FCA's stop the clock powers are used proportionately and are not used in a way that undermines the statutory deadline?We can't talk about growth, competitiveness and innovation while tolerating unnecessary delays in basic processes that allow firms to operate and people to take up senior roles.
We know from history that we need strong management and strong and challenging non-executive directors on our banks, but we need an efficient approval system that supports that. My Lords, I beg to move.
Fundamentally, the amendments in this group all seek to make regulatory approvals faster, clearer and less prone to delay. We've heard throughout our consideration of this bill that delays in authorisations, approvals and permissions are a brake on growth. They affect firms ability to enter the market, to expand and to appoint senior people and to innovate and to compete. The government recognises the problem. Clause 21 reduces a number of statutory determination periods, including for part four, A permission applications, senior manager, approvals and other regulatory decisions.
And that is welcome. But the question is whether the bill goes far enough and whether the powers it creates are sufficiently disciplined. Our concern. One concern raised with us by firms is that the authorisations process can feel driven by deadline, rather than by workflow. The issue is not only whether the FCA or PRA technically meets the statutory deadline. It's whether substantive work begins early enough in the process. If a case is not allocated promptly, if an initial review takes place only late in the period, or if information requests are made close to the deadline, then the firm bears unnecessary costs and uncertainty.
Even if the regulator ultimately meets the formal target. My first set of amendments 105 one, ten, 113 and 114, would ensure that the Treasury's Treasury's power to alter these time limits can only be used to reduce them. If the purpose of this bill, and indeed of the government's wider financial services strategy, is to make the regulatory system more streamlined and fit for purpose, then success must be measured in part by reductions in the time taken to make decisions. I hope the Minister will be sympathetic to that principle.
The Treasury should be able to shorten regulatory approval periods where experience shows that this can be done safely, and it should not be able to lengthen them without returning to Parliament with a clear and specific justification. The amendments tabled by my noble friend Lord Holmes take a similar approach, but go further by proposing an automatic ratcheting down mechanism where regulators have met the applicable time period for a defined period, the Treasury would be required to reduce the time limit further. That is a sensible principle of continued improvement.
Continuous improvement. If regulators consistently demonstrate that they can meet a deadline, then we should be willing to ask whether that deadline can become more ambitious. I turn to amendment 109, which concerns the FCA's ability to stop the clock during the senior managers approvals process. We've heard from industry that the power to stop the clock can be used repeatedly during an approvals process that is extremely frustrating for firms. It makes workforce planning more difficult. It can leave firms waiting for months without any real sense of when a decision will be made.
Stop. The clock powers can render the headline statutory deadline almost meaningless. Amendment 109 would therefore allow the FCA to use the formal stop the clock mechanism only once in relation to a Senior Manager approval application. When it does so, the FCA will be required, so far as reasonably practicable, to specify all the information it requires. At that point, the FCA could still ask for further information later, but that later request would not stop the statutory clock delays. Approvals, as I've said, can affect business decisions.
They can affect market entry, expansion, restructuring and succession planning, and they can discourage talented individuals from taking up roles in the UK if they fear the process will be slow, uncertain or opaque, and even put at risk. And they could even. This could even put at risk our reputation as a leading financial centre. I also welcome amendment 151 from my noble friend Lord Howard of Rising. It asks whether there should be a more streamlined or expedited part for a authorisation process where the applicant is managed or directed by individuals with an established FCA, or indeed PRA, I assume, approved track record and good regulatory standing.
A review could help identify where duplication exists and where good regulatory history can be taken into account in a practical way, I'd be. Awful if the Minister could address three points. First, what does the government see as a reasonable timeframe for the approval of new products and new services, and for the approval of senior managers?Those of us used to more dynamic sectors think the new targets are insufficiently challenging. But let's hear what they are. Second, do the government accept the principle that the Treasury's power to change approval time limits should be used only to reduce them, not to increase them?If the government do not accept that, in what circumstances do they envisage the Treasury using this power to lengthen regulatory approval periods?And third, what safeguards exist to ensure that the FCA's stop the clock powers are used proportionately and are not used in a way that undermines the statutory deadline?We can't talk about growth, competitiveness and innovation while tolerating unnecessary delays in basic processes that allow firms to operate and people to take up senior roles.
We know from history that we need strong management and strong and challenging non-executive directors on our banks, but we need an efficient approval system that supports that. My Lords, I beg to move.
16:45
16:45
16:45
Speaker 9
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Speaker 9
What a pleasure to follow, my noble friend, Baroness Neville Rolfe. I agree with everything she said, all the principles that she set out, and indeed, in the set of amendments in this group I rise to speak to amendment 106 and all of the other amendments in my name. My Lords were asking a lot of our financial regulators. I think it's only right that we offer help on the face of the bill. When we come to the minister's response without in any sense pre-empting him, there may be comments around overly prescriptive, but I would suggest that what all of these amendments do is not ask prescription.
But in fact deliver clarity. And in a sense, are variously helpful to our financial services regulators. My amendments seek to offer that help, but also, as Lady Neville-rolfe referred to, really assist in driving that high performance culture. Our regulators are well regarded around the world. That is about high performance but high performance in turn is about continuous development and improvement. I think this bill can assist in that purpose. My Lords, in essence, it's all about the ease in this group efficiency, effectiveness and economic activity.
It's often said that delay defeats equity. In this instance, delay defeats economic activity, economic growth. Frustrates small, medium and larger businesses in what they're trying to do right across the United Kingdom economies. I believe that this suite of amendments offers clarity to the regulator and through that clarity, the regulator can give the right direction. The right small s support to all of our businesses to do what they do best, create economic activity and drive and deliver economic growth. I look forward to the minister's response.
My Lords, I declare.
But in fact deliver clarity. And in a sense, are variously helpful to our financial services regulators. My amendments seek to offer that help, but also, as Lady Neville-rolfe referred to, really assist in driving that high performance culture. Our regulators are well regarded around the world. That is about high performance but high performance in turn is about continuous development and improvement. I think this bill can assist in that purpose. My Lords, in essence, it's all about the ease in this group efficiency, effectiveness and economic activity.
It's often said that delay defeats equity. In this instance, delay defeats economic activity, economic growth. Frustrates small, medium and larger businesses in what they're trying to do right across the United Kingdom economies. I believe that this suite of amendments offers clarity to the regulator and through that clarity, the regulator can give the right direction. The right small s support to all of our businesses to do what they do best, create economic activity and drive and deliver economic growth. I look forward to the minister's response.
My Lords, I declare.
16:47
Speaker 10
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Speaker 10
My interest as an employee of Marsh, an FCA regulated entity. I rise to speak to these amendments in the names of my noble friends Baroness Neville Rolfe, Lord Altrincham and Lord Holmes. Concerning clause 21, which I very much welcome in principle. The improvements to regulators approval timelines are a positive step, as are the powers within the clause that enable the government to amend those timeframes over time. In effect, the Bill already recognises the need for a mechanism to drive improvement. However, the evidence suggests that we can and should go further.
The fact that regulators have consistently met their existing targets, targets that have remained largely unchanged for some 25 years, indicates that there is clear scope for more ambitious deadlines. These amendments are therefore designed to embed a culture of continuous improvement, as referred to by my noble friend Lord Holmes. Would ensure that any future changes to the timeframe set out in clause 21 could only move in one direction towards faster decision making. Moreover, where regulators have consistently met revised targets over a period of two years, the Treasury would be required to reduce those timelines further.
In doing so, we would place a statutory obligation on the system to evolve and improve. My Lords, these matters great. This matters greatly for the competitiveness of the United Kingdom and particularly the insurance market in which I work. The speed at which regulators handle authorizations, authorizations, variations of permission and approvals for senior managers has a direct impact on the ease of doing business. These processes define many firms day to day interactions with regulation, and shape broader perceptions of our market. Firms today have choices about where to deploy capital, where to grow and where to locate talent.
A regulatory system that is clear, predictable and timely is a key part of that decision making calculus. The UK must offer a compelling proposition. There are many other places to go. From the London Market Group reinforces this point. A recent survey of firms regulated by the FCA and PRA shows shows that both institutions are respected, with strong overall scores. Yet concerns remain. More than half of firms believe that aspects of the FCA's approach. Negatively, negatively affect the attractiveness of the London market, and nearly 9 in 10 highlight slow approvals for senior managers as having a strong detrimental impact on their operations.
My Lords, improving timelines is not about reducing standards, it's about ensuring that our system supports growth, innovation and competitiveness. These amendments help to achieve just that.
The fact that regulators have consistently met their existing targets, targets that have remained largely unchanged for some 25 years, indicates that there is clear scope for more ambitious deadlines. These amendments are therefore designed to embed a culture of continuous improvement, as referred to by my noble friend Lord Holmes. Would ensure that any future changes to the timeframe set out in clause 21 could only move in one direction towards faster decision making. Moreover, where regulators have consistently met revised targets over a period of two years, the Treasury would be required to reduce those timelines further.
In doing so, we would place a statutory obligation on the system to evolve and improve. My Lords, these matters great. This matters greatly for the competitiveness of the United Kingdom and particularly the insurance market in which I work. The speed at which regulators handle authorizations, authorizations, variations of permission and approvals for senior managers has a direct impact on the ease of doing business. These processes define many firms day to day interactions with regulation, and shape broader perceptions of our market. Firms today have choices about where to deploy capital, where to grow and where to locate talent.
A regulatory system that is clear, predictable and timely is a key part of that decision making calculus. The UK must offer a compelling proposition. There are many other places to go. From the London Market Group reinforces this point. A recent survey of firms regulated by the FCA and PRA shows shows that both institutions are respected, with strong overall scores. Yet concerns remain. More than half of firms believe that aspects of the FCA's approach. Negatively, negatively affect the attractiveness of the London market, and nearly 9 in 10 highlight slow approvals for senior managers as having a strong detrimental impact on their operations.
My Lords, improving timelines is not about reducing standards, it's about ensuring that our system supports growth, innovation and competitiveness. These amendments help to achieve just that.
16:49
Speaker 11
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Speaker 11
I would like to, very briefly, and in so doing, declare my interest as an adviser to and shareholder in Banco Santander. I very much support these amendments. I think all of us would agree that we want our regulations to be simple and robust, and that is the bedrock of, and the entire process to be simple and robust, as that is the bedrock of a competitive global financial centre. I don't think anyone here is arguing for a weakening to the extent that it would undermine confidence in the market, as that is absolutely critical.
But just to, um, support. What has just been said, I would draw your Lordship's attention to a study that the city UK brought out a few years ago. I think it's 2023. And it highlighted in its survey concerns amongst those in the city as to the speed of regulatory requirements. If I look at this, if I'm reading it right, the proportion of those who responded to this survey who thought that the FCA were experiencing delays in the processes that were undergoing in terms of regulatory approvals of the FCA, as far as I can see, 92% experienced delay.
If you look at the their views on the opaqueness of the um system. Which indeed adds to uncertainty and and undermines investor confidence. Uh, an enormous percentage. I think it is almost a hundred saw the system as opaque or somewhat opaque. And if one then looks further on in this study at the perceived overall impact that the efficiency of the regulator's authorisation processes have on the attractiveness of the UK as a place to establish and do business. In terms of the FCA, it is.
If my maths serves me right, almost 90% saw it as detrimental to the UK's attractiveness or somewhat detrimental. My Lords, this is an issue which I am sure the FCA and others within it are doing their best to solve, but I think these amendments would do a lot to add pressure to that process and actually strengthen the resolve within the system to address what is a clear need. If we are to build on the competitiveness of London as a financial centre.
But just to, um, support. What has just been said, I would draw your Lordship's attention to a study that the city UK brought out a few years ago. I think it's 2023. And it highlighted in its survey concerns amongst those in the city as to the speed of regulatory requirements. If I look at this, if I'm reading it right, the proportion of those who responded to this survey who thought that the FCA were experiencing delays in the processes that were undergoing in terms of regulatory approvals of the FCA, as far as I can see, 92% experienced delay.
If you look at the their views on the opaqueness of the um system. Which indeed adds to uncertainty and and undermines investor confidence. Uh, an enormous percentage. I think it is almost a hundred saw the system as opaque or somewhat opaque. And if one then looks further on in this study at the perceived overall impact that the efficiency of the regulator's authorisation processes have on the attractiveness of the UK as a place to establish and do business. In terms of the FCA, it is.
If my maths serves me right, almost 90% saw it as detrimental to the UK's attractiveness or somewhat detrimental. My Lords, this is an issue which I am sure the FCA and others within it are doing their best to solve, but I think these amendments would do a lot to add pressure to that process and actually strengthen the resolve within the system to address what is a clear need. If we are to build on the competitiveness of London as a financial centre.
16:52
16:52
16:52
Speaker 12
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Speaker 12
Uh, this amendment seeks to enable employment in the financial services industry to be made more efficient. At present. Section 55 of SMA requires the Financial Conduct Authority to determine a complete application for, for for part, for a permission within six months and an incomplete application within 12 months. The statutory limits provide certainty, but they do not distinguish between entirely new market entrants and applicants who have previously been authorised and regulated by the FCA. Many experienced financial services professionals have already undergone extensive regulatory scrutiny, have held approved positions within FCA authorised firms and possess established records of compliance, integrity and competence.
Despite this, when establishing a new authorised firm, they're often subject to the same authorisation timetable as applicants with no prior regulatory history. This approach can create unnecessary delays, increase costs, discourage entrepreneurship and inhibit competition within the UK financial services sector. It is also inconsistent with the government's broader objective of promoting growth, innovation and international competitiveness within the UK financial markets. I propose that His Majesty's Government considers introducing a fast track authorisation process, whereby applicants who. Have previously been authorised by the FCA or who have held FCA approved senior management or controlled functions for a substantial period, have no record of serious regulatory misconduct.
The threshold conditions and prudential requirements and submit a complete application. They should receive a determination from the FCA within 90 days of the application being submitted. Such a provision would not reduce regulatory standards. It would recognise that the FCA already possesses significant information regarding the applicant's competence, conduct, fitness and propriety. The FCA would retain full discretion to refuse applications where concerns arise, but qualifying applicants will benefit from a more proportionate and efficient regulatory process. The United Kingdom's reputation as a leading global financial centre depends not only on effective regulation, but also on efficient regulation.
A targeted, expedited process for proven and reputable applicants would help reduce barriers to market entry, encourage innovation, support economic growth and make the UK a more attractive jurisdiction in which to establish regulated businesses. It would tie in with the government's declared interest in reducing burdensome regulation, which impedes growth in the economy.
Despite this, when establishing a new authorised firm, they're often subject to the same authorisation timetable as applicants with no prior regulatory history. This approach can create unnecessary delays, increase costs, discourage entrepreneurship and inhibit competition within the UK financial services sector. It is also inconsistent with the government's broader objective of promoting growth, innovation and international competitiveness within the UK financial markets. I propose that His Majesty's Government considers introducing a fast track authorisation process, whereby applicants who. Have previously been authorised by the FCA or who have held FCA approved senior management or controlled functions for a substantial period, have no record of serious regulatory misconduct.
The threshold conditions and prudential requirements and submit a complete application. They should receive a determination from the FCA within 90 days of the application being submitted. Such a provision would not reduce regulatory standards. It would recognise that the FCA already possesses significant information regarding the applicant's competence, conduct, fitness and propriety. The FCA would retain full discretion to refuse applications where concerns arise, but qualifying applicants will benefit from a more proportionate and efficient regulatory process. The United Kingdom's reputation as a leading global financial centre depends not only on effective regulation, but also on efficient regulation.
A targeted, expedited process for proven and reputable applicants would help reduce barriers to market entry, encourage innovation, support economic growth and make the UK a more attractive jurisdiction in which to establish regulated businesses. It would tie in with the government's declared interest in reducing burdensome regulation, which impedes growth in the economy.
16:56
Speaker 5
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Speaker 5
I am grateful to the noble Baroness, Lady Neville Rolfe, the noble Lord, Lord Altrincham and the noble Lord, Lord Holmes, for tabling these amendments on statutory deadlines for regulatory approvals. The government agrees that determining authorisations and regulatory applications must be prompt and proportionate, whilst maintaining high standards, and continues to push the regulators to be ambitious as possible. This is why the government has taken action to shorten the range of statutory deadlines through the Bill, and, on top of this, has agreed voluntary stretch targets for the regulator to go further and faster to speed up the processing of the most crucial applications and facilitate growth.
And the focus is starting to pay off. For example, the FCA authorisation metrics for the last quarter show that the FCA determined 99.9% of senior manager applications within the existing three month deadline, compared to 92.5% in the same quarter in the year 2223. And on top of this, the FCA determined 98.1% of senior manager applications within its two month voluntary stretch target, determining 50% of authorisations within only 19 days. To amendment 105, 106 110 1111, 13114 and 115, which seek to ensure that the Treasury can use the power under clause 21 to reduce the deadlines for determining applications.
The government understands the intention behind these amendments. The government is committed to keeping these statutory deadlines under review to ensure that they are ambitious as possible to support firms. The intention behind this is to primarily allow certain deadlines to be shortened further. If the conditions change in future and the regulators can process applications faster. However, it is vital that the regulatory framework reflects the need for robust approvals process and the high standards expected of firms operating within the UK, limiting the firms, limiting the government's ability to recalibrate the statutory deadlines in the other direction would limit our ability to react to unexpected circumstances, and could risk those high standards being watered down, or push the regulators to refuse more applications to ensure they are meeting their legal obligations.
This is why the government's view is that the powers must remain flexible. Amendments 107, 112 and 116 would oblige the government to further shorten the statutory deadlines should the regulator meet these deadlines for two consecutive years. The government understand the intention and ambition of these amendments, but does not agree that it is the right way to achieve it. Meeting the existing deadline for two consecutive years does not in of itself mean that further shortening of deadline would be appropriate and could risk watering down standards.
Such a ratcheting mechanism could also drive perverse behaviour. Disincentivising the regulators from meeting these deadlines to avoid further operational pressures. Noble Lords The government's view is that these amendments will prevent the exact outcome they are seeking to achieve, I was turning to amendment 109. I understand the concern that statutory deadlines are less meaningful. If the FSA can repeatedly stop the clock and make rolling requests for information, the government recognises the frustrations firms feel when applications are paused or when they receive repeated requests for information.
The noble lady, Baroness Neville-rolfe, asked about the proportionality of circumstances in which the FCA can indeed stop the clock, the FCA can only stop the clock in three specific circumstances under Fsma for change of control senior manager and appointed representative application. This power allows the FCA to fully investigate issues which emerge only after an initial response has been received, or where further clarification is needed on matters that are not reasonably identifiable at the outset. This is important for ensuring robust standards can be applied. The government thinks it's important that regulators retain some flexibility to scrutinise senior manager applications properly, a rigid rule limiting the formal stop the clock power to a single occasion.
Risk weakens the regulator's ability to conduct proper scrutiny in more complex cases, which is which it only does on very few occasions. When really necessary. It also risks encouraging broad, defensive and overly onerous initial information requests, as the FCA seeks to adjust procedures to the new requirement, making the process more onerous for all applications. Potentially. However, I do not want to sound complacent. The government will continue to engage with the regulators to ensure that they are processing applications as quickly as possible, while maintaining standards and avoiding delay, avoiding delays.
The right answer is therefore not to hide.
And the focus is starting to pay off. For example, the FCA authorisation metrics for the last quarter show that the FCA determined 99.9% of senior manager applications within the existing three month deadline, compared to 92.5% in the same quarter in the year 2223. And on top of this, the FCA determined 98.1% of senior manager applications within its two month voluntary stretch target, determining 50% of authorisations within only 19 days. To amendment 105, 106 110 1111, 13114 and 115, which seek to ensure that the Treasury can use the power under clause 21 to reduce the deadlines for determining applications.
The government understands the intention behind these amendments. The government is committed to keeping these statutory deadlines under review to ensure that they are ambitious as possible to support firms. The intention behind this is to primarily allow certain deadlines to be shortened further. If the conditions change in future and the regulators can process applications faster. However, it is vital that the regulatory framework reflects the need for robust approvals process and the high standards expected of firms operating within the UK, limiting the firms, limiting the government's ability to recalibrate the statutory deadlines in the other direction would limit our ability to react to unexpected circumstances, and could risk those high standards being watered down, or push the regulators to refuse more applications to ensure they are meeting their legal obligations.
This is why the government's view is that the powers must remain flexible. Amendments 107, 112 and 116 would oblige the government to further shorten the statutory deadlines should the regulator meet these deadlines for two consecutive years. The government understand the intention and ambition of these amendments, but does not agree that it is the right way to achieve it. Meeting the existing deadline for two consecutive years does not in of itself mean that further shortening of deadline would be appropriate and could risk watering down standards.
Such a ratcheting mechanism could also drive perverse behaviour. Disincentivising the regulators from meeting these deadlines to avoid further operational pressures. Noble Lords The government's view is that these amendments will prevent the exact outcome they are seeking to achieve, I was turning to amendment 109. I understand the concern that statutory deadlines are less meaningful. If the FSA can repeatedly stop the clock and make rolling requests for information, the government recognises the frustrations firms feel when applications are paused or when they receive repeated requests for information.
The noble lady, Baroness Neville-rolfe, asked about the proportionality of circumstances in which the FCA can indeed stop the clock, the FCA can only stop the clock in three specific circumstances under Fsma for change of control senior manager and appointed representative application. This power allows the FCA to fully investigate issues which emerge only after an initial response has been received, or where further clarification is needed on matters that are not reasonably identifiable at the outset. This is important for ensuring robust standards can be applied. The government thinks it's important that regulators retain some flexibility to scrutinise senior manager applications properly, a rigid rule limiting the formal stop the clock power to a single occasion.
Risk weakens the regulator's ability to conduct proper scrutiny in more complex cases, which is which it only does on very few occasions. When really necessary. It also risks encouraging broad, defensive and overly onerous initial information requests, as the FCA seeks to adjust procedures to the new requirement, making the process more onerous for all applications. Potentially. However, I do not want to sound complacent. The government will continue to engage with the regulators to ensure that they are processing applications as quickly as possible, while maintaining standards and avoiding delay, avoiding delays.
The right answer is therefore not to hide.
17:00
17:00
Speaker 5
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Speaker 5
I did have an original draft. In fact, let me come back to the noble Lord with that data I did. I did have it in the original request, but it seems like we've. We've passed it out, but I will I will write to the noble Lord over the coming days. Um, I believe is the right answer is not to hardwire this procedural restriction into primary legislation, but to continue improving operational performance and scrutiny of timelines through our wider framework. Amendment 108 would insert detailed operational requirements into Fsma for the handling of authorisation applications.
I recognise the attraction of measurable standards on case allocation. Initial review information requests, publication and monitoring data, and limiting the use of stop the clock mechanism. However, as we have discussed earlier today. The Fsma model delegates certain responsibilities. Um to the independent regulators and like any other organization, they need to be, they need to be able to figure out how to fulfill these responsibilities and these responsibilities for ensuring that they have the resources, systems and processes need to discharge the functions effectively.
The right approach for Parliament, we believe, and the government is to hold the regulator to account for speed, service quality and operational effectiveness, not to prescribe in primary legislation the detailed mechanics of how the application must be processed. If the noble Lord, Lord Holmes, will allow me, have been passed the data. There was an additional speech in in the full year, 25 to 26, 55% of FCA solo regulated senior manager applications had no stop the clock and for 32% of cases, the clock was only stopped once.
Even when the FCA does use its stop the clock power, it continues to determine applications promptly. And in Q4 of 2526, 50% of senior manager cases were determined within 19 days. As mentioned previously, 99% were determined within the new target of two months. Sir, thank.
I recognise the attraction of measurable standards on case allocation. Initial review information requests, publication and monitoring data, and limiting the use of stop the clock mechanism. However, as we have discussed earlier today. The Fsma model delegates certain responsibilities. Um to the independent regulators and like any other organization, they need to be, they need to be able to figure out how to fulfill these responsibilities and these responsibilities for ensuring that they have the resources, systems and processes need to discharge the functions effectively.
The right approach for Parliament, we believe, and the government is to hold the regulator to account for speed, service quality and operational effectiveness, not to prescribe in primary legislation the detailed mechanics of how the application must be processed. If the noble Lord, Lord Holmes, will allow me, have been passed the data. There was an additional speech in in the full year, 25 to 26, 55% of FCA solo regulated senior manager applications had no stop the clock and for 32% of cases, the clock was only stopped once.
Even when the FCA does use its stop the clock power, it continues to determine applications promptly. And in Q4 of 2526, 50% of senior manager cases were determined within 19 days. As mentioned previously, 99% were determined within the new target of two months. Sir, thank.
17:02
Speaker 9
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Speaker 9
The Minister for those statistics and very much appreciate him having them in front of him while we while we have this ability to elucidate such detail, which is incredibly helpful. Could I also ask him?He set out the importance of enabling the regulator to continue to have the option to increase timelines, rather than just having them set as is, or, as our amendment suggests, to be able to be reduced?So perhaps, would he be able to set out to the Grand Committee?Perhaps 4 or 5 examples of where it would be helpful for regulators to be able to increase timelines?
17:03
17:03
17:03
17:04
17:04
Speaker 5
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Speaker 5
I think this requires some further detail, my noble Lord. I mean, it's an affirmative power that the Treasury has to regulate. But let me write in full to you to make sure that we've understood we're taking the issue seriously. Um, to amendment 151. I thank the Lord, noble Lord Howard, for raising this, which I know reflects long standing frustration that credible firms, particularly those led by individuals already known to the regulator, may still face lengthy authorisation processes which can delay market entry and inhibit innovation and growth.
However, while the previous approval and track record for senior individuals is clearly relevant to the regulator's assessment, authorising a firm is not simply a matter of approving the people that run it. The regulators must assess the firm as a whole, including its business model, governance systems and controls, and whether it's capable of operating safely and in the interests of its customers. The government recognises the importance of timely and effective authorisation process, especially for new firms. This is why the government is shortening the deadlines for new firm authorisation applications through this bill.
However, while the previous approval and track record for senior individuals is clearly relevant to the regulator's assessment, authorising a firm is not simply a matter of approving the people that run it. The regulators must assess the firm as a whole, including its business model, governance systems and controls, and whether it's capable of operating safely and in the interests of its customers. The government recognises the importance of timely and effective authorisation process, especially for new firms. This is why the government is shortening the deadlines for new firm authorisation applications through this bill.
17:05
Speaker 8
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Speaker 8
A licensing regime to reduce the barriers firms face when seeking FCA authorisation and help them get up and running faster. The challenges firms face when seeking authorisation are real, and I am happy to discuss further with the FCA. But imposing a statutory requirement on the Treasury to undertake such a review is disproportionate and not the right way to address them. However, I to the noble Lord in our meeting today, I will talk to the FCA about this and come back and see how they are ensuring that this process is speeded up.
I fully recognise the concerns that noble peers have raised about the delays, responsiveness and the need for approvals. Regime that supports growth and competitiveness. The government is actively addressing these through the shortening of a range of statutory deadlines within the bill, in a way that is targeted, proportionate and will ensure competitiveness without compromising the rightly high regulatory standards that the firms must meet to operate in the UK. I therefore ask the noble Baroness to withdraw amendment 42.
I fully recognise the concerns that noble peers have raised about the delays, responsiveness and the need for approvals. Regime that supports growth and competitiveness. The government is actively addressing these through the shortening of a range of statutory deadlines within the bill, in a way that is targeted, proportionate and will ensure competitiveness without compromising the rightly high regulatory standards that the firms must meet to operate in the UK. I therefore ask the noble Baroness to withdraw amendment 42.
17:06
Speaker 7
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Speaker 7
My Lords. Grateful to all noble Lords who have contributed to this debate and to the Minister for his response. And I welcome the fact that the government recognised the problem of delay in authorizations and approvals. Clause 21 is clearly intended to make further progress, make progress in that respect, but the existing approval figures suggests the. To me that the deadlines are insufficiently ambitious, and I think leaving it to the FCA and all feeds risk aversion and it's disappointing to hear the minister endorsing that unless the powers in the Bill and on.
The Treasury and the regulators are better disciplined. We may not achieve the cultural and operational shift that firms need, and we all want. And there's not an incentive to continuous improvement of the kind that my noble friend Lord, as described in the insurance industry that is so badly needed. I'm also not sure what the unexpected circumstances are. Not on stop the clock, but on on the basic system. What's the detail of that?Is it Covid?Is it a war?I don't know.
Um, on stop the clock. I'm grateful for the minister's comments. Um, it was interesting to hear that nearly half of the cases involve stopping the clock. And we've no idea how long the bad cases take. A statutory deadline is of limited value if it can be paused repeatedly, or if firms feel that pauses are being used in a way that creates uncertainty, the FCA should, wherever possible, identify missing information early and comprehensively, which I don't think I had a satisfactory answer.
Um. I also welcome the points raised by my noble friend Lord Holmes on more granular performance data. My noble friend Lord Howard of Rising has also raised the idea of a fast track for established senior managers, and I very much look forward to hearing the results of the Minister's conversations with the FCA and perhaps the PRA on that. Um, I'm not that hopeful, and I do encourage the minister to press on these issues. They matter a lot to the industry. And I know from planning and other areas that I've been involved in my long career, that speeding things up can lead to very positive feedback.
So I hope the minister will reflect further. But for now, I beg leave to withdraw my amendments.
The Treasury and the regulators are better disciplined. We may not achieve the cultural and operational shift that firms need, and we all want. And there's not an incentive to continuous improvement of the kind that my noble friend Lord, as described in the insurance industry that is so badly needed. I'm also not sure what the unexpected circumstances are. Not on stop the clock, but on on the basic system. What's the detail of that?Is it Covid?Is it a war?I don't know.
Um, on stop the clock. I'm grateful for the minister's comments. Um, it was interesting to hear that nearly half of the cases involve stopping the clock. And we've no idea how long the bad cases take. A statutory deadline is of limited value if it can be paused repeatedly, or if firms feel that pauses are being used in a way that creates uncertainty, the FCA should, wherever possible, identify missing information early and comprehensively, which I don't think I had a satisfactory answer.
Um. I also welcome the points raised by my noble friend Lord Holmes on more granular performance data. My noble friend Lord Howard of Rising has also raised the idea of a fast track for established senior managers, and I very much look forward to hearing the results of the Minister's conversations with the FCA and perhaps the PRA on that. Um, I'm not that hopeful, and I do encourage the minister to press on these issues. They matter a lot to the industry. And I know from planning and other areas that I've been involved in my long career, that speeding things up can lead to very positive feedback.
So I hope the minister will reflect further. But for now, I beg leave to withdraw my amendments.
17:09
17:09
Speaker 11
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Speaker 11
Pleasure?This amendment be withdrawn?It is by leave withdrawn. Amendments 106 to 108. Taken together, Lord Holmes of Richmond not moved. Amendments 109 to 110. Taken together, Baroness Neville-rolfe not moved. Amendments 111 and 112. Taken together, Lord Holmes of Richmond, not moved. Amendments 113 114. Taken together, Baroness Neville Rolfe not moved. Amendments 115 and 116. Taken together, Lord Holmes of Richmond.
Not moved. The question is that clauses 21 and 22 stand part of the bill, as many of that opinion say, content. The contrary not content. The contents have it after clause 22, amendment 117. Baroness Bowles of Berkhamsted.
Not moved. The question is that clauses 21 and 22 stand part of the bill, as many of that opinion say, content. The contrary not content. The contents have it after clause 22, amendment 117. Baroness Bowles of Berkhamsted.
17:10
17:11
17:11
Speaker 7
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Speaker 7
Speaking to my amendments 117 and 123. And I think, as I've already mentioned before in committee, when we've been talking about proportionality, I've said that it is at least possible to look at rules and assess whether they appear proportionate and growth friendly, but it's far harder to understand what is happening on the ground in supervision and enforcement, because that activity is not public and therefore it's less visible. And this is particularly so with section 166 notices. And I seem once again to have hit on the same subject as the noble lady, Baroness Noakes.
And as I say on University Challenge, I promise you there's been no conferring. Um now, there was a time when section 166 notice was very rare, I'd say, and regarded as a serious matter, something you didn't want others to know about, lest it suggested you were doing something really wrong, or in real difficulty or trouble over something. Now the reaction is much more along the lines of, oh, you too. And the sense in industry is that what was once rare and a targeted tool is becoming routine and a general purpose device, sometimes even a fishing expedition.
Now, these investigations are not small matters. They can go on for a very long time. They're intrusive, expensive and disruptive to normal operations. They require the appointment of external consultants, often at very significant cost, involve a lot of staff time, even requiring the hiring of additional staff to deal with keeping day to day activity going. Now in 2020 324, there were 83. Section one, 66 notices, and in 2425 there were a further 47 and the 2425 cost was 44.7 million.
And which is which is not trivial. So there's a legitimate concern that the threshold for initiating a section 166 notice has drifted downwards, and that matters and matters. And that should be dealt with through ordinary supervisory channels, uh, are now being dealt with through section 166. Um, they should be dealt with routinely using the regulator's own knowledge and expertise wherever possible. And it does seem that maybe some of that is now being outsourced through this section 166 route. And what is needed is a pinning back to serious matters and greater transparency about how and why these notices are used.
Now, my amendment aims to restore section 166 reviews to what they were always understood to be a tool for investigating issues that pose a serious detriment to regulatory outcomes. It also introduces a modest reporting requirement an annual statement setting out the number of issues of notices issued, a breakdown by sector and the reason why there was a material risk of serious detriment and the aggregate financial cost to firms. This is not an attempt to remove sexual 166 or constrain the regulator's ability to act. It's simply an attempt to ensure that a powerful and intrusive tool is used proportionately, transparently and for the purposes for which it was originally intended.
Too much use is harmful and a reputation for routine use is itself a deterrent for locating businesses in the UK. Now to my amendment 123. Also in this group, which concerns information powers under section 165 of Fsma, it aims to set a framework around the. Information demands that regulators can make. It's not intended to intrude on anything reasonably necessary for investigatory, supervisory or other statutory functions, or for advancing the regulator's objectives. However, as the Lords Financial Regulation Committee heard in evidence, firms are receiving many requests for information that do not appear necessary or are duplicative or are made without coordination across teams.
These requests impose real costs and disruption, and they are not always proportionate to the matter at hand. So this amendment seeks simply to put some structure and coordination around what can reasonably be expected, ensuring that information requests are targeted, necessary and proportionate, and that firms are not repeatedly asked for the same material by different parts of the of of the same regulator. I beg to move.
And as I say on University Challenge, I promise you there's been no conferring. Um now, there was a time when section 166 notice was very rare, I'd say, and regarded as a serious matter, something you didn't want others to know about, lest it suggested you were doing something really wrong, or in real difficulty or trouble over something. Now the reaction is much more along the lines of, oh, you too. And the sense in industry is that what was once rare and a targeted tool is becoming routine and a general purpose device, sometimes even a fishing expedition.
Now, these investigations are not small matters. They can go on for a very long time. They're intrusive, expensive and disruptive to normal operations. They require the appointment of external consultants, often at very significant cost, involve a lot of staff time, even requiring the hiring of additional staff to deal with keeping day to day activity going. Now in 2020 324, there were 83. Section one, 66 notices, and in 2425 there were a further 47 and the 2425 cost was 44.7 million.
And which is which is not trivial. So there's a legitimate concern that the threshold for initiating a section 166 notice has drifted downwards, and that matters and matters. And that should be dealt with through ordinary supervisory channels, uh, are now being dealt with through section 166. Um, they should be dealt with routinely using the regulator's own knowledge and expertise wherever possible. And it does seem that maybe some of that is now being outsourced through this section 166 route. And what is needed is a pinning back to serious matters and greater transparency about how and why these notices are used.
Now, my amendment aims to restore section 166 reviews to what they were always understood to be a tool for investigating issues that pose a serious detriment to regulatory outcomes. It also introduces a modest reporting requirement an annual statement setting out the number of issues of notices issued, a breakdown by sector and the reason why there was a material risk of serious detriment and the aggregate financial cost to firms. This is not an attempt to remove sexual 166 or constrain the regulator's ability to act. It's simply an attempt to ensure that a powerful and intrusive tool is used proportionately, transparently and for the purposes for which it was originally intended.
Too much use is harmful and a reputation for routine use is itself a deterrent for locating businesses in the UK. Now to my amendment 123. Also in this group, which concerns information powers under section 165 of Fsma, it aims to set a framework around the. Information demands that regulators can make. It's not intended to intrude on anything reasonably necessary for investigatory, supervisory or other statutory functions, or for advancing the regulator's objectives. However, as the Lords Financial Regulation Committee heard in evidence, firms are receiving many requests for information that do not appear necessary or are duplicative or are made without coordination across teams.
These requests impose real costs and disruption, and they are not always proportionate to the matter at hand. So this amendment seeks simply to put some structure and coordination around what can reasonably be expected, ensuring that information requests are targeted, necessary and proportionate, and that firms are not repeatedly asked for the same material by different parts of the of of the same regulator. I beg to move.
17:15
17:15
Speaker 9
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Speaker 9
One eight in this group, and the noble Baroness Lady Balls, has. Already noted, it is aimed at the same target as her amendment 117. Both of us are focusing on the regulators needing to have some specific and serious concerns about regulatory breaches before triggering a section 166. I've had some experience of being on the receiving end of section 166 from my time on the board of a major bank. They are genuinely very burdensome. They cost a lot of money.
They divert a huge amount of staff resources and more importantly, senior management time. So they are not something to be, um, undertaken lightly. The consulting firms absolutely love them. Uh, the fees are set by the regulator so they don't have to do anything awful, like negotiate with a client around the fees. They often have some perverse incentives. Quite a lot of them are structured as phase one and phase two. And phase one is where you see if there's a bit of a problem, then you move on to phase two.
Now phase two is where the real money usually is. So the consultants leave no stone unturned in their efforts to trigger phase two, so they can end up being, uh. Creating a. More work than might perhaps have been needed now, like the noble Baroness Bowles. I'm not saying that 166 should not exist, but the use of them should probably revert to the use that that existed before, which is why I think it's important to put a higher hurdle than is currently in the statute for the use of 166, so that the burdens are imposed only when there is really genuine cause.
They divert a huge amount of staff resources and more importantly, senior management time. So they are not something to be, um, undertaken lightly. The consulting firms absolutely love them. Uh, the fees are set by the regulator so they don't have to do anything awful, like negotiate with a client around the fees. They often have some perverse incentives. Quite a lot of them are structured as phase one and phase two. And phase one is where you see if there's a bit of a problem, then you move on to phase two.
Now phase two is where the real money usually is. So the consultants leave no stone unturned in their efforts to trigger phase two, so they can end up being, uh. Creating a. More work than might perhaps have been needed now, like the noble Baroness Bowles. I'm not saying that 166 should not exist, but the use of them should probably revert to the use that that existed before, which is why I think it's important to put a higher hurdle than is currently in the statute for the use of 166, so that the burdens are imposed only when there is really genuine cause.
17:17
Speaker 2
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Speaker 2
My Lord, I'm grateful to the noble Baroness, Lady Bowles and lady. Nokes for bringing forward these amendments, and and, uh, declare my interest as the director of South Molton Street Capital, which is regulated by the FCA. The amendments in this group focus principally on sections one, 65 and 166 of Fsma section 166, and it's worth just recalling that the very expression of section 166 has become part of the language of financial regulation. And when when the history of financial regulation and this period is written, this will be the most famous item of regulation for this period, because this is part of the common language, because there are dozens and dozens and dozens of these regulatory interventions.
Section 166, in particular, gives the regulators the power to require a firm to appoint or to pay for a skilled person, often a very expensive law firm, to produce a report on specified matters. These reviews can be burdensome, expensive and disruptive for the firms concerned. The concern we have heard from industry is that section 166 notices have become more and more common in recent years. They were as high as as the noble lady, Baroness Bowles pointed out. Initially quite scarce and quite important and quite quiet.
Incidentally, now talked about all the time because they're just common as anything. The serious issue is that they can, in effect, be used by the regulator as a demonstration of the exercise of its supervisory function. Now, um, these notices are supposedly for an inquiry, but they do look quite threatening. They can be written in bold and in caps and in different sized fonts. Uh, and they arrive at the firm with a variety of different names. Often the firm has not actually heard of who they are at the regulator.
And the tone of the notices can be unintentionally discourteous. And this, of course, touches on other amendments which reference the right profile for the UK in regulating international firms that may operate in this country. A section 166 review is not cost free regulation. It can require substantial external expenditure. Internal management time, legal advice, data gathering systems work and follow on remediation. The direct cost of the Skills Persons report may be only one part of the total burden. This means that there is inevitably a presumption of guilt in these inquiries without a balanced challenge to which the firm can fully respond.
And bear in mind, the firms often don't even know what the inquiry is looking for. So the ability to seek legal protection or a balance in the inquiry is made impossible by this approach in regulation in the. General insurance and protection sector, an FOI based report suggested that firms paid around £2.7 million for FCA mandated section 166 reviews in the year to 31st March 2024. It also noted that internal costs and remediation costs can exceed the external review costs itself. That illustrates the point very clearly.
The financial and operational impact on firms can be significant. There is also the problem that some firms are not clear on why they are being subject to section 166 in the first place. The regulator may go on a fishing trip, as described by the noble lady, Baroness Bowles. On a fishing trip really is a good expression of how these inquiries proceed to find fault without disclosing precisely what they're looking for. That is why these powers need guardrails. As my noble friend Lady Noakes has argued, section 166 notices should be reserved for serious circumstances.
They should not become a routine supervisory practice. They should not be used where the same information could reasonably be obtained through less burdensome means, and they should not be imposed without proper consideration of proportionality. Amendment 117 in the name of the noble Baroness, Lady Bowles, would require the regulator to be satisfied that there is a material risk of serious detriment to regulatory outcomes, and that using a skilled person is a proportionate response. It would also require the regulator to consider the scale and nature of the suspected issue, the burden on the firm and whether the matter could reasonably be addressed through existing supervisory tools.
That seems to be the very sensible framework, as does that set out in amendment 118. In the name of my noble friend Lady Noakes, which would restrict. Section 166 reports to circumstances where the regulator. Consider that there is likely to have been a significant contravention of a relevant requirement, and where the information or documents could not reasonably be obtained without the report. These amendments speak to the same underlying principle. Section 166 should be an exceptional tool for serious cases, not a default mechanism.
I also want to welcome amendment one, two, three in the names of the noble Baroness Lady Bowles and Lady Altmann. That amendment deals with section 165 information gathering powers and sets sensible thresholds around access to information. If a regulator asks a firm for information or documents, it should be able to explain why that material is reasonably necessary, why the request is proportionate and why the information cannot be obtained from another source. Requests should not be duplicative. They should not be broader than necessary.
Firms should not be left trying to satisfy vague or excessive demands without a clear understanding of the purpose behind them. That is a basic principle of good regulation, and it means and it matters, particularly for smaller firms. The broader issue here is one we have returned to throughout the committee. Regulatory power must be matched by accountability and proportionality. The FCA and PRA have significant supervisory tools at their disposal where those tools impose real costs on firms. There must be proper discipline around their use.
These amendments raise important questions about the balance between effective supervision and regulatory burden. We will listen carefully to what the minister has to say in response.
Section 166, in particular, gives the regulators the power to require a firm to appoint or to pay for a skilled person, often a very expensive law firm, to produce a report on specified matters. These reviews can be burdensome, expensive and disruptive for the firms concerned. The concern we have heard from industry is that section 166 notices have become more and more common in recent years. They were as high as as the noble lady, Baroness Bowles pointed out. Initially quite scarce and quite important and quite quiet.
Incidentally, now talked about all the time because they're just common as anything. The serious issue is that they can, in effect, be used by the regulator as a demonstration of the exercise of its supervisory function. Now, um, these notices are supposedly for an inquiry, but they do look quite threatening. They can be written in bold and in caps and in different sized fonts. Uh, and they arrive at the firm with a variety of different names. Often the firm has not actually heard of who they are at the regulator.
And the tone of the notices can be unintentionally discourteous. And this, of course, touches on other amendments which reference the right profile for the UK in regulating international firms that may operate in this country. A section 166 review is not cost free regulation. It can require substantial external expenditure. Internal management time, legal advice, data gathering systems work and follow on remediation. The direct cost of the Skills Persons report may be only one part of the total burden. This means that there is inevitably a presumption of guilt in these inquiries without a balanced challenge to which the firm can fully respond.
And bear in mind, the firms often don't even know what the inquiry is looking for. So the ability to seek legal protection or a balance in the inquiry is made impossible by this approach in regulation in the. General insurance and protection sector, an FOI based report suggested that firms paid around £2.7 million for FCA mandated section 166 reviews in the year to 31st March 2024. It also noted that internal costs and remediation costs can exceed the external review costs itself. That illustrates the point very clearly.
The financial and operational impact on firms can be significant. There is also the problem that some firms are not clear on why they are being subject to section 166 in the first place. The regulator may go on a fishing trip, as described by the noble lady, Baroness Bowles. On a fishing trip really is a good expression of how these inquiries proceed to find fault without disclosing precisely what they're looking for. That is why these powers need guardrails. As my noble friend Lady Noakes has argued, section 166 notices should be reserved for serious circumstances.
They should not become a routine supervisory practice. They should not be used where the same information could reasonably be obtained through less burdensome means, and they should not be imposed without proper consideration of proportionality. Amendment 117 in the name of the noble Baroness, Lady Bowles, would require the regulator to be satisfied that there is a material risk of serious detriment to regulatory outcomes, and that using a skilled person is a proportionate response. It would also require the regulator to consider the scale and nature of the suspected issue, the burden on the firm and whether the matter could reasonably be addressed through existing supervisory tools.
That seems to be the very sensible framework, as does that set out in amendment 118. In the name of my noble friend Lady Noakes, which would restrict. Section 166 reports to circumstances where the regulator. Consider that there is likely to have been a significant contravention of a relevant requirement, and where the information or documents could not reasonably be obtained without the report. These amendments speak to the same underlying principle. Section 166 should be an exceptional tool for serious cases, not a default mechanism.
I also want to welcome amendment one, two, three in the names of the noble Baroness Lady Bowles and Lady Altmann. That amendment deals with section 165 information gathering powers and sets sensible thresholds around access to information. If a regulator asks a firm for information or documents, it should be able to explain why that material is reasonably necessary, why the request is proportionate and why the information cannot be obtained from another source. Requests should not be duplicative. They should not be broader than necessary.
Firms should not be left trying to satisfy vague or excessive demands without a clear understanding of the purpose behind them. That is a basic principle of good regulation, and it means and it matters, particularly for smaller firms. The broader issue here is one we have returned to throughout the committee. Regulatory power must be matched by accountability and proportionality. The FCA and PRA have significant supervisory tools at their disposal where those tools impose real costs on firms. There must be proper discipline around their use.
These amendments raise important questions about the balance between effective supervision and regulatory burden. We will listen carefully to what the minister has to say in response.
17:23
Speaker 8
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Speaker 8
My Lords, I am grateful to noble Baroness for raising these amendments. I'm listening carefully to the points raised today. The principle of ensuring the regulators take proportionate approach to their work. In the case of these amendments to the skilled person, reviews and regulatory information collected is one that the government strongly agrees with, and we have previously stated that the principle and how it applies more broadly to the work of the financial services Regulator amendments. 117 and 118 relate to skilled person reviews under section 166 of Fsma.
This is an important supervisory tool, and the government agrees that it should be deployed, deployed proportionately. However, the government is not persuaded that there is an issue here that requires us to follow the constraint, the regulator's ability to require these reviews when it considers the appropriate, appropriate to effectively safeguard markets and consumer. The regulators have existing procedures to ensure proportionality. When considering whether to initiate a skilled person review, the FCA Handbook sets out what they will first consider the circumstances of the firm, the costs involved and the ability and the availability of other supervisory tools to tackle the issue.
The PRA has a similar process in place, layering additional statutory requirements on top of this risk, creating burdensome delays over supervisory decisions. Skilled person reviews are often used precisely in circumstances where the regulator needs independent expert analysis, for example, requiring the regulator to satisfy a threshold test before commissioning a view could limit the regulator's ability to direct skilled person to investigate a potential consumer harm and implement a mitigation strategy. The data does not suggest that the use of skilled section person versions has grown over time. I would also like to reassure my Lords that the FCA's use of skilled person reviews has been broadly consistent over the last ten years, with an average of 48.5 commissioned a year over those ten years.
However, in in year 2526, only 31 were commissioned, down from a high of 83 and 2324. The increase reflected the FCA strengthened oversight in key areas, including financial crime and appointed representatives. And despite the increase in volume, overall costs to firms remain flat. Amendment 1117 would create statutory disclosure requirements relating to 116, section 116 skilled person reviews. The FCA and PRA already provide transparency through publishing data on reviews that they have commissioned in their annual reports. Turning now to amendment one two, three, which seeks to raise the bar for regulators requesting information for firms they oversee.
The government recognises the impact that regulation and supervision can have on firms, and agrees that regulators supervisory activities include information requests must not create disproportionate burdens on firms. This is why the government has committed to cutting the administrative burden on regulation by 25%. By the end of this Parliament, the financial services regulator are actively contributing to this agenda. For example, the PRA is deleting redundant and duplicative data collections. Their future banking data programme has reduced costs to firms by around £26 million annually so far, and the FCA has stripped out data requests for 36,000 firms.
All of this has been done without detracting from consumer protections or system wide resilience. And through the bill, the government is taking action to reduce the burdens of regulations on businesses. This includes through reforms on the senior managers and certification certification regime, which will enable regulators to reduce the regulatory burden of the regime by 50%, all while maintaining is strong and effective framework for individual accountability. By imposing prescriptive statutory requirements on how regulators gather information risks undermining effective supervision and all the serious risks that that might bring.
Regulators must be able to respond to emerging risks quickly, and that sometimes means requesting information in ways that cannot be neatly anticipated by legislation. My Lords, the government agrees that proportionality is hugely important, that unnecessary burden should be avoided and that regulators must be held properly to account for how they exercise the significant powers Parliament has given them. But there is no evidence that these amendments are needed to ensure proportionality, and they would risk constraining the regulator's ability to do their jobs effectively, and that would introduce risks to our financial system.
I therefore ask the noble Baroness to withdraw her amendment.
This is an important supervisory tool, and the government agrees that it should be deployed, deployed proportionately. However, the government is not persuaded that there is an issue here that requires us to follow the constraint, the regulator's ability to require these reviews when it considers the appropriate, appropriate to effectively safeguard markets and consumer. The regulators have existing procedures to ensure proportionality. When considering whether to initiate a skilled person review, the FCA Handbook sets out what they will first consider the circumstances of the firm, the costs involved and the ability and the availability of other supervisory tools to tackle the issue.
The PRA has a similar process in place, layering additional statutory requirements on top of this risk, creating burdensome delays over supervisory decisions. Skilled person reviews are often used precisely in circumstances where the regulator needs independent expert analysis, for example, requiring the regulator to satisfy a threshold test before commissioning a view could limit the regulator's ability to direct skilled person to investigate a potential consumer harm and implement a mitigation strategy. The data does not suggest that the use of skilled section person versions has grown over time. I would also like to reassure my Lords that the FCA's use of skilled person reviews has been broadly consistent over the last ten years, with an average of 48.5 commissioned a year over those ten years.
However, in in year 2526, only 31 were commissioned, down from a high of 83 and 2324. The increase reflected the FCA strengthened oversight in key areas, including financial crime and appointed representatives. And despite the increase in volume, overall costs to firms remain flat. Amendment 1117 would create statutory disclosure requirements relating to 116, section 116 skilled person reviews. The FCA and PRA already provide transparency through publishing data on reviews that they have commissioned in their annual reports. Turning now to amendment one two, three, which seeks to raise the bar for regulators requesting information for firms they oversee.
The government recognises the impact that regulation and supervision can have on firms, and agrees that regulators supervisory activities include information requests must not create disproportionate burdens on firms. This is why the government has committed to cutting the administrative burden on regulation by 25%. By the end of this Parliament, the financial services regulator are actively contributing to this agenda. For example, the PRA is deleting redundant and duplicative data collections. Their future banking data programme has reduced costs to firms by around £26 million annually so far, and the FCA has stripped out data requests for 36,000 firms.
All of this has been done without detracting from consumer protections or system wide resilience. And through the bill, the government is taking action to reduce the burdens of regulations on businesses. This includes through reforms on the senior managers and certification certification regime, which will enable regulators to reduce the regulatory burden of the regime by 50%, all while maintaining is strong and effective framework for individual accountability. By imposing prescriptive statutory requirements on how regulators gather information risks undermining effective supervision and all the serious risks that that might bring.
Regulators must be able to respond to emerging risks quickly, and that sometimes means requesting information in ways that cannot be neatly anticipated by legislation. My Lords, the government agrees that proportionality is hugely important, that unnecessary burden should be avoided and that regulators must be held properly to account for how they exercise the significant powers Parliament has given them. But there is no evidence that these amendments are needed to ensure proportionality, and they would risk constraining the regulator's ability to do their jobs effectively, and that would introduce risks to our financial system.
I therefore ask the noble Baroness to withdraw her amendment.
17:27
Speaker 9
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Speaker 9
He made a lot of play of the importance of proportionality, which I think there would be considerable agreement on. This bill removes the requirements to have regard to the regulatory principles, including, importantly, the proportionality paragraphs for anything other than the five year plan. It is therefore incumbent on the government to look at all other areas of the Bill to ensure that proportionality, where it is needed, is correctly referenced in the Bill because by taking it away at the outset from the requirement to have regard in areas other than the five year plan, the government are actually leaving this bill wide open to Non-proportional use of powers by the regulators.
So I think this is an area which is not has not been fully developed by the government in their thinking on this.
So I think this is an area which is not has not been fully developed by the government in their thinking on this.
17:28
17:28
Speaker 7
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Speaker 7
Spoken in this debate. I particularly thank the noble lady, Baroness Noakes, and her last question and intervention. The Minister had finished, I presume. Yes. Yeah. Um and and you know, um possibly, you know, we need 200 amendments at report saying um and this has got to be done proportionately. I mean that that's literally where we're at. And anybody who has been near or close to a section 166, uh, review will know that there's an awful lot about it that seems awfully unfair that the, uh.
Regulator may not have its own expertise. And so it makes you pay to hire it in. And some of these things are things that should be done under the regulator's ordinary duties. And it does need to be looked at. Um, and some kind of, I think, as Lord Altrincham said, proper discipline put around it. And that's what we're, we're, we're asking for. Um I'm glad to hear that there's this target of cutting of 25%. Well we'll see how that goes.
But I just don't think that everything can be left as open as it is now, which is obviously a very repeated message that we've been delivering, but obviously, for now, I beg leave to withdraw my amendment.
Regulator may not have its own expertise. And so it makes you pay to hire it in. And some of these things are things that should be done under the regulator's ordinary duties. And it does need to be looked at. Um, and some kind of, I think, as Lord Altrincham said, proper discipline put around it. And that's what we're, we're, we're asking for. Um I'm glad to hear that there's this target of cutting of 25%. Well we'll see how that goes.
But I just don't think that everything can be left as open as it is now, which is obviously a very repeated message that we've been delivering, but obviously, for now, I beg leave to withdraw my amendment.
17:30
17:30
Speaker 9
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Speaker 9
I. Move amendment 119. I thank the noble Lord. Adding his name, he is unfortunately not able to be in the house today. The amendments in this group concern cost benefit panels which were created by the 2023 act in order to underpin the existing Fsma requirement for cost benefit analysis to be undertaken and published when rules are consulted on by the PRA and the FCA. The panels were created a little under two years ago, and they are doing good work, as their annual reports show, the Financial Services Regulation Committee has had a private briefing session with the chairs of the two panels, and we were impressed by the progress that they've made.
My amendment has two elements. The first element is that it requires the panels to keep under review the cumulative impact of rules, including those for which a cost benefit analysis was not required because the impact was expected to be less than the £10 million, which is the threshold used by both regulators in their cost benefit analysis. Policy statements. Track of the cumulative burden of regulation was a recommendation of the Financial Services Regulation Committee in its Growing Pains report on the secondary Competitiveness and Growth objective, and it was also one of the provisional recommendations of the FCA's panel in its first report for the period to the end of March 2025, the 2526 report is not out until next week, but I would be very surprised if it did not feature again.
Now, ideally, fisma should be changed so that the existing statutory requirement on the regulators, which is confined to cost benefit analysis on proposed new rules, is widened so that it would be the responsibility of the FCA and the PRA to keep the cumulative burden on regulatory activity under review. I've taken a slightly easier drafting route in my amendment, uh, to put a putting a slightly narrower, narrower, narrower requirement into the role of the panels. Um, the second element of my amendment concerns the issue of guidance. Um, by the FCA, which covers a little in our last committee day and.
The PRA um, and I start with a confession that subsection four of my amendment captures only one part of what I was trying to achieve. And I realized that a little bit too late when I was preparing my speaking notes, but it was too late to do anything about it. So I will speak to what I intended to cover in my amendment. Rather than what it in fact does cover. This is committee, after all. Um, at present the FCA and the PRA are required to issue guidance under sections one K of three I of Fsma, and the FCA has power to issue guidance under section 139 A.
If the FCA issues guidance under 139 A, it has to be consulted on. But no cost benefit analysis is required to be done or published and section four of my new clause in amendment 119 seeks to require cost benefit analysis for section one three a guidance. What I'd intended to do, but failed to do was to require cost benefit analysis for all guidance issued by both regulators. And so that is the difference. That is not reflected in the amendments. I'm well aware of the government's plan in clause 18 to remove all the guidance obligations pretty well from the regulators, as well as the requirement for consultation on the FCA's guidance under section 139 a so this part of my amendment is predicated on the government realising the folly of their ways in clause 18.
For the purposes of today's debate. Um, one of the findings of the FCA's cost benefit panel last year was the minimalist approach taken to cost benefit analysis by the FCA. They are only undertaken when required by statute, rather than being seen as good regulatory practice underpinning the detailed actions of regulation. The Financial Services and Regulation Committee, as part of our inquiry into the naming and shaming provisions by the FCA, which had a potentially very significant impact on certain firms, called for a cost benefit analysis.
But the FCA refused, saying they weren't required to do it by law. So attaching cost benefit analysis to pretty well everything that the regulators do, uh, is, I believe, necessary guidance would have been a good start. Um, but I believe that the, the changes that are required are even broader than I tried to achieve in my amendments. I know that my noble friend, Lady Neville-rolfe moment 132 in this group seeks to ride in the work of the FCA of the CBA panel. So I look forward to hearing what she has to say on that.
But with that I beg leave to move.
My amendment has two elements. The first element is that it requires the panels to keep under review the cumulative impact of rules, including those for which a cost benefit analysis was not required because the impact was expected to be less than the £10 million, which is the threshold used by both regulators in their cost benefit analysis. Policy statements. Track of the cumulative burden of regulation was a recommendation of the Financial Services Regulation Committee in its Growing Pains report on the secondary Competitiveness and Growth objective, and it was also one of the provisional recommendations of the FCA's panel in its first report for the period to the end of March 2025, the 2526 report is not out until next week, but I would be very surprised if it did not feature again.
Now, ideally, fisma should be changed so that the existing statutory requirement on the regulators, which is confined to cost benefit analysis on proposed new rules, is widened so that it would be the responsibility of the FCA and the PRA to keep the cumulative burden on regulatory activity under review. I've taken a slightly easier drafting route in my amendment, uh, to put a putting a slightly narrower, narrower, narrower requirement into the role of the panels. Um, the second element of my amendment concerns the issue of guidance. Um, by the FCA, which covers a little in our last committee day and.
The PRA um, and I start with a confession that subsection four of my amendment captures only one part of what I was trying to achieve. And I realized that a little bit too late when I was preparing my speaking notes, but it was too late to do anything about it. So I will speak to what I intended to cover in my amendment. Rather than what it in fact does cover. This is committee, after all. Um, at present the FCA and the PRA are required to issue guidance under sections one K of three I of Fsma, and the FCA has power to issue guidance under section 139 A.
If the FCA issues guidance under 139 A, it has to be consulted on. But no cost benefit analysis is required to be done or published and section four of my new clause in amendment 119 seeks to require cost benefit analysis for section one three a guidance. What I'd intended to do, but failed to do was to require cost benefit analysis for all guidance issued by both regulators. And so that is the difference. That is not reflected in the amendments. I'm well aware of the government's plan in clause 18 to remove all the guidance obligations pretty well from the regulators, as well as the requirement for consultation on the FCA's guidance under section 139 a so this part of my amendment is predicated on the government realising the folly of their ways in clause 18.
For the purposes of today's debate. Um, one of the findings of the FCA's cost benefit panel last year was the minimalist approach taken to cost benefit analysis by the FCA. They are only undertaken when required by statute, rather than being seen as good regulatory practice underpinning the detailed actions of regulation. The Financial Services and Regulation Committee, as part of our inquiry into the naming and shaming provisions by the FCA, which had a potentially very significant impact on certain firms, called for a cost benefit analysis.
But the FCA refused, saying they weren't required to do it by law. So attaching cost benefit analysis to pretty well everything that the regulators do, uh, is, I believe, necessary guidance would have been a good start. Um, but I believe that the, the changes that are required are even broader than I tried to achieve in my amendments. I know that my noble friend, Lady Neville-rolfe moment 132 in this group seeks to ride in the work of the FCA of the CBA panel. So I look forward to hearing what she has to say on that.
But with that I beg leave to move.
17:35
17:35
Speaker 12
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Speaker 12
A pleasure to follow, my noble friend Lady Noakes. And can I congratulate her on her purposive rather than literal interpretation of her amendment on the marshalled list?I support her amendment and everything that she said, and indeed the other amendments in this group. I speak to my amendment one, two, nine. Many noble Lords were in the debates that we had in Grand Committee for the 2023 FSM bill, as it was at that stage, and as Lady Noakes has rightly identified, the CBA panels have done very good work in their first couple of years of being brought into being my amendment one, two nine seeks to give them further clarity to assist them in doing that good work to ensure that they have the materials they need to do that work, and to bring an element more around public awareness of the work of the panels, which speaks to greater transparency, greater awareness and greater engagement, which can only help not only the work of the CBA panels, but the wider work of the regulators themselves.
I look forward to the minister's response.
I look forward to the minister's response.
17:37
Speaker 2
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Speaker 2
My Lords, I am grateful to the noble Lords who tabled amendments in this group which will take broadly the same approach to the cost benefit analysis panels. Underlying point addressed here is simple if we are serious about accountability, proportionality and reducing regulatory burden, then the panels had already exist to scrutinise the costs and benefits of regulation should be able to look at the full practical impact of what regulators do. Amendment 119 in the names in the names of my noble friend Lady Noakes and the noble Lord, Lord Vox, uh, raises the important issue of cumulative regulatory burden.
Amendment one two, nine in the name of my noble friend Lord Holmes would give the panels a broader and more visible role, including through regular impact assessments, stronger access to information, and greater transparency. Amendment 132. In the name of my noble friend Baroness L, Ralph and myself addresses a specific gap which is the use of guidance and supervisory practices which may have significant practical effects on firms, but which do not currently receive the same level of cost benefit scrutiny as formal rule changes. I want to start with the cumulative burden point, because it is extremely important.
Regulation is not experienced by firms as a series of isolated events. New rules come on top of existing ones guidance, reporting requirements, supervisory expectations, data requests. Dear CEO letters and enforcement signals individually, each new intervention may appear manageable, but collectively they can become very burdensome. The effect is not only on cost, it is on management time, operational complexity, legal advice, compliance, headcount systems changes, and reduced capacity to focus on customers innovation and growth. It therefore seems ineffective that the cost benefit process so often considers individual regulatory interventions without proper reference to the wider impact of the regulatory environment as a whole.
If the regulator is only required to ask whether one new proposal is proportionate in isolation, there is no real incentive to look back at legacy regulation and ask whether the total burden has become excessive. That is why there is real merit in allowing the cost benefit analysis panels to look more strategically at the total regulatory load. If we want regulators to support growth and competitiveness, they must not only justify new burdens, they must also have incentives to remove or reduce old ones. I turn to amendment one, three, two.
This amendment would extend the existing cost benefit analysis and consultation framework so that it applies not only to formal rules, but also to materially significant general guidance and general supervisory practices or policies that. Is important because in practice, guidance and supervisory expectations can have effects that are very close to rules. If such a measure has a material effect on regulated firms, it should not be able to escape scrutiny simply because it is not formally described as a rule. Our amendment would create a sensible check.
It would require the regulator to notify the relevant cost benefit analysis panel early, where guidance or supervisory practice may be materially significant, the panel could then give an opinion on whether the proposal is likely to have a material effect and, where appropriate, requests that a cost benefit analysis be carried out. If the regulator disagreed, it would still be able to proceed, but it would have to publish a statement explaining why it did not accept the panel's view. Alongside the panel's opinion. The purpose of this is to recognise that materially significant guidance and supervisory practices can impose real costs, and that those costs should be scrutinised, and this sort of reporting would provide valuable information to inform the work of our important committees, both in this House and in the other place.
I do not see why the government would resist this as a sensible expansion of the remit of the cost benefit analysis panels, particularly where the regulators they are overseeing have, have had and continues to have a substantial increase in their remits. Indeed, the more power we give regulators, the more important these mechanisms become. If more of the regulatory framework is to be made through rules, guidance and supervisory judgment rather than primary legislation, then Parliament must be confident that those that there is proper scrutiny of the cost and proportionality and the cumulative burden.
The cost benefit analysis panels are already part of that architecture. These amendments do not create an entirely new body. They strengthen the role of an existing mechanism and make it better able to do the job for which it was created. Could the minister explain why, if firms experience regulation cumulatively and guidance or supervisory practices can have a material effect, even where they are not formally binding, the cost benefit analysis panels should not have a broader remit to examine those wider burdens. I hope the minister will engage constructively with these amendments, and particularly with the principle behind amendment one, three, two.
Amendment one two, nine in the name of my noble friend Lord Holmes would give the panels a broader and more visible role, including through regular impact assessments, stronger access to information, and greater transparency. Amendment 132. In the name of my noble friend Baroness L, Ralph and myself addresses a specific gap which is the use of guidance and supervisory practices which may have significant practical effects on firms, but which do not currently receive the same level of cost benefit scrutiny as formal rule changes. I want to start with the cumulative burden point, because it is extremely important.
Regulation is not experienced by firms as a series of isolated events. New rules come on top of existing ones guidance, reporting requirements, supervisory expectations, data requests. Dear CEO letters and enforcement signals individually, each new intervention may appear manageable, but collectively they can become very burdensome. The effect is not only on cost, it is on management time, operational complexity, legal advice, compliance, headcount systems changes, and reduced capacity to focus on customers innovation and growth. It therefore seems ineffective that the cost benefit process so often considers individual regulatory interventions without proper reference to the wider impact of the regulatory environment as a whole.
If the regulator is only required to ask whether one new proposal is proportionate in isolation, there is no real incentive to look back at legacy regulation and ask whether the total burden has become excessive. That is why there is real merit in allowing the cost benefit analysis panels to look more strategically at the total regulatory load. If we want regulators to support growth and competitiveness, they must not only justify new burdens, they must also have incentives to remove or reduce old ones. I turn to amendment one, three, two.
This amendment would extend the existing cost benefit analysis and consultation framework so that it applies not only to formal rules, but also to materially significant general guidance and general supervisory practices or policies that. Is important because in practice, guidance and supervisory expectations can have effects that are very close to rules. If such a measure has a material effect on regulated firms, it should not be able to escape scrutiny simply because it is not formally described as a rule. Our amendment would create a sensible check.
It would require the regulator to notify the relevant cost benefit analysis panel early, where guidance or supervisory practice may be materially significant, the panel could then give an opinion on whether the proposal is likely to have a material effect and, where appropriate, requests that a cost benefit analysis be carried out. If the regulator disagreed, it would still be able to proceed, but it would have to publish a statement explaining why it did not accept the panel's view. Alongside the panel's opinion. The purpose of this is to recognise that materially significant guidance and supervisory practices can impose real costs, and that those costs should be scrutinised, and this sort of reporting would provide valuable information to inform the work of our important committees, both in this House and in the other place.
I do not see why the government would resist this as a sensible expansion of the remit of the cost benefit analysis panels, particularly where the regulators they are overseeing have, have had and continues to have a substantial increase in their remits. Indeed, the more power we give regulators, the more important these mechanisms become. If more of the regulatory framework is to be made through rules, guidance and supervisory judgment rather than primary legislation, then Parliament must be confident that those that there is proper scrutiny of the cost and proportionality and the cumulative burden.
The cost benefit analysis panels are already part of that architecture. These amendments do not create an entirely new body. They strengthen the role of an existing mechanism and make it better able to do the job for which it was created. Could the minister explain why, if firms experience regulation cumulatively and guidance or supervisory practices can have a material effect, even where they are not formally binding, the cost benefit analysis panels should not have a broader remit to examine those wider burdens. I hope the minister will engage constructively with these amendments, and particularly with the principle behind amendment one, three, two.
17:42
Speaker 8
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Speaker 8
My Lords, the government agrees that cost benefit analysis sits at the heart of good regulation and is committed to ensuring the FCA and PRA are transparent and rigorous when they assess the impact of the rules on firms and consumers. Fisma 2023 introduced requirements on regulators to publish a statement of policy for their approach to cost benefit analysis, or CBA, and required them to establish CBA panels. As you know, the CBA panels play an important role in the regulator's work, acting as a critical friend to provide advice to the regulators on their cbas with the aim of improving their methodology and approach to CBA, they are required to include experts working at authorised firms to ensure that the regulators benefit from the insights of firms as they develop cbas, and particularly to improve the awareness of the impacts of regulatory proposals on firms.
Amendments one, 19, one, two nine and 132 seek to build on these existing statutory requirements to prescribe in primary legislation the precise functions, working methods and outputs of the panels. The CPA panels are still relatively new institutions. The value lies partly in their ability to independently develop their own optimal working practices to identify where their scrutiny has the highest value, and to evolve as the regulatory landscape changes, locking in their mandate in such a detailed statutory provision removes the flexibility and ability to evolve that makes them effective, and many of the detail requirements set out here are already achieved as a result of the normal principles of public law.
For example, in order for the FCA to comply with its statutory requirement to establish and maintain a CPA panel with specified functions, it must ensure its panel has the appropriate information and data to perform those functions. A further explicit provision is unnecessary. Amendments 119 and 129 also seek to require the CPA panels to keep under review. The cumulative impact of rules the government understands the motivation behind this. No single CBA tells the whole story of the regulatory burden facing firms and the CBA panel itself has.
Noted that measuring cumulative costs is inherently challenging and would require substantial industry input and resource, and would be subject to constant revision given the pace of policy development, this could perversely add to burdens on firms by requiring an extensive data gathering exercise in order to understand the cumulative impact. Further, if we focus exclusively on the cumulative costs, this could lead to discounting the benefits associated with certain regulations. Whether those benefits accrue to consumers, wider society or firms themselves. The FCA is already making progress by reporting its cumulative regulatory impact through its secondary international competitiveness and growth objective metrics.
This includes the total value of the equivalent annual net direct cost to business across all cbas. For policy statements published each year, and the aggregate benefits of the policy work and the CBA panel is already helping to identify where costs may be disproportionate and could be reduced, which is targeted and effective. The government's view is that the right response is the FCA Emperor to build on these early steps, working with their expert panels to further understand and assess cumulative impact of regulation, not to mandate the work of the panels through legislation.
The reports of this.
Amendments one, 19, one, two nine and 132 seek to build on these existing statutory requirements to prescribe in primary legislation the precise functions, working methods and outputs of the panels. The CPA panels are still relatively new institutions. The value lies partly in their ability to independently develop their own optimal working practices to identify where their scrutiny has the highest value, and to evolve as the regulatory landscape changes, locking in their mandate in such a detailed statutory provision removes the flexibility and ability to evolve that makes them effective, and many of the detail requirements set out here are already achieved as a result of the normal principles of public law.
For example, in order for the FCA to comply with its statutory requirement to establish and maintain a CPA panel with specified functions, it must ensure its panel has the appropriate information and data to perform those functions. A further explicit provision is unnecessary. Amendments 119 and 129 also seek to require the CPA panels to keep under review. The cumulative impact of rules the government understands the motivation behind this. No single CBA tells the whole story of the regulatory burden facing firms and the CBA panel itself has.
Noted that measuring cumulative costs is inherently challenging and would require substantial industry input and resource, and would be subject to constant revision given the pace of policy development, this could perversely add to burdens on firms by requiring an extensive data gathering exercise in order to understand the cumulative impact. Further, if we focus exclusively on the cumulative costs, this could lead to discounting the benefits associated with certain regulations. Whether those benefits accrue to consumers, wider society or firms themselves. The FCA is already making progress by reporting its cumulative regulatory impact through its secondary international competitiveness and growth objective metrics.
This includes the total value of the equivalent annual net direct cost to business across all cbas. For policy statements published each year, and the aggregate benefits of the policy work and the CBA panel is already helping to identify where costs may be disproportionate and could be reduced, which is targeted and effective. The government's view is that the right response is the FCA Emperor to build on these early steps, working with their expert panels to further understand and assess cumulative impact of regulation, not to mandate the work of the panels through legislation.
The reports of this.
17:45
Speaker 9
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Speaker 9
Are what the FCA and the PRA are doing about cumulative burden. Are they focusing on the cumulative burdens of those rules which they have assessed a cost benefit analysis, or is it all of their activities?Because it's my understanding that they are both pretty clear that they're going to be using cost benefit analysis in the way that statute has prescribed. That is to say they they use materiality thresholds. So quite a lot are not required to be looked at at all. And then the whole range of their activities.
Which anything isn't. Rulemaking doesn't get assessed for cost benefit at all. So could I just be clear what the minister thinks that the regulators are doing.
Which anything isn't. Rulemaking doesn't get assessed for cost benefit at all. So could I just be clear what the minister thinks that the regulators are doing.
17:46
17:46
17:46
17:46
17:47
Speaker 8
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Speaker 8
I think is an important issue. But at the same time ensuring that the victors have the flexibility to make those decisions. So we are definitely in listening mode on this and there's much more discussion, I imagine, between committee and report. But I want to make sure I'm getting the right response to that point. Member 132 seeks to extend the CBA obligations to general guidance and supervisor practices. I now take that. That should mean all guidance.
The government recognises the concern that can be imposed on the guidance and supervisory practice as well, through formal rules. Is a. Rules which are already being made. In most cases, the underlying policy already have been subject to CBA through the rulemaking process requiring the CBA for such guidance to and requiring for such guidance or opportunity. In this case, the guidance is to help firms understand what the required, how they operate and where the guidance may result in the significant cost being incurred, the government notes, and welcomes the regulator's work on voluntary.
Prepare CBA for guidance. For example, the FCA's guidance on fair treatment for vulnerable customers. My Lords, most guidance issued by the regulators does not impose material incremental costs on firms obligating the regulator to undertake CBA on guidance would impose heavy weight analysis where it is less meaningful, it would introduce delays for guidance being issued, undermining the regulator's ability to respond quickly to market developments, risks or firms failures. The CBA panels are hugely valuable and still developing part of our legacy architecture. The right approach is to allow them to mature and to hold regulators publicly accountable for how they respond to input from the panels.
Rather than embed detailed operational rule book in primary legislation that will be inflexible and and the face in the face of ever evolving circumstances. I therefore ask for the amendments to be withdrawn.
The government recognises the concern that can be imposed on the guidance and supervisory practice as well, through formal rules. Is a. Rules which are already being made. In most cases, the underlying policy already have been subject to CBA through the rulemaking process requiring the CBA for such guidance to and requiring for such guidance or opportunity. In this case, the guidance is to help firms understand what the required, how they operate and where the guidance may result in the significant cost being incurred, the government notes, and welcomes the regulator's work on voluntary.
Prepare CBA for guidance. For example, the FCA's guidance on fair treatment for vulnerable customers. My Lords, most guidance issued by the regulators does not impose material incremental costs on firms obligating the regulator to undertake CBA on guidance would impose heavy weight analysis where it is less meaningful, it would introduce delays for guidance being issued, undermining the regulator's ability to respond quickly to market developments, risks or firms failures. The CBA panels are hugely valuable and still developing part of our legacy architecture. The right approach is to allow them to mature and to hold regulators publicly accountable for how they respond to input from the panels.
Rather than embed detailed operational rule book in primary legislation that will be inflexible and and the face in the face of ever evolving circumstances. I therefore ask for the amendments to be withdrawn.
17:48
Speaker 9
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Speaker 9
Minister for his reply. I don't think it's deals comprehensively with the nature of the problem. I don't think our amendments actually any of them, deal comprehensively with the nature of the problem, because I think the answer is not about loading extra things for the CBA panels to do. It's about looking again at what the obligations of the regulators are, which is not actually what we've put down in the amendments. We have had the debate about the the, the issue. Um, so I, I was pleased to hear the minister say that he was prepared to have discussions between now and report.
And I think this is an area where a number of us would like to get together with the minister and try and work out how we can make some improvements here, because the law, as it stands, is quite narrowly drawn. Um, and I don't think we can assume that the regulators will voluntarily expand that into the areas that some of us think should be covered. So I do think it is right that we look at the legal provisions, but perhaps not necessarily the ones covered by these amendments, so that, my Lords, I beg leave to withdraw.
And I think this is an area where a number of us would like to get together with the minister and try and work out how we can make some improvements here, because the law, as it stands, is quite narrowly drawn. Um, and I don't think we can assume that the regulators will voluntarily expand that into the areas that some of us think should be covered. So I do think it is right that we look at the legal provisions, but perhaps not necessarily the ones covered by these amendments, so that, my Lords, I beg leave to withdraw.
17:49
17:49
17:50
Speaker 14
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Speaker 14
My amendment about the impact of prudential capital requirements on lending capacity, on borrowing costs, on competition and on growth. Since tabling this amendment, His Majesty's Opposition have announced a new policy position in this area, which I shall speak to now. Our new policy is straightforward. The statutory basis for Post-financial crisis bank capital requirements should be amended so that UK regulators are required to take proper account of equivalent capital regimes in competitor jurisdictions and to identify, justify and where not justify, whether or not justified remove any UK specific overcapitalization relative to equivalent international regimes.
We want to consider the position in competitor jurisdictions to benchmark equivalent regimes to publish detailed analysis, and to explain clearly where the UK is imposing requirements above international standards, or above those imposed by comparable financial centres. This seems to be a basic requirement of a serious competitiveness agenda, in which the UK is particularly reliant because. Reliant. I mean, the thing is, the UK is the world's largest net exporter of financial services, whereas other comparable jurisdictions like the US rely much more on their domestic markets.
It's therefore an absolute imperative that we remain competitive on the world stage. Capital requirements matter, but there's also a cost capital held solely for statutory compliance is capital that cannot otherwise be used for supporting lending, investment, home ownership, business expansion or economic activity. The central question is therefore, not whether banks should hold capital. The question is whether the UK is requiring materially more capital than comparable jurisdictions, without a clear and evidence stability justification. If we are, then we are placing the UK at a competitive disadvantage.
Where constraining lending, where increasing borrowing costs, where making it harder for firms to access finance, where weakening growth. And we're doing it doing so in a way that may not be required by international standards or by the actual risk profile of the system. The analysis behind our policy suggests that the UK Capital Framework may materially exceed international Basel II requirements in competitive regimes. It's been suggested that the resulting constraint on UK banks lending and financing capacity could amount to £250 billion across overlapping capital requirements and 200 billion across leverage ratio rate constraints.
Of course, not every pound of capital released would automatically translate into new lending. We understand that some may be used for business investment dividends, buybacks or balance sheet strengthening, but the key point remains that capital deployed productively in the economy is preferable to capital trapped by regulatory framework that is more restrictive than it needs to be. Now, we appreciate that the government recognises this issue and indeed have moved a little on it already and have made the bank resolution regime more flexible, allowing the Bank of England to reduce or remove MRI, MRL.
For some firms where the new FCS recapitalisation recapitalisation mechanism can substitute for pre-positioned loss absorbing resources. Our proposal is a step to unlocking a lot more capital. We already require the PRA in some contexts to have regard to the UK's relative standing against competitor jurisdictions, but that duty is incomplete. It does not apply across the whole capital framework. In particular, it does not fully capture pillar two A, the PRA buffer or systemic buffers. The FPC has also produced useful comparative analysis, but there is not yet a binding requirement for regular systemic benchmarking against competitor jurisdictions.
Our proposed review is also about transparency. If regulators believe that the UK should impose higher requirements than comparable regimes, then parliament, industry and the public should be able to see the analysis behind that decision. And that is how we preserve independence while improving accountability. My Lords, the amendment before the committee is part of a wider argument. Prudential regulation must be understood not only through the lens of stability, but also through the lens of growth, lending and competitiveness. A capital frame that is more demanding than necessary does not make the economy stronger.
It may make it less dynamic, less competitive and less able to support households and businesses, especially SMEs and scale ups. I speak from experience as a director at a responsible and careful challenger bank, where the UK capital rules were a significant constraint on what we could do. They also consumed a great deal of management and board time. My Lords, I'd like the government to accept that the UK should not impose capital requirements above equivalent, international or competitive. Especially if there's no financial stability justification for doing so.
The first step is to undertake the necessary analysis. Ours is a serious and responsible policy. It preserves regulatory independence. It protects financial stability, but it also recognises that excessive or unjustified capital requirements carry real economic costs. If we want growth, if we want competitiveness, if we want banks to support businesses and home buyers, then we need a capital framework that is robust but not over restrictive. That is the balance that our policy seeks to strike. I look forward to the minister's response.
To insert the new clause as printed on the marshalled list.
We want to consider the position in competitor jurisdictions to benchmark equivalent regimes to publish detailed analysis, and to explain clearly where the UK is imposing requirements above international standards, or above those imposed by comparable financial centres. This seems to be a basic requirement of a serious competitiveness agenda, in which the UK is particularly reliant because. Reliant. I mean, the thing is, the UK is the world's largest net exporter of financial services, whereas other comparable jurisdictions like the US rely much more on their domestic markets.
It's therefore an absolute imperative that we remain competitive on the world stage. Capital requirements matter, but there's also a cost capital held solely for statutory compliance is capital that cannot otherwise be used for supporting lending, investment, home ownership, business expansion or economic activity. The central question is therefore, not whether banks should hold capital. The question is whether the UK is requiring materially more capital than comparable jurisdictions, without a clear and evidence stability justification. If we are, then we are placing the UK at a competitive disadvantage.
Where constraining lending, where increasing borrowing costs, where making it harder for firms to access finance, where weakening growth. And we're doing it doing so in a way that may not be required by international standards or by the actual risk profile of the system. The analysis behind our policy suggests that the UK Capital Framework may materially exceed international Basel II requirements in competitive regimes. It's been suggested that the resulting constraint on UK banks lending and financing capacity could amount to £250 billion across overlapping capital requirements and 200 billion across leverage ratio rate constraints.
Of course, not every pound of capital released would automatically translate into new lending. We understand that some may be used for business investment dividends, buybacks or balance sheet strengthening, but the key point remains that capital deployed productively in the economy is preferable to capital trapped by regulatory framework that is more restrictive than it needs to be. Now, we appreciate that the government recognises this issue and indeed have moved a little on it already and have made the bank resolution regime more flexible, allowing the Bank of England to reduce or remove MRI, MRL.
For some firms where the new FCS recapitalisation recapitalisation mechanism can substitute for pre-positioned loss absorbing resources. Our proposal is a step to unlocking a lot more capital. We already require the PRA in some contexts to have regard to the UK's relative standing against competitor jurisdictions, but that duty is incomplete. It does not apply across the whole capital framework. In particular, it does not fully capture pillar two A, the PRA buffer or systemic buffers. The FPC has also produced useful comparative analysis, but there is not yet a binding requirement for regular systemic benchmarking against competitor jurisdictions.
Our proposed review is also about transparency. If regulators believe that the UK should impose higher requirements than comparable regimes, then parliament, industry and the public should be able to see the analysis behind that decision. And that is how we preserve independence while improving accountability. My Lords, the amendment before the committee is part of a wider argument. Prudential regulation must be understood not only through the lens of stability, but also through the lens of growth, lending and competitiveness. A capital frame that is more demanding than necessary does not make the economy stronger.
It may make it less dynamic, less competitive and less able to support households and businesses, especially SMEs and scale ups. I speak from experience as a director at a responsible and careful challenger bank, where the UK capital rules were a significant constraint on what we could do. They also consumed a great deal of management and board time. My Lords, I'd like the government to accept that the UK should not impose capital requirements above equivalent, international or competitive. Especially if there's no financial stability justification for doing so.
The first step is to undertake the necessary analysis. Ours is a serious and responsible policy. It preserves regulatory independence. It protects financial stability, but it also recognises that excessive or unjustified capital requirements carry real economic costs. If we want growth, if we want competitiveness, if we want banks to support businesses and home buyers, then we need a capital framework that is robust but not over restrictive. That is the balance that our policy seeks to strike. I look forward to the minister's response.
To insert the new clause as printed on the marshalled list.
17:55
Speaker 15
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Speaker 15
To. Amendment, which is, say, in our papers and the speech given by the noble Baroness Neville-rolfe, I thought were sensible in terms of making us think about bank capital requirements and whether we've got them right. Um a and as she says, the first step is undertaking the proper analysis to be able to work out whether that happens. I noted she a caveated everything that they may not be right, they may be right, but they may not be right. I mean, look, my worry in this is that that is a very sensible position to take.
But it didn't sound like the position that was being taken by the leader of the opposition when she made her speech last week, saying that she was going to reduce bank capital requirements and to release 450 billion in capital. Wow. Where did that come from?That calculation come from that hundreds of billions were sitting idly on bank balance sheets. Really?Where do those hundreds of billions come from?And if we're going to release 450 billion, what is the calculation in the reduction of bank capital requirements that sits behind that calculation?So while I feel quite supportive of the issues that the noble Baroness Neville Rolfe was raising, we do need to be sure.
I hope she'll agree that we don't jump the gun on this.
But it didn't sound like the position that was being taken by the leader of the opposition when she made her speech last week, saying that she was going to reduce bank capital requirements and to release 450 billion in capital. Wow. Where did that come from?That calculation come from that hundreds of billions were sitting idly on bank balance sheets. Really?Where do those hundreds of billions come from?And if we're going to release 450 billion, what is the calculation in the reduction of bank capital requirements that sits behind that calculation?So while I feel quite supportive of the issues that the noble Baroness Neville Rolfe was raising, we do need to be sure.
I hope she'll agree that we don't jump the gun on this.
17:57
17:57
Speaker 6
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Speaker 6
Can I just start by saying I thought Lord Pitt-watson was rather generous that in his comments that this is. I mean, it's sometimes it's important to to speak truth to power. This is a lowest common denominator strategy. And we've heard it before from the conservatives in its repeated with enthusiasm again today, my Lords, I heard so many of these arguments back in the early 2000, and it contributed and was a fundamental part of the reasons why we ended up with such a major financial crash, with consequences which echo through to this day, that have had huge, both financial and political consequences.
But, um, I could see the argument being made for we, we need to sit, you know, we need to take proper care that we're looking at capital requirements, that we need to assess them. We need to look at the consequences that undoing that on a regular basis, I think is already part of the programme, but it certainly would always need to be part of the programme. But I notice in line seven the phrases, while also considering financial stability. Now, if ever there was a phrase lowering the significance of the primary objective with which we task the Bank of England, that phrase does it merely a consideration of financial stability.
I was very afraid when the growth and productivity objectives were introduced as secondary objectives that very quickly, the attraction of the phrases that would cause them to cannibalize the primary objective, and I think this is a very good example of the way in which that, frankly, has been happening. That's my Lords, that's a I have seen across so many of the measures in this bill a step away from the precautionary principle in this particular case, of looking for appropriate capital requirements, whether it be in equities or in MRL, that's a.
A to a notion that we deal with all of this through a resolution regime that. And I am very suspicious of resolution regimes, and I am very suspicious of. After the effect that after the fact, uh, ways of, of ensuring financial stability, I would much rather we didn't have a bank failure that to then attempt to remedy through the use of. I say that a something like. MRL which I don't think will ever work, that's because frankly, MRL is held by insurance companies and pension funds, and we are never going to wreck those in order to save a major bank.
That's a. But that's. I am very concerned with with this change in approach that we're hearing that today from from the Conservative Party. That's. My Lord. Very often the argument is that this is going to release new money that will flood into SMEs. I've argued before this House, and I continue to argue that the reason why the high street banks do not lend extensively to SMEs is not because they don't have the money on their books.
In fact, they will say to you, we indeed have money available. It's because the way in which they now operate after the closing, that local banks, changing the role of their managers so that essentially they work with distant data, not with personal knowledge. That's a small banking institutions. It's those behavioural and operational reasons that have essentially created that, uh, that the, the, the, the, the problem that so many small businesses face in actually accessing funds. It's not because the banks face capital requirements that somehow make it very difficult for them to lend that it's that decision that they've made internally.
Um, my Lords, that I'm not sure that I have much more to add to this than to say I do regret it, but at least it's a very honest amendment, making it very clear. Making it very clear that this is a move away from treating financial stability as a core requirement for our country. That is particularly significant because, as we know, the financial sector makes up something like 1011 people argue 12% of our GDP. If you look at the United States or you look at other major countries that we label as competitors, for most of them, this is a relative financial sector is a relatively small part of their GDP.
So when it goes wrong for us, as it did in 2008, the consequences are far more severe. And I'm always impressed that a crisis which began in America and was actually very much driven by a series of American, both commercial and investment banks, ended up costing the British economy and the British financial sector far more than it ever did that in the United States. But in the United States, it was a relatively small part of their GDP, which was impacted in our country. It was a very significant part of the GDP that was impacted.
So I think we should be exceedingly careful when we see phrases that say that considering financial stability, obviously it no longer is a primary objective.
But, um, I could see the argument being made for we, we need to sit, you know, we need to take proper care that we're looking at capital requirements, that we need to assess them. We need to look at the consequences that undoing that on a regular basis, I think is already part of the programme, but it certainly would always need to be part of the programme. But I notice in line seven the phrases, while also considering financial stability. Now, if ever there was a phrase lowering the significance of the primary objective with which we task the Bank of England, that phrase does it merely a consideration of financial stability.
I was very afraid when the growth and productivity objectives were introduced as secondary objectives that very quickly, the attraction of the phrases that would cause them to cannibalize the primary objective, and I think this is a very good example of the way in which that, frankly, has been happening. That's my Lords, that's a I have seen across so many of the measures in this bill a step away from the precautionary principle in this particular case, of looking for appropriate capital requirements, whether it be in equities or in MRL, that's a.
A to a notion that we deal with all of this through a resolution regime that. And I am very suspicious of resolution regimes, and I am very suspicious of. After the effect that after the fact, uh, ways of, of ensuring financial stability, I would much rather we didn't have a bank failure that to then attempt to remedy through the use of. I say that a something like. MRL which I don't think will ever work, that's because frankly, MRL is held by insurance companies and pension funds, and we are never going to wreck those in order to save a major bank.
That's a. But that's. I am very concerned with with this change in approach that we're hearing that today from from the Conservative Party. That's. My Lord. Very often the argument is that this is going to release new money that will flood into SMEs. I've argued before this House, and I continue to argue that the reason why the high street banks do not lend extensively to SMEs is not because they don't have the money on their books.
In fact, they will say to you, we indeed have money available. It's because the way in which they now operate after the closing, that local banks, changing the role of their managers so that essentially they work with distant data, not with personal knowledge. That's a small banking institutions. It's those behavioural and operational reasons that have essentially created that, uh, that the, the, the, the, the problem that so many small businesses face in actually accessing funds. It's not because the banks face capital requirements that somehow make it very difficult for them to lend that it's that decision that they've made internally.
Um, my Lords, that I'm not sure that I have much more to add to this than to say I do regret it, but at least it's a very honest amendment, making it very clear. Making it very clear that this is a move away from treating financial stability as a core requirement for our country. That is particularly significant because, as we know, the financial sector makes up something like 1011 people argue 12% of our GDP. If you look at the United States or you look at other major countries that we label as competitors, for most of them, this is a relative financial sector is a relatively small part of their GDP.
So when it goes wrong for us, as it did in 2008, the consequences are far more severe. And I'm always impressed that a crisis which began in America and was actually very much driven by a series of American, both commercial and investment banks, ended up costing the British economy and the British financial sector far more than it ever did that in the United States. But in the United States, it was a relatively small part of their GDP, which was impacted in our country. It was a very significant part of the GDP that was impacted.
So I think we should be exceedingly careful when we see phrases that say that considering financial stability, obviously it no longer is a primary objective.
18:02
Speaker 3
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Speaker 3
Response to the. Again, drawing your attention to my entry as an adviser and shareholder returns and I just want to make three quick points. The first is. I overwhelmingly agree with the thrust of this amendment. I do think analysis on this critical issue is very, very important for the reasons that the noble Lord, Lord Robertson, has said he will know much better than I will about how notoriously difficult it is, to compare the regimes of the United States, the UK and the EU.
And I think if your noble Lords are interested in this. If you can't sleep, I would very much advise you to look online at recent reports that have come out some in the Financial Times. I think it's a report by a law firm called Alvarez and Marshall pointing to the impact of the US's current moves in terms of prudential regulation and how that has unleashed considerable amount of bank capital. Meanwhile, the ECB has pushed back with its own analysis showing actually, the US and the EU were broadly on par.
So you can't compare the others. The European Banking Federation, I think, have recently come out with its own analysis of this. A lot of this depends on as far as I can see, and I stand to be corrected by others. How you are measuring not just the regulatory and the prudential aspects of this, but the supervisory actions and how supervisors can put buffer upon buffer depending on the banks, the g-sibs, and which who you are looking within the perimeter. So this analysis will be very important and it could be very, very worthwhile, but it has to try to overcome that enormous problem.
And it is a problem which no matter how you bridge it, it exists. So I think that's the first point. Second point really flowing from that is the more I look at this, the more I think that it is the objectives. And indeed underlying that, the culture of the regulators and supervisors that seem to be almost more important here. And when you look at the difference in terms of regulatory approach, be it the Singaporeans or the US, it is actually largely a matter of the culture within those bodies and where they are coming from.
And the messages that the politicians are sending them. And I'll take just one example, just to pick up on the noble Baroness, Baroness Kramer. We are disagree on this. I know I'm very interested in the US approach. The Secretary Bessant in the US Treasury gave a speech about eight months ago where he told the Financial Stability Oversight Council, which is a key body that brings together regulators and supervisors, that low growth was in itself a financial stability risk. Let me repeat that low growth with a financial stability risk, and that they needed to act accordingly.
Now, that sent a signal, as far as I can tell, throughout the entire regulatory and supervisory environment in Washington and the States, and they have acted accordingly. And actually, it's that that has really had more of an impact than necessarily what the capital requirements are for various bodies. The final point is on SMEs. And again, I think the noble Baroness again, we won't have a long debate about this. I would make one point here about the demand from SMEs for lending, and we can debate what the role is on capital requirements.
I think there probably is more of a role and more of an impact in terms of capital requirements on bank lending than maybe the Baroness does. But where I think we would probably agree is that it's the overall general environment in which SMEs are operating that will stimulate demand for lending. If you have a government that is piling on pressure after pressure on SMEs to spend more, to be taxed more in terms of employment, to have more regulation, etc., etc., this will dent their demand for lending.
This will dent their demand for more investment. That is what will happen. And therefore, I think it is very important that we look at that issue per se in the round, and that I will sit down.
And I think if your noble Lords are interested in this. If you can't sleep, I would very much advise you to look online at recent reports that have come out some in the Financial Times. I think it's a report by a law firm called Alvarez and Marshall pointing to the impact of the US's current moves in terms of prudential regulation and how that has unleashed considerable amount of bank capital. Meanwhile, the ECB has pushed back with its own analysis showing actually, the US and the EU were broadly on par.
So you can't compare the others. The European Banking Federation, I think, have recently come out with its own analysis of this. A lot of this depends on as far as I can see, and I stand to be corrected by others. How you are measuring not just the regulatory and the prudential aspects of this, but the supervisory actions and how supervisors can put buffer upon buffer depending on the banks, the g-sibs, and which who you are looking within the perimeter. So this analysis will be very important and it could be very, very worthwhile, but it has to try to overcome that enormous problem.
And it is a problem which no matter how you bridge it, it exists. So I think that's the first point. Second point really flowing from that is the more I look at this, the more I think that it is the objectives. And indeed underlying that, the culture of the regulators and supervisors that seem to be almost more important here. And when you look at the difference in terms of regulatory approach, be it the Singaporeans or the US, it is actually largely a matter of the culture within those bodies and where they are coming from.
And the messages that the politicians are sending them. And I'll take just one example, just to pick up on the noble Baroness, Baroness Kramer. We are disagree on this. I know I'm very interested in the US approach. The Secretary Bessant in the US Treasury gave a speech about eight months ago where he told the Financial Stability Oversight Council, which is a key body that brings together regulators and supervisors, that low growth was in itself a financial stability risk. Let me repeat that low growth with a financial stability risk, and that they needed to act accordingly.
Now, that sent a signal, as far as I can tell, throughout the entire regulatory and supervisory environment in Washington and the States, and they have acted accordingly. And actually, it's that that has really had more of an impact than necessarily what the capital requirements are for various bodies. The final point is on SMEs. And again, I think the noble Baroness again, we won't have a long debate about this. I would make one point here about the demand from SMEs for lending, and we can debate what the role is on capital requirements.
I think there probably is more of a role and more of an impact in terms of capital requirements on bank lending than maybe the Baroness does. But where I think we would probably agree is that it's the overall general environment in which SMEs are operating that will stimulate demand for lending. If you have a government that is piling on pressure after pressure on SMEs to spend more, to be taxed more in terms of employment, to have more regulation, etc., etc., this will dent their demand for lending.
This will dent their demand for more investment. That is what will happen. And therefore, I think it is very important that we look at that issue per se in the round, and that I will sit down.
18:06
18:06
Speaker 6
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Speaker 6
Right to do. I have I probably do have a right to reply because it's committee, isn't it?I can speak more than once. Can I just say to the the. I think Lord bridges and I often find a whole lot of common ground that I. And I agree completely that the environment in which SMEs are operating is an extremely difficult one. But if he will go back and look at numbers that are produced by the Federation of Small Business, he will actually find that there is very significant demand for borrowing that is there, and that is continuously turned down and rejected.
So I just want to make sure that he understands that side of the picture. That and I do find it. I have no problem with people going away, as I said, and doing, you know, looking, looking and doing proper analysis and trying to understand exactly what the picture is. But I do think there's another side to that, and that isn't included in this amendment. If I was amending it, I would add that line, which is I do think we need an analysis of the cumulative risk that has been reduced, reintroduced into the financial sector by everything from solvency UK to a whole range of different.
I think I listed them once in a second reading speech, and it went on for nearly a page and a half of changes that had been made that reintroduced risk into the financial sector, and measuring that cumulative risk, I think, would be extremely instructive to us when we start to look at issues like financial stability. But for goodness sake, if we're reducing financial stability to no more than a have rigor, which is exactly what this amendment does, we are stepping into really dangerous territory.
So I just want to make sure that he understands that side of the picture. That and I do find it. I have no problem with people going away, as I said, and doing, you know, looking, looking and doing proper analysis and trying to understand exactly what the picture is. But I do think there's another side to that, and that isn't included in this amendment. If I was amending it, I would add that line, which is I do think we need an analysis of the cumulative risk that has been reduced, reintroduced into the financial sector by everything from solvency UK to a whole range of different.
I think I listed them once in a second reading speech, and it went on for nearly a page and a half of changes that had been made that reintroduced risk into the financial sector, and measuring that cumulative risk, I think, would be extremely instructive to us when we start to look at issues like financial stability. But for goodness sake, if we're reducing financial stability to no more than a have rigor, which is exactly what this amendment does, we are stepping into really dangerous territory.
18:08
Speaker 8
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Speaker 8
My Lord, I'm grateful for the noble Baroness for raising this important issue. Prudential capital requirements play a vital role in ensuring that our banking system remains resilient, supports sustainable lending and underpins confidence in the wider economy. We have had a range of views on capital requirements. Today, the UK's framework is internationally respected and has been carefully designed to balance growth with financial stability. This amendment would require HMM Treasury to publish within 12 months of report reviewing the impact of capital requirements on lending, borrowing costs, competition and economic growth alongside financial stability.
Drawing on consultation with the Bank of England and the regulators, I genuinely recognise the intent behind this amendment. However, the amendment isn't necessary as the Financial Policy Committee or FPC is. Already undertaking a comprehensive review of the UK's Bank capital framework through precisely the lens the amendment seeks, including the impact on lending growth and financial stability. The FPA, the.
Drawing on consultation with the Bank of England and the regulators, I genuinely recognise the intent behind this amendment. However, the amendment isn't necessary as the Financial Policy Committee or FPC is. Already undertaking a comprehensive review of the UK's Bank capital framework through precisely the lens the amendment seeks, including the impact on lending growth and financial stability. The FPA, the.
18:09
18:09
Speaker 8
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Speaker 8
No, no sorry. The um the FPC is the. FPC has been tasked by Parliament with responsibility for the stability of the financial system. Overall, they are the right body to carry out this review, which needs to balance the economic impacts of capital requirements against the protections that they may offer. Getting the balance right in the prudential framework for capital. Sorry, getting the balance right in the Prudential framework and bank capital requirements has been a key priority for the Chancellor and an issue she discusses frequently frequently with industry.
The noble lady Baroness never raised the issue of international comparisons. The FPC set out its assessment of international comparisons when it reviewed this in December 2025. They found that the requirements are broadly in line with international comparators in some areas, like leverage requirements on domestic firms. The FPC noted that the requirements may be higher. However, I can assure her that the noted leverage as an area for further reform it plans to cover in next week's update, as my Lords may also be aware, the Chancellor set out an annual remit and recommendations for the FPC.
The most recent letter was sent last November and sets out clearly that the UK must regulate for both risk and growth and remain competitive in a changing world. And part of that, the Chancellor recommended the FPC review should ensure the UK's capital framework strikes the optimal balance to deliver resilience, growth and competitiveness. I would like to reassure the noble Baroness that the FPC understands this balance. In December 2025, the assessment the Financial Policy Committee reassessed the optimal level of system wide capital, reducing its benchmark from 14% to 13% of risk weighted assets.
For this reasons, while I understand the objective, this amendment is unnecessary and risks undermining the clarity and credibility of the current regime, and I recognise that we will come back to this discussion over the coming weeks. I therefore ask the noble Baroness to withdraw this amendment.
The noble lady Baroness never raised the issue of international comparisons. The FPC set out its assessment of international comparisons when it reviewed this in December 2025. They found that the requirements are broadly in line with international comparators in some areas, like leverage requirements on domestic firms. The FPC noted that the requirements may be higher. However, I can assure her that the noted leverage as an area for further reform it plans to cover in next week's update, as my Lords may also be aware, the Chancellor set out an annual remit and recommendations for the FPC.
The most recent letter was sent last November and sets out clearly that the UK must regulate for both risk and growth and remain competitive in a changing world. And part of that, the Chancellor recommended the FPC review should ensure the UK's capital framework strikes the optimal balance to deliver resilience, growth and competitiveness. I would like to reassure the noble Baroness that the FPC understands this balance. In December 2025, the assessment the Financial Policy Committee reassessed the optimal level of system wide capital, reducing its benchmark from 14% to 13% of risk weighted assets.
For this reasons, while I understand the objective, this amendment is unnecessary and risks undermining the clarity and credibility of the current regime, and I recognise that we will come back to this discussion over the coming weeks. I therefore ask the noble Baroness to withdraw this amendment.
18:11
Speaker 14
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Speaker 14
I'm grateful to those who have contributed to this debate and to the Minister for his response, and to the noble Lord Pitt-watson, for being for being generally support, supportive and. And I think explaining that this is a matter of judgment. And of course, we do now have the resolution regime. So things have changed. And as I noted in my introduction, the, you know, some changes in this direction have already been made. And indeed, I note the minister's summary of what is being done by the PRA and FPC.
And I want to look at that report. Um and I'm sure we'll come back to this at that point, as he said, I mean. Contrary to what the noble lady lady, Lady Cramer's. Suggested her suspicions, we recognise the importance of financial stability and why capital requirements exist. And indeed, that's why in my amendment, I actually mention financial stability. It was meant to be a positive. And I think that perhaps she's overinfluenced by past failures. And of course they took place before we had the resolution regime.
My concern is that current requirements go further than is necessary or further than the equivalent regimes in competitor jurisdictions without proper justification. And as my noble friend Lord bridges said, there does seem to be a gap. And we do have a different regulatory culture, and that may be having an effect, he said, quoting, I'm not sure who, but he quoted low growth is also bad for financial stability, and I feel that strongly. The cost is felt in lending capacity, in borrowing costs, in competition, in investment and ultimately in growth.
And it's also failed in the UK's ability to remain one of the world's leading financial centres. And I want to make clear that I and my party support the UK financial services sector. We want the UK to be the place where firms choose to invest, lend, innovate and grow and that's especially true for SMEs, which have been referenced in discussion as, as I'd like to repeat, is a serious and responsible approach. It protects independence, but it also strengthens accountability. It preserves resilience, but it recognises that unnecessary overcapitalization can constrain productive activity in the wider UK economy.
And given the objective of growth, which I think is shared across the political divide, um, we hope that there will be further consideration to what is the right way forward. But for now I beg leave to withdraw the amendment.
And I want to look at that report. Um and I'm sure we'll come back to this at that point, as he said, I mean. Contrary to what the noble lady lady, Lady Cramer's. Suggested her suspicions, we recognise the importance of financial stability and why capital requirements exist. And indeed, that's why in my amendment, I actually mention financial stability. It was meant to be a positive. And I think that perhaps she's overinfluenced by past failures. And of course they took place before we had the resolution regime.
My concern is that current requirements go further than is necessary or further than the equivalent regimes in competitor jurisdictions without proper justification. And as my noble friend Lord bridges said, there does seem to be a gap. And we do have a different regulatory culture, and that may be having an effect, he said, quoting, I'm not sure who, but he quoted low growth is also bad for financial stability, and I feel that strongly. The cost is felt in lending capacity, in borrowing costs, in competition, in investment and ultimately in growth.
And it's also failed in the UK's ability to remain one of the world's leading financial centres. And I want to make clear that I and my party support the UK financial services sector. We want the UK to be the place where firms choose to invest, lend, innovate and grow and that's especially true for SMEs, which have been referenced in discussion as, as I'd like to repeat, is a serious and responsible approach. It protects independence, but it also strengthens accountability. It preserves resilience, but it recognises that unnecessary overcapitalization can constrain productive activity in the wider UK economy.
And given the objective of growth, which I think is shared across the political divide, um, we hope that there will be further consideration to what is the right way forward. But for now I beg leave to withdraw the amendment.
18:14
18:14
Speaker 7
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Speaker 7
Um, my Lords, I'm speaking to my amendment 121 and I also support Lord bridge's amendments in this group. My proposal is for an independent oversight mechanism for our financial services regulators. It builds on the ideas that are in section one S of Fsma 2000, under which the Treasury can require an independent review. This is usually triggered after a significant event as the most recent the Gloucester Review, published in December 2020, was triggered after the collapse of London Capital and Finance. I propose, in addition to having that ad hoc facility, that there are periodic independent reviews by a panel of independent persons, I suggest at least three people because I envisage this would be a larger matter than an incident led type of inquiry.
I first proposed this in the 2021 Financial Services and Markets Bill, and in the government consultation on the Future financial framework. Um, is it worth speaking if the minister's not here?Um, you all right?Okay. Shortly after my proposal for.
I first proposed this in the 2021 Financial Services and Markets Bill, and in the government consultation on the Future financial framework. Um, is it worth speaking if the minister's not here?Um, you all right?Okay. Shortly after my proposal for.
18:16
18:16
Speaker 7
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Speaker 7
Shortly after my proposal first surfaced, I was contacted by people involved in the Australian Royal Commission on Financial Services because they had noted that I reached the same conclusion as them, that it was too big a job for Parliament to do by itself, given everything else that national parliaments have to do. Australia introduced two yearly reviews, and Australia is not the only country to have independent review. A similar arrangement now exists in New Zealand and in the US. All regulators come under scrutiny by the Government Accountability Office one.
Advantage of my proposal is that it follows a path we understand from section one reviews, and it could be done quickly, maybe as an interim solution. For example, until an office such as that proposed by the noble Lord bridges could be formed. By having regular reviews, there would also be the possibility of oversight of progress after the Gloucester Review, Dame Elizabeth Gloster told the Treasury Committee we are left to hope that the regulator implements regulations. Hope is not a system. So why did I propose it?Well, it was the point at which the government was looking at the post-Brexit future financial framework and has already, as has already been rehearsed in this committee, this Parliament does not have the structure and focus that was available in the EU Parliament.
Having been chair of the Econ Committee dealing with all the Post-financial crisis legislation, I can safely say that I know what it takes and it isn't easy, and that is another reason why I am not recommending a continuous process. And in the UK there will be more to it because a lot of the issues arise from the execution. The post rulemaking, supervision. So Brexit created the first need, which we eventually tried to patch with a new committee. And you have heard from members of that committee and also from the report of the Industry and Regulators Committee in its report, who regulates the regulator, that the overwhelming conclusion now is that significant independent review is needed.
Now we have a new second need due to the changes in this bill, which remove the. Have regards away from the operational effectiveness and into a five year strategy. How is that to be monitored?Is there any intention at all for follow through the changes make the already difficult acquisition of information even harder, and there are also several things that the minister has said in his replies that ring alarm bells showing absolutely the need for scrutiny. We need it because financial services, regulation and supervision is too important to allow issues to creep up all the more so in a higher risk environment.
LCF type regulator risk needs even more guarding against, the minister has said. Proportionality will now be tested only at the strategic level. My Lords, let us be clear testing proportionality only at the strategic level is barely a nudge. Rule level and supervisory level proportionality is the real test and that has been put out of reach of accountability, as there is nothing to measure against. Indeed, they are not even looking at it. Apart from every five years from that, it's pretty clear that substantial follow ups on the five year strategy are necessary.
The minister says annual reports and remit letters provide accountability. Some substantial upgrading and interrogation of those is needed. And what actionable event flows from an annual report?It is judge, jury and public relations all in one place. Does the minister genuinely believe that an example here and there constitutes accountability?The minister argues that principles remain central, yet they're being moved into a document that cannot be enforced by the courts and cannot be used to test a specific rule or supervisory action.
They apply. They are applied every five years when the future cannot really be seen. This is not lip service, it's just print service. And as Baroness Kramer has been showing us from the current version of the five year report, there is little substance. Will we get something detailed for every category and size of financial market business?The government's rhetoric suggests that reducing the burden of accountability will unleash a more dynamic and agile regulator, but that does not demonstrate the stability, which is a prerequisite for competitiveness, stability, stability.
Is the best friend of a competitive financial sector, and whether you cite centuries of institutional experience or the second law of thermodynamics, thermodynamics left to their own devices, systems corrupt or tend to disorder, someone has to be on their case. But what the government is doing is making the regulators far more insulated from the procedures that keep them on their toes, avoiding the burden of accountability today is like banking a much larger, more expensive crisis for tomorrow. Additional periodic or permanent oversight has become even more necessary.
I beg to move.
Advantage of my proposal is that it follows a path we understand from section one reviews, and it could be done quickly, maybe as an interim solution. For example, until an office such as that proposed by the noble Lord bridges could be formed. By having regular reviews, there would also be the possibility of oversight of progress after the Gloucester Review, Dame Elizabeth Gloster told the Treasury Committee we are left to hope that the regulator implements regulations. Hope is not a system. So why did I propose it?Well, it was the point at which the government was looking at the post-Brexit future financial framework and has already, as has already been rehearsed in this committee, this Parliament does not have the structure and focus that was available in the EU Parliament.
Having been chair of the Econ Committee dealing with all the Post-financial crisis legislation, I can safely say that I know what it takes and it isn't easy, and that is another reason why I am not recommending a continuous process. And in the UK there will be more to it because a lot of the issues arise from the execution. The post rulemaking, supervision. So Brexit created the first need, which we eventually tried to patch with a new committee. And you have heard from members of that committee and also from the report of the Industry and Regulators Committee in its report, who regulates the regulator, that the overwhelming conclusion now is that significant independent review is needed.
Now we have a new second need due to the changes in this bill, which remove the. Have regards away from the operational effectiveness and into a five year strategy. How is that to be monitored?Is there any intention at all for follow through the changes make the already difficult acquisition of information even harder, and there are also several things that the minister has said in his replies that ring alarm bells showing absolutely the need for scrutiny. We need it because financial services, regulation and supervision is too important to allow issues to creep up all the more so in a higher risk environment.
LCF type regulator risk needs even more guarding against, the minister has said. Proportionality will now be tested only at the strategic level. My Lords, let us be clear testing proportionality only at the strategic level is barely a nudge. Rule level and supervisory level proportionality is the real test and that has been put out of reach of accountability, as there is nothing to measure against. Indeed, they are not even looking at it. Apart from every five years from that, it's pretty clear that substantial follow ups on the five year strategy are necessary.
The minister says annual reports and remit letters provide accountability. Some substantial upgrading and interrogation of those is needed. And what actionable event flows from an annual report?It is judge, jury and public relations all in one place. Does the minister genuinely believe that an example here and there constitutes accountability?The minister argues that principles remain central, yet they're being moved into a document that cannot be enforced by the courts and cannot be used to test a specific rule or supervisory action.
They apply. They are applied every five years when the future cannot really be seen. This is not lip service, it's just print service. And as Baroness Kramer has been showing us from the current version of the five year report, there is little substance. Will we get something detailed for every category and size of financial market business?The government's rhetoric suggests that reducing the burden of accountability will unleash a more dynamic and agile regulator, but that does not demonstrate the stability, which is a prerequisite for competitiveness, stability, stability.
Is the best friend of a competitive financial sector, and whether you cite centuries of institutional experience or the second law of thermodynamics, thermodynamics left to their own devices, systems corrupt or tend to disorder, someone has to be on their case. But what the government is doing is making the regulators far more insulated from the procedures that keep them on their toes, avoiding the burden of accountability today is like banking a much larger, more expensive crisis for tomorrow. Additional periodic or permanent oversight has become even more necessary.
I beg to move.
18:22
18:22
18:22
Speaker 3
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Speaker 3
Speak to the amendments in my name, which are 133, four, five, six, seven, eight and nine, not 135 a which is my noble friend Baroness Lawlor, and I'd like to thank um noble Baroness Noakes. Uh, I'm sorry, my noble friend Baroness Noakes and, uh, noble friend Baroness Lawlor, as well as Baroness Bowles, for putting their names to my amendment. My Lords, this little clutch of amendments is turning into déja vu because the noble Baroness Bowles, I think, has just spoken about issues that she raised some years ago.
This amendment is one that I raised in this very room sitting over there, uh, exactly three years ago. So it is déja vu all over again. Um, I start from a basic point, which is exactly where the noble Baroness picks are going to pick up where she left off. Um, I believe, my lords, that we here in Parliament, we need more powers, more and more critically, more independent analysis to hold financial regulators and supervisors to account. And actually let me just mention here that had it not been declared out of scope, I think that we need to do far more to hold the Bank of England to account.
And I was wanting to, um, table an amendment to call for a regular, probably 5 or 6 yearly review led by Parliament into the remit and the performance of the Bank of England as an entity and as an institution, as I believe that that is an enormous democratic deficit that we need to address. I was told it was out of scope for this piece of legislation, but I very, very much attempt to return to this at a future date. Much to the minister's relief, though, I'm sure as, um, we're not going to do that now.
Now, my Lords, we spent Monday debating clauses in the bill that I see as weakening parliamentary accountability and these amendments, and those of the noble Baroness will take us in the opposite direction towards more accountability for a number of us on all sides of the House have been asking a very simple question do we, in this House and in the other place, have sufficient means to hold our financial regulators and supervisors to account without compromising their operational independence?And the answer keeps coming back resoundingly. No, we don't.
And it's not as if this is the first time that we have been saying this. As the noble Baroness mentioned, the your Lordships Industry and Regulators Committee in 2024 and their excellent report, Who Watches the watchdogs found that parliamentary scrutiny of regulators remains too fragmented, too reactive and too limited by the resources available to Parliament. And I stress to the resources available to Parliament. And it concluded that the balance between regulatory independence and democratic accountability needs to be strengthened. And, as I said, that report came after all the debates we had in this room on the last Financial Services and Markets Bill now act.
And we warned then that the transfer of extensive rule making powers from Parliament, from Parliament to the regulators had created an accountability gap. And that's why I addressed this very same proposal. Then my concerns about accountability, my Lords, have not diminished. If anything, they have grown in the years since I was standing over there. So I'm trying again now. I'm not going to go through line by line what each of these amendments will do. You'll be grateful to know.
Um, I would simply say that this amendment would establish the office for Financial Regulatory Accountability, offer an independent body to support Parliament in scrutinising the work of financial regulators. It is crucial to stress. I do not see this as second guessing regulatory judgments nor interfering with regulatory, operational, operational independence, rather as set out in clause 135, which I see as pretty key in this clutch of amendments. It would provide Parliament and the outside world with impartial analysis of regulation and the actions of regulators in the round and, crucially, their performance at meeting their objectives as set by Parliament.
Why do we need this for?A very, very simple reason. And my noble friend Baroness Noakes will pay testament to this. The volume and technical complexity of financial regulations is now making this absolutely necessary. If Parliament is to fully scrutinise and effectively scrutinise hundreds of pages of regulation which keep churning out from our regulators, we need to do more. Now, my concern is, and I'm very grateful, if the noble Lord can put my mind at rest. But my concern is, is that the government seems to be suggesting that we don't need to have a case by case analysis of regulations.
And I think this is wrong. I think it is absolutely critical to have that analysis. We cannot rely on a five year strategic report. We cannot rely on overall impressions from and analysis from regulators. We need to have the ability of analysing regulation point by point. If the government were to say and if the noble minister, when he. Noble Lord, the minister, when he rises, says, don't worry, the regulators will reflect their objectives in their actions and their decisions.
And this strategic. We have nothing to worry about here. I would say, let's prove it. Let's prove it. Let's have the independent analysis to make sure that it is indeed the case that our regulators in what they are doing, are reflecting the objectives that Parliament has set them for greater scrutiny and with it, greater accountability will surely strengthen trust, which is critical. The minister may go on to argue that my proposal is not needed for two other reasons.
First is what my noble friend Baroness Neville Rolfe and others have been talking about in the previous amendments, which is the cost benefit analysis panels. Now I completely accept that they perform a very important function, but I see their role as a very different one. Their role is to improve the quality of individual cost benefit analyses prepared by the regulators, their advisory bodies to the regulators themselves. They are not designed to provide Parliament and others with independent assessment of the overall effectiveness, proportionality of regulation and regulation, bit by bit, this amendment therefore complements rather than replaces those panels.
One improves regulatory decision making from within. That's the cost benefit analysis. Panel's offer would strengthen parliamentary accountability from without. The second reason the Minister might use to oppose my proposal is that the FCA introduced its rules Review framework in 2024 with the stated aim of undertaking increasingly rigorous post-implementation implementation analysis of what it does now. I stand to be corrected by this, but I have my delving into. This suggests that the results so far of this new framework are modest, as far as I can see, since its introduction, there has been only one full impact evaluation which has been published and only one other has appeared in the past five years.
Now, I think that's overall pre pre the framework has been introduced. Now I'd like to know whether that's the case. I'd like to know how effective this rules framework rules review framework has been. But either way I think it underlines the point that Parliament needs access to independent analysis and especially so as the government wants to give regulators more discretion. And this seems to be the entire drift of this bill, more discretion for the regulators. Now, if that is the case, surely, my Lords, the quid pro quo for more discretion has to be more mechanisms for accountability.
If we're being asked to entrust the regulators more, we need to have more a greater ability to have independent scrutiny of what they're doing. So ultimately, my Lords, this amendment is about improving accountability to Parliament. We have we in Parliament have entrusted regulators and supervisors with more powers. Surely it should be the right that we have the institutional capacity to hold them properly to account. My amendments seek to do that, and I very much hope that they will be given careful consideration.
This amendment is one that I raised in this very room sitting over there, uh, exactly three years ago. So it is déja vu all over again. Um, I start from a basic point, which is exactly where the noble Baroness picks are going to pick up where she left off. Um, I believe, my lords, that we here in Parliament, we need more powers, more and more critically, more independent analysis to hold financial regulators and supervisors to account. And actually let me just mention here that had it not been declared out of scope, I think that we need to do far more to hold the Bank of England to account.
And I was wanting to, um, table an amendment to call for a regular, probably 5 or 6 yearly review led by Parliament into the remit and the performance of the Bank of England as an entity and as an institution, as I believe that that is an enormous democratic deficit that we need to address. I was told it was out of scope for this piece of legislation, but I very, very much attempt to return to this at a future date. Much to the minister's relief, though, I'm sure as, um, we're not going to do that now.
Now, my Lords, we spent Monday debating clauses in the bill that I see as weakening parliamentary accountability and these amendments, and those of the noble Baroness will take us in the opposite direction towards more accountability for a number of us on all sides of the House have been asking a very simple question do we, in this House and in the other place, have sufficient means to hold our financial regulators and supervisors to account without compromising their operational independence?And the answer keeps coming back resoundingly. No, we don't.
And it's not as if this is the first time that we have been saying this. As the noble Baroness mentioned, the your Lordships Industry and Regulators Committee in 2024 and their excellent report, Who Watches the watchdogs found that parliamentary scrutiny of regulators remains too fragmented, too reactive and too limited by the resources available to Parliament. And I stress to the resources available to Parliament. And it concluded that the balance between regulatory independence and democratic accountability needs to be strengthened. And, as I said, that report came after all the debates we had in this room on the last Financial Services and Markets Bill now act.
And we warned then that the transfer of extensive rule making powers from Parliament, from Parliament to the regulators had created an accountability gap. And that's why I addressed this very same proposal. Then my concerns about accountability, my Lords, have not diminished. If anything, they have grown in the years since I was standing over there. So I'm trying again now. I'm not going to go through line by line what each of these amendments will do. You'll be grateful to know.
Um, I would simply say that this amendment would establish the office for Financial Regulatory Accountability, offer an independent body to support Parliament in scrutinising the work of financial regulators. It is crucial to stress. I do not see this as second guessing regulatory judgments nor interfering with regulatory, operational, operational independence, rather as set out in clause 135, which I see as pretty key in this clutch of amendments. It would provide Parliament and the outside world with impartial analysis of regulation and the actions of regulators in the round and, crucially, their performance at meeting their objectives as set by Parliament.
Why do we need this for?A very, very simple reason. And my noble friend Baroness Noakes will pay testament to this. The volume and technical complexity of financial regulations is now making this absolutely necessary. If Parliament is to fully scrutinise and effectively scrutinise hundreds of pages of regulation which keep churning out from our regulators, we need to do more. Now, my concern is, and I'm very grateful, if the noble Lord can put my mind at rest. But my concern is, is that the government seems to be suggesting that we don't need to have a case by case analysis of regulations.
And I think this is wrong. I think it is absolutely critical to have that analysis. We cannot rely on a five year strategic report. We cannot rely on overall impressions from and analysis from regulators. We need to have the ability of analysing regulation point by point. If the government were to say and if the noble minister, when he. Noble Lord, the minister, when he rises, says, don't worry, the regulators will reflect their objectives in their actions and their decisions.
And this strategic. We have nothing to worry about here. I would say, let's prove it. Let's prove it. Let's have the independent analysis to make sure that it is indeed the case that our regulators in what they are doing, are reflecting the objectives that Parliament has set them for greater scrutiny and with it, greater accountability will surely strengthen trust, which is critical. The minister may go on to argue that my proposal is not needed for two other reasons.
First is what my noble friend Baroness Neville Rolfe and others have been talking about in the previous amendments, which is the cost benefit analysis panels. Now I completely accept that they perform a very important function, but I see their role as a very different one. Their role is to improve the quality of individual cost benefit analyses prepared by the regulators, their advisory bodies to the regulators themselves. They are not designed to provide Parliament and others with independent assessment of the overall effectiveness, proportionality of regulation and regulation, bit by bit, this amendment therefore complements rather than replaces those panels.
One improves regulatory decision making from within. That's the cost benefit analysis. Panel's offer would strengthen parliamentary accountability from without. The second reason the Minister might use to oppose my proposal is that the FCA introduced its rules Review framework in 2024 with the stated aim of undertaking increasingly rigorous post-implementation implementation analysis of what it does now. I stand to be corrected by this, but I have my delving into. This suggests that the results so far of this new framework are modest, as far as I can see, since its introduction, there has been only one full impact evaluation which has been published and only one other has appeared in the past five years.
Now, I think that's overall pre pre the framework has been introduced. Now I'd like to know whether that's the case. I'd like to know how effective this rules framework rules review framework has been. But either way I think it underlines the point that Parliament needs access to independent analysis and especially so as the government wants to give regulators more discretion. And this seems to be the entire drift of this bill, more discretion for the regulators. Now, if that is the case, surely, my Lords, the quid pro quo for more discretion has to be more mechanisms for accountability.
If we're being asked to entrust the regulators more, we need to have more a greater ability to have independent scrutiny of what they're doing. So ultimately, my Lords, this amendment is about improving accountability to Parliament. We have we in Parliament have entrusted regulators and supervisors with more powers. Surely it should be the right that we have the institutional capacity to hold them properly to account. My amendments seek to do that, and I very much hope that they will be given careful consideration.
18:30
Speaker 9
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Speaker 9
Added my name to my noble friend Lord. Headley's. Amendments. Creating. I also support the noble Baroness. Lady Bowles's amendment. Creating or using a panel to look at how the regulators are performing. But the key thing is that we need more external heavyweight. Uh, oversight of what the regulators are doing. Because as we've been identifying throughout this grand committee, accountability is the key issue that we are focusing on in particular in the context of the way in which this bill weakens the current accountability constructs.
Um, my noble friend Lord bridges referred to when we were sitting on the other side of the chamber of the Grand Committee, um, debating the very same amendments last time. And I remember it very well at that time, as my noble friend knows, I did not support his amendments because at that time I was dead set on trying to get either a House of Lords committee, um, or a joint committee of both houses, because the original version of the what's now 23. Um, had only um an.
Involvement of the Treasury Select Committee of the other place and we were very clear that this House had far more expertise in financial services than the other place. And it was important that we could leverage that either through the use of a dedicated select committee in House or a joint committee. Um, there was no appetite for a joint committee from the other place. And so we ended up with a joint committee, but it took an amendment to the 2023 bill, which is where I focused all of my effort last time.
I also, as I said to my noble friend at the time, I didn't think we needed yet another unaccountable public body. Since then, of course, we've had the Financial Services Regulation Committee, which has been in operation for about two and a half years, and I am now very clear that the scale of the task is very large and very hard to execute without the kind of independent analysis that we would get from having something like opera or something like a panel to assist in the task. It is just too big for one select committee in your lordships house to handle.
We meet weekly, as is customary for all select committees. Once a week. We have very limited staff resource um in common with all other select committees of your lordships House. And we do actually, I think, pretty good work on that basis, but it does not mean that we can cover the whole area. And it doesn't mean that we can. Look at as many things as we would like to. We have to be very selective about what we look at.
So it is not a comprehensive, uh, look at the accountability of the regulators. And I think that is the missing piece. Now, somebody, somebody who is resourced and able to look at it in the round. So I support all of the amendments in this group because I think any anything would be a big improvement on what we have to date. I bring good news for the minister I have tabled today another. Another I. Idea of improving the accountability, which has evolved from discussions with some people in the industry, which some members of the committee already know about.
I've tabled that this afternoon, so I hope we'll be able to debate that on Monday. All. I'm. The only point I'm trying to make is we are looking for options to improve the accountability because it was under pressure as it was, and now we've got this huge new bit of consumer credit legislation coming in, which will be a lot of regulations, rules being issued over the next couple of years. So quite a big task coming down the line. We have to do something about it in this bill.
Um, my noble friend Lord bridges referred to when we were sitting on the other side of the chamber of the Grand Committee, um, debating the very same amendments last time. And I remember it very well at that time, as my noble friend knows, I did not support his amendments because at that time I was dead set on trying to get either a House of Lords committee, um, or a joint committee of both houses, because the original version of the what's now 23. Um, had only um an.
Involvement of the Treasury Select Committee of the other place and we were very clear that this House had far more expertise in financial services than the other place. And it was important that we could leverage that either through the use of a dedicated select committee in House or a joint committee. Um, there was no appetite for a joint committee from the other place. And so we ended up with a joint committee, but it took an amendment to the 2023 bill, which is where I focused all of my effort last time.
I also, as I said to my noble friend at the time, I didn't think we needed yet another unaccountable public body. Since then, of course, we've had the Financial Services Regulation Committee, which has been in operation for about two and a half years, and I am now very clear that the scale of the task is very large and very hard to execute without the kind of independent analysis that we would get from having something like opera or something like a panel to assist in the task. It is just too big for one select committee in your lordships house to handle.
We meet weekly, as is customary for all select committees. Once a week. We have very limited staff resource um in common with all other select committees of your lordships House. And we do actually, I think, pretty good work on that basis, but it does not mean that we can cover the whole area. And it doesn't mean that we can. Look at as many things as we would like to. We have to be very selective about what we look at.
So it is not a comprehensive, uh, look at the accountability of the regulators. And I think that is the missing piece. Now, somebody, somebody who is resourced and able to look at it in the round. So I support all of the amendments in this group because I think any anything would be a big improvement on what we have to date. I bring good news for the minister I have tabled today another. Another I. Idea of improving the accountability, which has evolved from discussions with some people in the industry, which some members of the committee already know about.
I've tabled that this afternoon, so I hope we'll be able to debate that on Monday. All. I'm. The only point I'm trying to make is we are looking for options to improve the accountability because it was under pressure as it was, and now we've got this huge new bit of consumer credit legislation coming in, which will be a lot of regulations, rules being issued over the next couple of years. So quite a big task coming down the line. We have to do something about it in this bill.
18:35
18:35
Speaker 1
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Speaker 1
133 and 135. And I'd like to say a few words about those and and my own one, three, five which is an amendment to Lord bridges one, three five. Two of the questions raised by this bill is how the regulators will operate, make, impose and judge the rules and how Parliament's proper role in the legislative process is ensured. In some cases, not only do we not know what we are supposed to be legislating on, as we've discussed here in the committee, but we do not know on what basis the regulators will, in practice be held to account.
Indeed, as matters stand, the arrangements and the deployment of powers is not known entirely, or perhaps in many cases, the amendments tabled by Lord bridges and supported by the noble Baroness Noakes and Lady Bowles, to which I've added my name to establish an office for financial offerer with the specific duty of examining and reporting on the performance of the FCA and PRA, and how they perform on specific measures, will provide some of the essential answers they'll assess as we. We. We see how far the regulators meet their statutory objects and principles under Fisma 2000 and the effect of specific pieces of regulation.
And I think that's a very important one. The effect which specific pieces of regulation will have. And now we. We need to know. And I'm very glad that Lord Bridges's one. Three, five refers to it. We need to know the impact of these regulations on the domestic. Um, development of financial services and the market. And that internationally. And we need to know what costs and burdens the compliance has.
Now these are very specific duties in one, three, five. And I think they've been very well thought out. And I do hope the minister will take them into account and why we need this office, which will be independent, quite independent of the whole process of regulation and will be independent of Parliament as well as independent of the regulators. But it will help Parliament to do what it ought to do in the legislation in as a legislator now, my own one, three, five A is only a small addition.
It's to include in these independent reports examples of how the rules have been implemented and have been applied to to different firms, including, say, similar firms doing the same kind of activity because, um, we don't have an independent analysis of those rules, of those regulations and the process or the compliance. And very often small businesses are at sea and they can't look to Parliament because we haven't got the basis for assessing them. They can't look to our reports, they can't look necessarily to the regulators. And they tell me and they explain quite often that they are unsure.
They want to take a step to grow their business, to develop some perhaps new new instrument or to expand their markets. But they're not quite sure how the regulators will treat it. And they have no example of how these things have been, um, seen. In the past or how the the rules have been applied and requiring an independent officer office for financial regulatory Accountability to provide some examples, I think will not only help Parliament, but help businesses to, in their competitive in being competitive and growing their businesses, they'll see the precedents and they'll be able to predict much more easily how the system operates.
And it's not a very expensive way for them to make judgements. They don't have to get in expensive consultants and, and do little trials here and there. And pilots, they would give security in knowing where the boundaries are set, judged and whether consistent with the opportunities entrepreneurs need to seize if they are to make their businesses grow. But above all, such an office and reporting and assessing on these duties will encourage the regulators to be consistent and and predictable and focus on their statutory objects.
And as the bill does, to focus on competitive, the competitiveness and growth object. And indeed, um, though we've talked a lot about, um, reporting requirements and the overall strategic plan, um. There is a problematic lack of transparency and a lack of accountability by the regulators other than to the Treasury. And that relationship is sometimes seems a little bit too cosy. The amendments tabled by Lord bridges will promote an effective mechanism to ensure we have objective, transparent and impartial evidence externally provided by an independent body.
And I. I support them for that reason, but I add my own small amendments so we have greater transparency in how they're.
Indeed, as matters stand, the arrangements and the deployment of powers is not known entirely, or perhaps in many cases, the amendments tabled by Lord bridges and supported by the noble Baroness Noakes and Lady Bowles, to which I've added my name to establish an office for financial offerer with the specific duty of examining and reporting on the performance of the FCA and PRA, and how they perform on specific measures, will provide some of the essential answers they'll assess as we. We. We see how far the regulators meet their statutory objects and principles under Fisma 2000 and the effect of specific pieces of regulation.
And I think that's a very important one. The effect which specific pieces of regulation will have. And now we. We need to know. And I'm very glad that Lord Bridges's one. Three, five refers to it. We need to know the impact of these regulations on the domestic. Um, development of financial services and the market. And that internationally. And we need to know what costs and burdens the compliance has.
Now these are very specific duties in one, three, five. And I think they've been very well thought out. And I do hope the minister will take them into account and why we need this office, which will be independent, quite independent of the whole process of regulation and will be independent of Parliament as well as independent of the regulators. But it will help Parliament to do what it ought to do in the legislation in as a legislator now, my own one, three, five A is only a small addition.
It's to include in these independent reports examples of how the rules have been implemented and have been applied to to different firms, including, say, similar firms doing the same kind of activity because, um, we don't have an independent analysis of those rules, of those regulations and the process or the compliance. And very often small businesses are at sea and they can't look to Parliament because we haven't got the basis for assessing them. They can't look to our reports, they can't look necessarily to the regulators. And they tell me and they explain quite often that they are unsure.
They want to take a step to grow their business, to develop some perhaps new new instrument or to expand their markets. But they're not quite sure how the regulators will treat it. And they have no example of how these things have been, um, seen. In the past or how the the rules have been applied and requiring an independent officer office for financial regulatory Accountability to provide some examples, I think will not only help Parliament, but help businesses to, in their competitive in being competitive and growing their businesses, they'll see the precedents and they'll be able to predict much more easily how the system operates.
And it's not a very expensive way for them to make judgements. They don't have to get in expensive consultants and, and do little trials here and there. And pilots, they would give security in knowing where the boundaries are set, judged and whether consistent with the opportunities entrepreneurs need to seize if they are to make their businesses grow. But above all, such an office and reporting and assessing on these duties will encourage the regulators to be consistent and and predictable and focus on their statutory objects.
And as the bill does, to focus on competitive, the competitiveness and growth object. And indeed, um, though we've talked a lot about, um, reporting requirements and the overall strategic plan, um. There is a problematic lack of transparency and a lack of accountability by the regulators other than to the Treasury. And that relationship is sometimes seems a little bit too cosy. The amendments tabled by Lord bridges will promote an effective mechanism to ensure we have objective, transparent and impartial evidence externally provided by an independent body.
And I. I support them for that reason, but I add my own small amendments so we have greater transparency in how they're.
18:41
Speaker 9
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Speaker 9
Think I want to get involved in the mechanics of the, of the group and how we get this independent scrutiny. But I do want to emphasize that that is important. How how it's done. I think we would welcome a discussion with the minister about that. Um. We had various inquiries over the last two and a half years, and I would ask the federations and the organisations whether they thought having a concierge service would be a useful thing to overcome.
Some of those difficulties that Baroness Lawlor has outlined, especially for the the new boys on the block and the smaller companies to find their way round the. The complex barriers that they have to face. And it seemed to be quite a popular suggestion, but nothing ever came of it. Uh, the example was used, I think, in the Singapore settlement, although I don't want to. I'm very wary of international comparisons, and I think it's quite right not to follow too much because they're very different.
But they did have a kind of concierge service to help, uh, the new companies where we, where we have a difficulty. And I'm thinking back on the history of the relationship between governments and regulators. Regulators are subject to political pressures. You might not agree, but that's the fact. That's the real politics. And when things go bad, the regulator will get blamed. So they are cautious. Their very nature makes them cautious because they don't want to be the one that goes on holiday and gets the sack because something has gone badly wrong.
And I think we have to be we have to have protections both for the methodology that the regulator uses. And I have to say that the panels are just on the nursery slopes. The cost benefit analysis panels. I was very rude about them last week as as the minister knows, and I don't want to be rude again, but they are on the nursery slopes and they need nurturing. Um, I think that the work that they could do will be really good if they are given more clarity.
Um, uh, on their possible role so that they can't be fobbed off by the regulator. I'm not suggesting the regulator will fobbed them off, but there would be a tendency to stick to the actual law and not go beyond that. Um, so I just feel that we need to build in a system, not just because we want to protect the existence of a committee that we think is important. Although I do, um, but because parliamentary scrutiny, scrutiny is an important part, but we sometimes are searching for the objective facts and figures, the granularity of why a regulator does something or why a regulator neglects to do something.
To what extent political pressures are involved. Now, I know no system, even the system that Lord bridges has asked for will ever get to the bottom of some of that. You know, we're not naive. Um, but I do believe that we need more transparency. Yes. Less complexity, but we need a system which has got more checks and balances. I think that a lot in this legislation is going the wrong way. And I think that what we need to do is carefully assess what is working well and what is really very, very early days and needs to be nurtured.
And what we should be avoided, like the plague.
Some of those difficulties that Baroness Lawlor has outlined, especially for the the new boys on the block and the smaller companies to find their way round the. The complex barriers that they have to face. And it seemed to be quite a popular suggestion, but nothing ever came of it. Uh, the example was used, I think, in the Singapore settlement, although I don't want to. I'm very wary of international comparisons, and I think it's quite right not to follow too much because they're very different.
But they did have a kind of concierge service to help, uh, the new companies where we, where we have a difficulty. And I'm thinking back on the history of the relationship between governments and regulators. Regulators are subject to political pressures. You might not agree, but that's the fact. That's the real politics. And when things go bad, the regulator will get blamed. So they are cautious. Their very nature makes them cautious because they don't want to be the one that goes on holiday and gets the sack because something has gone badly wrong.
And I think we have to be we have to have protections both for the methodology that the regulator uses. And I have to say that the panels are just on the nursery slopes. The cost benefit analysis panels. I was very rude about them last week as as the minister knows, and I don't want to be rude again, but they are on the nursery slopes and they need nurturing. Um, I think that the work that they could do will be really good if they are given more clarity.
Um, uh, on their possible role so that they can't be fobbed off by the regulator. I'm not suggesting the regulator will fobbed them off, but there would be a tendency to stick to the actual law and not go beyond that. Um, so I just feel that we need to build in a system, not just because we want to protect the existence of a committee that we think is important. Although I do, um, but because parliamentary scrutiny, scrutiny is an important part, but we sometimes are searching for the objective facts and figures, the granularity of why a regulator does something or why a regulator neglects to do something.
To what extent political pressures are involved. Now, I know no system, even the system that Lord bridges has asked for will ever get to the bottom of some of that. You know, we're not naive. Um, but I do believe that we need more transparency. Yes. Less complexity, but we need a system which has got more checks and balances. I think that a lot in this legislation is going the wrong way. And I think that what we need to do is carefully assess what is working well and what is really very, very early days and needs to be nurtured.
And what we should be avoided, like the plague.
18:45
18:45
18:45
18:46
Speaker 6
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Speaker 6
I was standing as a winder and I didn't want to prevent a back from person with something to contribute having that opportunity. So sorry, sir. Um, I'm going to be extremely brief on this, sir. Um, but I think I and my colleagues take the position that in this collection of amendments in the name of Baroness Bowles and Lord bridges that are from this, the government could craft something really effective that to create the information base and the capacity for Parliament to be have very appropriate oversight of the regulator.
But the point that I particularly wanted to add is this is not hostility to the regulator, part of the regulator's problem is it's trying to communicate to so many different parts of the sort of political framework with very different levels of understanding. And we've all seen that five year strategy now, I think, from the FCA. And I mean, let's admit, it's a completely vacuous document, but I can understand that perhaps those who crafted it thought that they were dealing with people who had almost no grasp at all of how the finance sector worked or operated, was directed or regulated.
We've given them absolutely impossible task of not knowing who they talk to, what level of detail, what information to provide. And I would say from a regulators perspective, that having an educated oversight body is in fact, removing a huge burden, creates a proper and constructive conversation and benefits in the end, both sides. So I hope the minister will take away that this is not some hostility to the regulator. This is a process that will make sure Parliament can do its job, but also means that the regulator is far better positioned to be able to do its job and communicate and understand.
But the point that I particularly wanted to add is this is not hostility to the regulator, part of the regulator's problem is it's trying to communicate to so many different parts of the sort of political framework with very different levels of understanding. And we've all seen that five year strategy now, I think, from the FCA. And I mean, let's admit, it's a completely vacuous document, but I can understand that perhaps those who crafted it thought that they were dealing with people who had almost no grasp at all of how the finance sector worked or operated, was directed or regulated.
We've given them absolutely impossible task of not knowing who they talk to, what level of detail, what information to provide. And I would say from a regulators perspective, that having an educated oversight body is in fact, removing a huge burden, creates a proper and constructive conversation and benefits in the end, both sides. So I hope the minister will take away that this is not some hostility to the regulator. This is a process that will make sure Parliament can do its job, but also means that the regulator is far better positioned to be able to do its job and communicate and understand.
18:47
Speaker 14
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Speaker 14
My Lords, I'm grateful to noble lords who have, um, brought our attention to past debates on this, not on these knotty issues, um, from a. Position of great expertise. All the amendments raise fundamental questions about how we hold our financial regulators to account. We fully support the principle that sits behind these amendments that Parliament must have proper oversight over the way in which the regulators work. That includes their internal operations, their rule making, their engagement with firms and consumers, the quality of their impact assessments, their effect on competition and competitiveness, and the burden they impose on the wider economy.
This point has been underscored by many noble lords throughout our debates on this bill. If the FCA and the PRA are to be given greater powers and a wider remit as proposed, that must be matched by greater transparency and stronger accountability, greater delegated powers cannot simply mean more decisions being taken away, further away from Parliament, with fewer mechanisms for scrutiny. Minister has written to Noble Lords setting out existing mechanisms. That letter refers, among other things, to the ability of noble lords to ask parliamentary questions and the work of our excellent Financial Services Regulation Committee, now parliamentary.
Questions have their place, but they are not a systematic mechanism for reviewing the performance, effectiveness or proportionality of regulators. Committees do valuable work, but they can't be expected to provide continuous expert institutional scrutiny of the FCA and Pra's operations. What is needed is a mechanism through which the regulators can be reviewed, tested and held to account. So the problem is that we have an accountability gap. And my noble friend Lady Noakes, from her unique position as chair of the committee, uh.
Has highlighted the scale of the task that they now face. So we need an independent source of analysis and expertise. And the amendments in this group provide a number of serious and compelling proposals for how that might be done. The amendment, in the name of the noble Baroness Lady Bowles, would provide for periodic independent review to the regulators. A recurring independent health check of the FCA, the PRA and the relevant Bank of England functions could help Parliament understand whether the regulatory system is working as intended, where the burdens are proportionate and whether the regulators are engaging properly, and whether firms and consumers are being treated fairly.
I thought we had a good example of the problem in the discussion on sections 165 and 166 earlier, the amendments in the name of my noble friend Lord bridges, propose a more permanent structure, an office for Financial Regulatory Accountability. I think this is a valuable suggestion. As I understand it, the office would assess the FCA's and Pra's overall performance against their statutory objectives and regulatory principles. It would also analyze impact assessments of specific pieces of financial regulation in order to determine how those regulations contribute to the regulatory regulator's objectives.
As my noble friend Lady Lawler has suggested, um, their reports could introduce could include individual precedents and examples to bring problems to light. This is the sort of scrutiny we need. The two parliamentary committees would have an important locus in scrutinising the reports from the office, improving overall parliamentary accountability, whilst not getting in the regulator's hair. In a way they're not set up to do. And the proposed arrangements would allow Parliament to see not only what concerns have been identified, but how the regulators intend to respond to them.
Significantly, the office would be required to prioritise the analysis of regulations which restrict domestic competition, reduce reduce the UK's international competitiveness in financial services, create new compliance costs or have a significant impact on business and individuals in the UK economy. An excellent objective and it wouldn't interfere with operational independence. As we've heard from my noble friend Lord bridges. My Lords, the regulators have become powerful institutions. They make rules, issue guidance, set expectations, supervise firms, authorise market entry, influence, conduct and shape the competitiveness of one of the most important parts of the UK economy.
And as we've heard from Lady Nokes committee, they suffer from a culture of risk aversion fuelled by the current system. It's no longer enough simply to say that the existing accountability mechanisms are adequate. There's clearly a deficit in oversight, and that deficit becomes more serious as more power is transferred from parliament. Primary legislation to regulators and rule books. If the government are asking Parliament to accept that shift, then they must accept the need for stronger accountability. Essential parliamentary scrutiny has to trump deregulation.
The challenge is to set is set for the noble Lord, the minister, and I hope he will provide the clarity. We really need. A crest which was echoed by the noble lady, Lady Donohue, who. In another bit of history I served under very happily in the EU Financial Services Committee.
This point has been underscored by many noble lords throughout our debates on this bill. If the FCA and the PRA are to be given greater powers and a wider remit as proposed, that must be matched by greater transparency and stronger accountability, greater delegated powers cannot simply mean more decisions being taken away, further away from Parliament, with fewer mechanisms for scrutiny. Minister has written to Noble Lords setting out existing mechanisms. That letter refers, among other things, to the ability of noble lords to ask parliamentary questions and the work of our excellent Financial Services Regulation Committee, now parliamentary.
Questions have their place, but they are not a systematic mechanism for reviewing the performance, effectiveness or proportionality of regulators. Committees do valuable work, but they can't be expected to provide continuous expert institutional scrutiny of the FCA and Pra's operations. What is needed is a mechanism through which the regulators can be reviewed, tested and held to account. So the problem is that we have an accountability gap. And my noble friend Lady Noakes, from her unique position as chair of the committee, uh.
Has highlighted the scale of the task that they now face. So we need an independent source of analysis and expertise. And the amendments in this group provide a number of serious and compelling proposals for how that might be done. The amendment, in the name of the noble Baroness Lady Bowles, would provide for periodic independent review to the regulators. A recurring independent health check of the FCA, the PRA and the relevant Bank of England functions could help Parliament understand whether the regulatory system is working as intended, where the burdens are proportionate and whether the regulators are engaging properly, and whether firms and consumers are being treated fairly.
I thought we had a good example of the problem in the discussion on sections 165 and 166 earlier, the amendments in the name of my noble friend Lord bridges, propose a more permanent structure, an office for Financial Regulatory Accountability. I think this is a valuable suggestion. As I understand it, the office would assess the FCA's and Pra's overall performance against their statutory objectives and regulatory principles. It would also analyze impact assessments of specific pieces of financial regulation in order to determine how those regulations contribute to the regulatory regulator's objectives.
As my noble friend Lady Lawler has suggested, um, their reports could introduce could include individual precedents and examples to bring problems to light. This is the sort of scrutiny we need. The two parliamentary committees would have an important locus in scrutinising the reports from the office, improving overall parliamentary accountability, whilst not getting in the regulator's hair. In a way they're not set up to do. And the proposed arrangements would allow Parliament to see not only what concerns have been identified, but how the regulators intend to respond to them.
Significantly, the office would be required to prioritise the analysis of regulations which restrict domestic competition, reduce reduce the UK's international competitiveness in financial services, create new compliance costs or have a significant impact on business and individuals in the UK economy. An excellent objective and it wouldn't interfere with operational independence. As we've heard from my noble friend Lord bridges. My Lords, the regulators have become powerful institutions. They make rules, issue guidance, set expectations, supervise firms, authorise market entry, influence, conduct and shape the competitiveness of one of the most important parts of the UK economy.
And as we've heard from Lady Nokes committee, they suffer from a culture of risk aversion fuelled by the current system. It's no longer enough simply to say that the existing accountability mechanisms are adequate. There's clearly a deficit in oversight, and that deficit becomes more serious as more power is transferred from parliament. Primary legislation to regulators and rule books. If the government are asking Parliament to accept that shift, then they must accept the need for stronger accountability. Essential parliamentary scrutiny has to trump deregulation.
The challenge is to set is set for the noble Lord, the minister, and I hope he will provide the clarity. We really need. A crest which was echoed by the noble lady, Lady Donohue, who. In another bit of history I served under very happily in the EU Financial Services Committee.
18:53
Speaker 8
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Speaker 8
My Lord, I will return to the important topic of accountability of the financial services regulators. I am grateful to the noble Baroness Bowles of Berkhampstead and Lord Bridges of Headley for tabling these amendments and for the thoughtful contributions made by noble Lords during this debate. I hear what the Committee has said on the regulatory accountability, and I'm glad to be meeting the Lords Financial Services Regulation Committee next week, chaired by the noble Baroness Noakes. I've also written to the Noble Lords, as has already been mentioned, about the existing framework, the governance, accountability, regulators.
A copy of that letter is available in the library. Um, my Lords, amendment 121 proposes establishing an independent panel for periodic independent review of the FCA, the PRA and the Bank of England. The government agrees that is important that regulators are held to account for their performance. This is why it has formalized by annual performance reviews, which the Economic Secretary to the Treasury holds with the CEOs of the PRA and publishes the minutes of these on gov.uk to support transparency. A prescriptive legislative requirement would duplicate this and would not be a good use of taxpayers money as the purpose of such review could only be to understand the regulator's performance.
But through Fsma, Parliament and the government already has a large number of levers to understand and assess the performance of the regulators. And of course, there's nothing to stop. The Financial Services and Regulation Committee from calling up CEOs of the Emperor, the governor of the bank, to discuss the performance as frequently as the committee desires. But it is also difficult to see where the panel would get its legitimacy from. When the government and Parliament are responsible for democratic oversight and accountability for the regulators.
The regulators. That Parliament is vested with the responsibility for regulation of our financial services sector. My Lords, is the government's view that the existing avenues for accountability are appropriate and sufficient, and that Parliament has the authority to do this in a way that no other body could. If Parliament wants to enhance the scrutiny of regulators, it must consider how best to do that. Um. Amendments one, three, 3 to 1 three, nine, including one, three, five a would taken together, create a new statutory body, the office for Financial Regulatory Accountability, charged with examining and reporting on the performance of the FCA and the PRA, supported by a charter setting out the Treasury's regulatory objectives with full information, access rights and funding drawn from the regulators themselves.
My Lords, such a body would complicate the accountability framework in a way that could dilute individual responsibility and accountability and create significant additional costs, and as such, the government cannot support them. Since this proposal was last made during the debates, the financial markets sorry, financial Services markets built in 2023, the landscape has changed materially. The Financial Services Regulation Committee of this House was established precisely to provide sustained expert parliamentary scrutiny of the regulators and has done so with considerable vigour in other plays. In the other place, the Treasury Select Committee continues to hold the FCA and PRA to regular account.
These are active, resourced bodies with the standing powers, with the sorry, with the standing and powers to interrogate regulatory performance in depth and more importantly, as parliamentary committees, they have the constitutional authority to scrutinise and opine on the effectiveness of our independent regulators, creating a new statutory office. Alongside these structures would fragment accountability rather than strengthen it, and there is a risk that the existence of a parallel body would blur the lines of responsibility and create confusion about the authority of scrutiny. Authority sits.
A copy of that letter is available in the library. Um, my Lords, amendment 121 proposes establishing an independent panel for periodic independent review of the FCA, the PRA and the Bank of England. The government agrees that is important that regulators are held to account for their performance. This is why it has formalized by annual performance reviews, which the Economic Secretary to the Treasury holds with the CEOs of the PRA and publishes the minutes of these on gov.uk to support transparency. A prescriptive legislative requirement would duplicate this and would not be a good use of taxpayers money as the purpose of such review could only be to understand the regulator's performance.
But through Fsma, Parliament and the government already has a large number of levers to understand and assess the performance of the regulators. And of course, there's nothing to stop. The Financial Services and Regulation Committee from calling up CEOs of the Emperor, the governor of the bank, to discuss the performance as frequently as the committee desires. But it is also difficult to see where the panel would get its legitimacy from. When the government and Parliament are responsible for democratic oversight and accountability for the regulators.
The regulators. That Parliament is vested with the responsibility for regulation of our financial services sector. My Lords, is the government's view that the existing avenues for accountability are appropriate and sufficient, and that Parliament has the authority to do this in a way that no other body could. If Parliament wants to enhance the scrutiny of regulators, it must consider how best to do that. Um. Amendments one, three, 3 to 1 three, nine, including one, three, five a would taken together, create a new statutory body, the office for Financial Regulatory Accountability, charged with examining and reporting on the performance of the FCA and the PRA, supported by a charter setting out the Treasury's regulatory objectives with full information, access rights and funding drawn from the regulators themselves.
My Lords, such a body would complicate the accountability framework in a way that could dilute individual responsibility and accountability and create significant additional costs, and as such, the government cannot support them. Since this proposal was last made during the debates, the financial markets sorry, financial Services markets built in 2023, the landscape has changed materially. The Financial Services Regulation Committee of this House was established precisely to provide sustained expert parliamentary scrutiny of the regulators and has done so with considerable vigour in other plays. In the other place, the Treasury Select Committee continues to hold the FCA and PRA to regular account.
These are active, resourced bodies with the standing powers, with the sorry, with the standing and powers to interrogate regulatory performance in depth and more importantly, as parliamentary committees, they have the constitutional authority to scrutinise and opine on the effectiveness of our independent regulators, creating a new statutory office. Alongside these structures would fragment accountability rather than strengthen it, and there is a risk that the existence of a parallel body would blur the lines of responsibility and create confusion about the authority of scrutiny. Authority sits.
18:56
Speaker 3
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Speaker 3
Giving way. I just don't understand this argument at all. Um, the the committees in this House and the other place, as you rightly says, they have the power to summon. But as he knows full well, and I, my noble friend. Well, my noble friend, my noble friend Baroness Noakes, said that they have, as far as I know, one. Policy adviser and one expert adviser, and that's it. What to to analyze regulation and the actions of regulators and supervisors.
And as a noble Lord knows full well that is nowhere near enough to do what the purpose of Ofra would be, which, as I said, would be to establish a means by which there is independent analysis of regulations in the into the specific and in the round and the performance of the regulators and supervisors. They're very, very different things here. One is a means of holding regulators to account. The other is providing the means analysis and insights to give parliamentarians to do that. So I, I don't understand what the how the noble Lord can say that that would be diluting accountability.
And as a noble Lord knows full well that is nowhere near enough to do what the purpose of Ofra would be, which, as I said, would be to establish a means by which there is independent analysis of regulations in the into the specific and in the round and the performance of the regulators and supervisors. They're very, very different things here. One is a means of holding regulators to account. The other is providing the means analysis and insights to give parliamentarians to do that. So I, I don't understand what the how the noble Lord can say that that would be diluting accountability.
18:57
Speaker 8
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Speaker 8
That the structure that exists today does give the effective governance that is required. We believe we're open to the conversation about the Baroness says options to improve accountability. I think there's a separate conversation that the noble Lord rightly raises about. The resource required to do that, to make sure those committees are sufficiently resourced. I think that's a conversation that we should be having separately, but the current position is that we're trying to balance the level of accountability that already exists, with the ability for the regulator to be flexible.
But as I've stated in my previous conversation, we're open to that discussion because we want to make sure that this process does not dilute that.
But as I've stated in my previous conversation, we're open to that discussion because we want to make sure that this process does not dilute that.
18:58
Speaker 3
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Speaker 3
But this is not about making them inflexible. This is about giving Parliament the ability to hold them effectively to account. And I don't think anyone, uh, well, certainly I don't hear anyone saying that there is. That means at the moment, and I cannot think that there would ever be a committee of either this place or the other or the other house, the other place to enable those committees to do that. It would be an enormous resource for a committee. So that would be completely impossible, as far as I can see.
That's why we need to have a separate body.
That's why we need to have a separate body.
18:59
Speaker 8
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Speaker 8
Okay. The noble Lord, we're happy to have that conversation. I think, again, the framework that we set out, we believe is the right framework, which balances that ability to have oversight with the actual flexibility that we've empowered through Fisma. But I agree, this debate is clearly illuminated, that there's work to do, and I'm looking forward to that conversation with the committee next week, and I'm sure there'll be much conversation to be had between committee and report on this particular issue. Uh, amendment one, three, nine would require the FCA to fund this new body from its own resources, which will ultimately be drawn from industry levies.
The regulators would presumably need to increase their fees on authorised firms to cover this, establishing a body of this kind with its own membership staff, legal powers and information, access and publication obligations would involve significant recurring costs. We'd be making industry pay twice for fund functions that would have significant overlap, and amendment one, three, four would require the Treasury to prepare a charter for financial regulatory accountability, setting out the Treasury's objectives in relation to financial regulation and the means by which they will be attained. My Lords, the Financial Services Competitiveness and Growth Strategy, published in July last year, sets out the very clear that the government's objectives for the financial sector are sorry for the UK's financial services regulatory environment to be proportionate, predictable and internationally competitive, and the Chancellor and the Prime Minister have both been clear about the fact that they see regulation as a key to delivering growth and regulation.
Action plan sets out the government plans to develop a regulatory system that supports innovation economic growth, while ensuring that accountability. The Chancellor has issued letters to the FCA on the PRA on this very issue. The government is not complacent about the adequacy of existing oversight. We will continue to keep accountability arrangements under review, and the bill itself strengthens the framework in a number of respects. But the answer to any remaining gaps is to work with and through the parliamentary committees that already exist, instead of creating a new layer of bureaucracy that would sit alongside alongside them.
And finally, I thank the Baroness for her important contributions on accountability. As I've said, I'm meeting the the Financial Services Committee in the Lords next week to discuss this. However, on one point I can give a immediate reassurance, which is the government launched a concierge service in October 2025. So the government agrees with her that this was indeed an excellent idea. I would like to thank the noble Lords for this thoughtful debate. It's obvious that this will continue to develop over the coming weeks, but I will ask the noble Baroness to withdraw her amendment.
The regulators would presumably need to increase their fees on authorised firms to cover this, establishing a body of this kind with its own membership staff, legal powers and information, access and publication obligations would involve significant recurring costs. We'd be making industry pay twice for fund functions that would have significant overlap, and amendment one, three, four would require the Treasury to prepare a charter for financial regulatory accountability, setting out the Treasury's objectives in relation to financial regulation and the means by which they will be attained. My Lords, the Financial Services Competitiveness and Growth Strategy, published in July last year, sets out the very clear that the government's objectives for the financial sector are sorry for the UK's financial services regulatory environment to be proportionate, predictable and internationally competitive, and the Chancellor and the Prime Minister have both been clear about the fact that they see regulation as a key to delivering growth and regulation.
Action plan sets out the government plans to develop a regulatory system that supports innovation economic growth, while ensuring that accountability. The Chancellor has issued letters to the FCA on the PRA on this very issue. The government is not complacent about the adequacy of existing oversight. We will continue to keep accountability arrangements under review, and the bill itself strengthens the framework in a number of respects. But the answer to any remaining gaps is to work with and through the parliamentary committees that already exist, instead of creating a new layer of bureaucracy that would sit alongside alongside them.
And finally, I thank the Baroness for her important contributions on accountability. As I've said, I'm meeting the the Financial Services Committee in the Lords next week to discuss this. However, on one point I can give a immediate reassurance, which is the government launched a concierge service in October 2025. So the government agrees with her that this was indeed an excellent idea. I would like to thank the noble Lords for this thoughtful debate. It's obvious that this will continue to develop over the coming weeks, but I will ask the noble Baroness to withdraw her amendment.
19:01
Speaker 7
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Speaker 7
My Lords. I somehow. Think that a useful thing to do with the Minister would be to sit down with him, with the rule book. And go through some scrutiny, and then perhaps the Minister might begin to see the scale of the task. And, as I've said, when I was econ chair in the European Parliament, the committee there had nearly a hundred members, of full members and substitute, all capable of doing work in specialist clusters. Doing the legislation and scrutinising everything a full.
Time job, basically doing it all day, every day. And that didn't even have to do what was happening in supervision. And I you know, it is not a task that is within the capacity of a national Parliament. And the minister was out of the room when I explained that in Australia they had a royal commission as part of their Post-financial crisis review, just to look at, well, what went wrong with regulation?And like royal commissions do?It took a long time.
And when they finally report, they came to the conclusion that they had to have an oversight body, and they have done similar in New Zealand and in the United States, where they have very powerful oversight over all of their regulators. And there is a. It's just unreasonable to suggest that that a committee that sits once a week for three hours can in any way touch this. I think our committees are really, really good at doing, you know, specific inquiries into problem areas, but you can't do it across the piece.
You can't see it across the piece. And that was what I described as the first need, the need that we had when we left the EU, the need that is perhaps taken. Some people who didn't have my experience, uh, the understanding of how much that it would take. But pretty soon, because I mean, a year later, Lord bridges was coming forward with his proposals and the Regulators and Industry Committee had already realised that, that we needed more. And then there is, as I said, there's this second need, you know, following on from this bill that has distanced us further away because we haven't got even the things that we're supposed to measure about.
We haven't got the information, you know, clause 16 creates a strategy. No, I know, I know you're I know you're going.
Time job, basically doing it all day, every day. And that didn't even have to do what was happening in supervision. And I you know, it is not a task that is within the capacity of a national Parliament. And the minister was out of the room when I explained that in Australia they had a royal commission as part of their Post-financial crisis review, just to look at, well, what went wrong with regulation?And like royal commissions do?It took a long time.
And when they finally report, they came to the conclusion that they had to have an oversight body, and they have done similar in New Zealand and in the United States, where they have very powerful oversight over all of their regulators. And there is a. It's just unreasonable to suggest that that a committee that sits once a week for three hours can in any way touch this. I think our committees are really, really good at doing, you know, specific inquiries into problem areas, but you can't do it across the piece.
You can't see it across the piece. And that was what I described as the first need, the need that we had when we left the EU, the need that is perhaps taken. Some people who didn't have my experience, uh, the understanding of how much that it would take. But pretty soon, because I mean, a year later, Lord bridges was coming forward with his proposals and the Regulators and Industry Committee had already realised that, that we needed more. And then there is, as I said, there's this second need, you know, following on from this bill that has distanced us further away because we haven't got even the things that we're supposed to measure about.
We haven't got the information, you know, clause 16 creates a strategy. No, I know, I know you're I know you're going.
19:04
19:04
19:05
19:05
19:05
Speaker 7
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Speaker 7
Well, I'm sorry, I am replying to the minister and indeed I have to say some things again, because the minister was out of the room. And I'm just trying to explain that then that in this bill it introduces a second need because we don't have access to the information any more. It's going into a strategy and there is no link to operational duties, no reporting and guidance. And the annual report is only about competitiveness and growth. So we are short of the basic information on which we are supposed to do this scrutiny.
It's not coming to us.
It's not coming to us.
19:06
19:06
Speaker 14
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Speaker 14
It's been rubbed out by this bill. So it's no good saying that a committee of this House, you know, able though and competent, that hard working that they are, can ever do it. When you've taken the basic information away, that is the point. So there's the the fundamental size need and then the, the, the removal of the information need. Now, I think we need this independent body for the first need. But my goodness, we jolly well need it.
If this bill ends up as an act, anything like it is now. And obviously, this is something that I think we'll all want to return to at report stage. But for now, I will, um, withdraw my. Amendment, but that the minister seems to think I mean, he's got the equivalent of a perpetual motion machine that something is going to happen when it's got no input.
If this bill ends up as an act, anything like it is now. And obviously, this is something that I think we'll all want to return to at report stage. But for now, I will, um, withdraw my. Amendment, but that the minister seems to think I mean, he's got the equivalent of a perpetual motion machine that something is going to happen when it's got no input.
19:07
19:07
Speaker 14
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Speaker 14
Short. I'll just speak very briefly to my amendment one, two, two, which is quite simple. It's intended to encourage the sharing of analysis, findings, information and judgments between the FCA and the PRA, particularly in relation to senior appointments, regulatory and supervisory activity and enforcement. Now, the amendment doesn't make this binding any way. It applies, only so far as it was reasonable to do so, and indeed that the regulators wanted to do so. But the objective is to try and remove duplication and give encouragement to the regulators to rely upon one another's work where that is sensible.
Now, I haven't looked at their memorandum of understanding recently, and I think that they probably have enabled themselves to do some of this, but I'm not sure that that enablement has extended to an actuality of doing it. And, you know, and it this meshes with some of the other amendments that have been around about, you know, not duplicating things. Um, when, when, you know, people are already approved by one regulator for the same thing, they're fit and proper, why would they not be for another?So, but I would not expect this to be done blindly or without review.
Um, and you know, it just goes to what I've said about this being everything should be a tried to avoid unnecessary duplication because those duplications are leading to delays. Um, this could help shorten approval times under the SCR for tried and tested individuals and to align rules or processes where the underlying purpose is the same, I think is a modest practical amendment aimed at reducing friction and delay in areas where both regulators are already engaged. Um, I also look forward to hearing from the noble lady, Baroness Neville and the noble Lord Altrincham on Amendment 166, which I think to some extent tilts in the same sort of direction.
I beg to move.
Now, I haven't looked at their memorandum of understanding recently, and I think that they probably have enabled themselves to do some of this, but I'm not sure that that enablement has extended to an actuality of doing it. And, you know, and it this meshes with some of the other amendments that have been around about, you know, not duplicating things. Um, when, when, you know, people are already approved by one regulator for the same thing, they're fit and proper, why would they not be for another?So, but I would not expect this to be done blindly or without review.
Um, and you know, it just goes to what I've said about this being everything should be a tried to avoid unnecessary duplication because those duplications are leading to delays. Um, this could help shorten approval times under the SCR for tried and tested individuals and to align rules or processes where the underlying purpose is the same, I think is a modest practical amendment aimed at reducing friction and delay in areas where both regulators are already engaged. Um, I also look forward to hearing from the noble lady, Baroness Neville and the noble Lord Altrincham on Amendment 166, which I think to some extent tilts in the same sort of direction.
I beg to move.
19:09
Speaker 6
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Speaker 6
Right. My Lords. I'm grateful to the noble Baroness for bringing forward amendment 122, and I rise to speak to amendment 166 in my name and that of my noble friend Lord Altrincham. I know we're all very excited by the result of the football. As the Minister knows, this is an area of great concern to me, so I will make the case in our discussions with firms we have repeatedly heard that regulation has accumulated over many years in a way that is often overlapping and unnecessarily complex.
Firms are required to repeat similar information to different bodies. It's slightly different formats at different times and through different systems. They're expected to absorb new rules and expectations, while older requirements remain in place. The result is a regulatory environment that becomes heavier and more expensive over time. This does not just affect large institutions, it particularly affects smaller firms, new entrants and challengers, which do not have the same compliance teams, legal budgets or administrative capacity as the larger incumbents. Amendment 122 raises an important point in this regard, where both the FCA and PRA are dealing with the same firm, it is sensible that they should be able to rely on one another's analysis, findings, information and judgements where it is reasonable to do so.
Our amendment 166 follows the same principle, but applies it more broadly. It would require the Treasury, the FCA and the PRA when exercising powers under the Bill, to have regard to minimizing the overall regulatory burden on regulated persons. That burden is not only the direct cost of complying with a new rule, it includes administrative burdens, reporting requirements, the costs of delay and the disproportionate impact that regulation can have on smaller firms and new entrants. If the Treasury, the FCA or the PRA consider that an increase in burden is necessary.
Our amendment would require them to publish reasons and an assessment of the expected effects on growth, competition, innovation and market entry. Regulation should not be judged by. Its practical should be judged by its practical economic effects. Does it make it harder for firms to grow?Does it reduce competition?Does it deter new entrants and does it slow innovation?Does it make the UK a less attractive place to do business?Now these questions matter because financial services are an internationally competitive sector.
As we keep emphasizing, if we allow our regulatory environment to become too complex, too expensive, too slow, firms and capital will go elsewhere. The bill is presented as part of a wider effort to make our regulatory framework more competitive and more supportive of growth, which we support. But amendment 166 would help make that ambition real. It would require the government and regulators to keep the burden of regulation in view, and to justify increases where they consider them necessary. This sort of provision doesn't exist in this regulatory area.
We have had amendments of this kind in other areas, in my experience, and I hope the minister will engage constructively with the amendments in this group.
Firms are required to repeat similar information to different bodies. It's slightly different formats at different times and through different systems. They're expected to absorb new rules and expectations, while older requirements remain in place. The result is a regulatory environment that becomes heavier and more expensive over time. This does not just affect large institutions, it particularly affects smaller firms, new entrants and challengers, which do not have the same compliance teams, legal budgets or administrative capacity as the larger incumbents. Amendment 122 raises an important point in this regard, where both the FCA and PRA are dealing with the same firm, it is sensible that they should be able to rely on one another's analysis, findings, information and judgements where it is reasonable to do so.
Our amendment 166 follows the same principle, but applies it more broadly. It would require the Treasury, the FCA and the PRA when exercising powers under the Bill, to have regard to minimizing the overall regulatory burden on regulated persons. That burden is not only the direct cost of complying with a new rule, it includes administrative burdens, reporting requirements, the costs of delay and the disproportionate impact that regulation can have on smaller firms and new entrants. If the Treasury, the FCA or the PRA consider that an increase in burden is necessary.
Our amendment would require them to publish reasons and an assessment of the expected effects on growth, competition, innovation and market entry. Regulation should not be judged by. Its practical should be judged by its practical economic effects. Does it make it harder for firms to grow?Does it reduce competition?Does it deter new entrants and does it slow innovation?Does it make the UK a less attractive place to do business?Now these questions matter because financial services are an internationally competitive sector.
As we keep emphasizing, if we allow our regulatory environment to become too complex, too expensive, too slow, firms and capital will go elsewhere. The bill is presented as part of a wider effort to make our regulatory framework more competitive and more supportive of growth, which we support. But amendment 166 would help make that ambition real. It would require the government and regulators to keep the burden of regulation in view, and to justify increases where they consider them necessary. This sort of provision doesn't exist in this regulatory area.
We have had amendments of this kind in other areas, in my experience, and I hope the minister will engage constructively with the amendments in this group.
19:13
Speaker 15
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Speaker 15
Noble Baroness, our noble Lord, for the proposed amendments. These are both important topics. I continue to listen and will definitely try and continue to engage in constructive debate and discussion as the weeks develop. Amendment one, two, two seeks to reduce duplication between the work of the FCA and PRA. I'd like to thank the noble lady, Baroness for raising the important issue, and the government agrees that it is important to identify and remove duplication between the FCA and PRA. The FCA and Para have distinct objectives and functions, and each must remain clearly responsible and accountable for the exercise of its statutory functions and for the advancement of our objectives.
Coordination is important, but we must be careful about blurring accountability between the FCA and PRA to support coordination. The FCA and PA has noted, have a memorandum of understanding which sets out the framework of how they will coordinate, cooperate, what's carrying out their respective responsibilities. The MOU covers their approach to rule making, supervision and enforcement of investigations under Fsma and how and when they will consult and share information with each other is designed to ensure they do not introduce incompatible requirements, that they share information from supervisory activities as materially relevant to the objectives, and to avoid duplication in regulatory data collection.
In particular, it makes the commitment that information available to one regulator, including regularly provided regulatory data that is relevant to the responsibility of the regulator, will be shared where requested, and if either regulator considers that information has been gathered, would be of material interest to the other, it will actively offer it. I would like to reassure the noble lady, Baroness Bowles, that when the FCA, Emperor reported on cooperation under the MOU in 2025, they highlighted sharing expertise and information such as data on the impact of authorised push payment for reimbursement rules on the sector.
The government therefore considers that the existing statutory and operational arrangements for coordination between the regulators provide the appropriate mechanism for reducing duplication without introducing ambiguity into the statutory framework. Turn to amendment 166 about the net burden of regulation. The government recognises the impact that regulatory burdens can have on firms, in particular on smaller firms and new entrants, and agrees it is vital that both the government and the regulators take steps to reduce the burden of regulation on firms. As previously mentioned, the government has made a commitment in cutting administrative burdens of regulation by 25% by the end of this Parliament.
The financial services sector, the financial services regulators are actively contributing to this agenda. For example, the POA has implemented new insurance reporting requirements that will cut paperwork by one third, contributing to savings for firms of £66 million per year. Meanwhile, the FCA has stripped out data requests for over 36,000 firms, saving them £6 million in administration costs, and has also proposed removing some transaction reporting in the form of fewer financial market transaction fields and a narrower scope. The FCA estimates that this could save over £100 million annually, whilst simplifying compliance, but the government does not think that is necessary or appropriate to induce such a duty.
The PRA and the FCA have a secondary objective to facilitate growth and competitiveness. That means they need to consider the impact the new regulation could have on the sector's growth prospects, and the ability to compete internationally, as well as the wider economic growth. Their existing requirements in Fisma, which require the regulators to keep their rules under review and to publish statements of policy on their approaches to reviewing rules. The government considers that this is a proportionate approach. In particular. In particular, the regulators are required to develop cost benefit analysis when developing new rules, which will help them understand how the costs weigh up against the expected benefits.
In the Financial Services and Markets Act 2023. New requirements to to establish cost benefit analysis panels were introduced to improve the quality of that analysis, and particularly to make sure it was informed by those with industry expertise. Given the demonstrable progress that regulators are making on reducing regulatory burdens and the existing mechanisms for continuing to to work to minimise duplication, I would ask that these amendments be withdrawn.
Coordination is important, but we must be careful about blurring accountability between the FCA and PRA to support coordination. The FCA and PA has noted, have a memorandum of understanding which sets out the framework of how they will coordinate, cooperate, what's carrying out their respective responsibilities. The MOU covers their approach to rule making, supervision and enforcement of investigations under Fsma and how and when they will consult and share information with each other is designed to ensure they do not introduce incompatible requirements, that they share information from supervisory activities as materially relevant to the objectives, and to avoid duplication in regulatory data collection.
In particular, it makes the commitment that information available to one regulator, including regularly provided regulatory data that is relevant to the responsibility of the regulator, will be shared where requested, and if either regulator considers that information has been gathered, would be of material interest to the other, it will actively offer it. I would like to reassure the noble lady, Baroness Bowles, that when the FCA, Emperor reported on cooperation under the MOU in 2025, they highlighted sharing expertise and information such as data on the impact of authorised push payment for reimbursement rules on the sector.
The government therefore considers that the existing statutory and operational arrangements for coordination between the regulators provide the appropriate mechanism for reducing duplication without introducing ambiguity into the statutory framework. Turn to amendment 166 about the net burden of regulation. The government recognises the impact that regulatory burdens can have on firms, in particular on smaller firms and new entrants, and agrees it is vital that both the government and the regulators take steps to reduce the burden of regulation on firms. As previously mentioned, the government has made a commitment in cutting administrative burdens of regulation by 25% by the end of this Parliament.
The financial services sector, the financial services regulators are actively contributing to this agenda. For example, the POA has implemented new insurance reporting requirements that will cut paperwork by one third, contributing to savings for firms of £66 million per year. Meanwhile, the FCA has stripped out data requests for over 36,000 firms, saving them £6 million in administration costs, and has also proposed removing some transaction reporting in the form of fewer financial market transaction fields and a narrower scope. The FCA estimates that this could save over £100 million annually, whilst simplifying compliance, but the government does not think that is necessary or appropriate to induce such a duty.
The PRA and the FCA have a secondary objective to facilitate growth and competitiveness. That means they need to consider the impact the new regulation could have on the sector's growth prospects, and the ability to compete internationally, as well as the wider economic growth. Their existing requirements in Fisma, which require the regulators to keep their rules under review and to publish statements of policy on their approaches to reviewing rules. The government considers that this is a proportionate approach. In particular. In particular, the regulators are required to develop cost benefit analysis when developing new rules, which will help them understand how the costs weigh up against the expected benefits.
In the Financial Services and Markets Act 2023. New requirements to to establish cost benefit analysis panels were introduced to improve the quality of that analysis, and particularly to make sure it was informed by those with industry expertise. Given the demonstrable progress that regulators are making on reducing regulatory burdens and the existing mechanisms for continuing to to work to minimise duplication, I would ask that these amendments be withdrawn.
19:17
Speaker 6
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Speaker 6
Before the minister sits down. I think in my amendment, I was trying to talk about when exercising powers under the act. You know, obviously I appreciate the work that's being done to get the thicket out of the existing regulator. What we're trying to do is to bring in a system so that when new regulations are being made, which there will be many as a result of this bill, because we're extending financial regulation into lots of new areas that it's looked at in a way that really looks at the burdens.
And I'm not sure that the cost benefit panels and their work, which we discussed earlier, quite does that. So I would ask him to look at this constructively.
And I'm not sure that the cost benefit panels and their work, which we discussed earlier, quite does that. So I would ask him to look at this constructively.
19:18
19:18
Speaker 14
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Speaker 14
The Minister for his replies and for everybody else that has spoken in this debate, and I don't need to go over any of it again. Um, I think it was interesting. Interesting that the minister said, elaborating some of the cooperation that already goes on. I think I think possibly an interesting thing for us to, to to do on the committee will be to ask the regulators to explain to us more about how they do that, because we hear from industry that they feel that there's duplication going on.
Um, so maybe we can try to sort of join up that loop. Um, but for now, I beg leave to withdraw my amendment.
Um, so maybe we can try to sort of join up that loop. Um, but for now, I beg leave to withdraw my amendment.
19:19
19:19
19:20
Speaker 4
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Speaker 4
You rise to speak to this group of amendments to move 126 in my name, to speak to 127 and to thank my noble friend Baroness Altmann for co-signing. Amendment 127. The purpose of these amendments is my latest attempt to get some innovation and technology focus in a bill which currently is strangely, surprisingly and unfortunately largely silent on this subject. It's my latest effort, but it won't be my last. We take a step back when it comes to open finance, how have we got to where we are?Well, it's something everybody across the UK should feel incredible pride in.
Open banking was created here, and for anybody who believes the false dichotomy that recurs with tedious inevitability, that you can either have regulation or innovation, I offer them open banking, a deliberate, a willed and intended regulatory intervention to address a market failure measure of. Success?Well, not for me to say open banking made in the UK replicated, taken up in just shy of 80 jurisdictions around the world, many of whom have taken it much further and much faster than the United Kingdom. And though open banking is excellent, positive, inclusive innovation, it still hasn't come to fruition in terms of mass take up.
But we should also consider how the principles can apply to open finance. We have some good stuff in the data Use and Access Act, but we need more to give. Focus on what open finance can do, not least in obvious adjacent sectors such as telco and energy. So what my amendment 126 seeks to do is exactly that, to look what is possible with the current data which is out there, not a data grab, not pushing citizens off the ball to give an up to the minute analogy.
But enabling, empowering those citizens who are oftentimes at the sharpest end of financial services, or not even able to avail themselves of financial services at all. Imagine being able to look in real time on a consented basis at alternative sources of data that exist, such as rental history, such as other activity of that individual, to enable them to empower them to have financial services, perhaps for the first time, better financial services, as opposed to all too often, what happens?Those who have the least having to pay the most?How can that be something which anybody can tolerate in 2026?Open finance could be enabling, empowering, transformational.
We have the technologies. I suggest amendment 126 does a small, tiny element of the next step on that journey. Amendment 127 suggests an innovation unit for the Financial Conduct Authority. I'm well aware that the FCA already has an innovation unit internally, and it does excellent work in terms of the work of regulators across the piece on innovation, it is far more than market leading, and it goes back to the innovation that the FCA has led for over a decade. The excellent fintech regulatory sandbox, the digital security sandbox, the tremendous last year announced AI sandbox.
This is all market leading, not just in this country, but internationally. Fantastic work. Similarly, on other emerging technologies such as quantum. So in no sense is this amendment suggesting that the regulator is not looking at emerging technologies. What this amendment seeks to do is further empower the regulator by putting that innovation unit on a statutory footing and bringing in external voices and expertise to be part of that, not a board of the great and the good white male, pale, stale, but experts in this area of emerging technologies across the piece.
What a fabulous addition to the excellent work they're already doing. It's a minor change. It would have a major impact. I very much look forward to the minister's response and the discussion on this group. I beg to move.
Open banking was created here, and for anybody who believes the false dichotomy that recurs with tedious inevitability, that you can either have regulation or innovation, I offer them open banking, a deliberate, a willed and intended regulatory intervention to address a market failure measure of. Success?Well, not for me to say open banking made in the UK replicated, taken up in just shy of 80 jurisdictions around the world, many of whom have taken it much further and much faster than the United Kingdom. And though open banking is excellent, positive, inclusive innovation, it still hasn't come to fruition in terms of mass take up.
But we should also consider how the principles can apply to open finance. We have some good stuff in the data Use and Access Act, but we need more to give. Focus on what open finance can do, not least in obvious adjacent sectors such as telco and energy. So what my amendment 126 seeks to do is exactly that, to look what is possible with the current data which is out there, not a data grab, not pushing citizens off the ball to give an up to the minute analogy.
But enabling, empowering those citizens who are oftentimes at the sharpest end of financial services, or not even able to avail themselves of financial services at all. Imagine being able to look in real time on a consented basis at alternative sources of data that exist, such as rental history, such as other activity of that individual, to enable them to empower them to have financial services, perhaps for the first time, better financial services, as opposed to all too often, what happens?Those who have the least having to pay the most?How can that be something which anybody can tolerate in 2026?Open finance could be enabling, empowering, transformational.
We have the technologies. I suggest amendment 126 does a small, tiny element of the next step on that journey. Amendment 127 suggests an innovation unit for the Financial Conduct Authority. I'm well aware that the FCA already has an innovation unit internally, and it does excellent work in terms of the work of regulators across the piece on innovation, it is far more than market leading, and it goes back to the innovation that the FCA has led for over a decade. The excellent fintech regulatory sandbox, the digital security sandbox, the tremendous last year announced AI sandbox.
This is all market leading, not just in this country, but internationally. Fantastic work. Similarly, on other emerging technologies such as quantum. So in no sense is this amendment suggesting that the regulator is not looking at emerging technologies. What this amendment seeks to do is further empower the regulator by putting that innovation unit on a statutory footing and bringing in external voices and expertise to be part of that, not a board of the great and the good white male, pale, stale, but experts in this area of emerging technologies across the piece.
What a fabulous addition to the excellent work they're already doing. It's a minor change. It would have a major impact. I very much look forward to the minister's response and the discussion on this group. I beg to move.
19:25
19:25
Speaker 13
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Speaker 13
Lords that I'm absolutely delighted with these two amendments from Lord Holmes that are. Because I. To begin with one, two, six. I've long been. As. He has a real supporter of both open banking and see the potential for it to really expand into open finance and utterly frustrated that it languished for so many years. But I am convinced that under the current leadership, real change is now and real is happening in real progress is being made.
And I hope that that's a correct assessment. And in other places, this bill continues to assist that particular process. It's absolutely logical that entities looking for financial services and going to one provider that they presumably know or can access, that that's a but failing to find a satisfactory answer that can't then avail themselves of the ability to talk to the rest of the, uh, the financial services provider world and open banking and open finance provide those mechanisms that I do have. One caveat that I want to add, which is, um, that in section C of one, two, six, uh, Lord Holmes, that's a.
Explains that the framework needs to provide for interoperability between different categories of financial service providers, including digital asset providers. Now, I agree completely with that. But the question is who pays?And traditionally it's always been the banks that have paid. And I have taken a position earlier in this bill and continue to take it that all those users of the payment system should be contributing. There shouldn't be something that falls on the banks, and the tech companies in particular, end up with a free ride that will leave us with an unsustainable system and with the system is far less effective than it could be if it had the full resources of all of those who participate and potentially benefit from it.
And it was also engaged them in some of the innovation that is, uh, addressed in one, two, seven, again, one, two, seven. I can see the advantages that are presented here by the content of one, two, seven. But there's just one more feature that I would like to add. One of my permanent frustrations with the regulator has been that they do not step in when there is market failure. They always say if a new company comes in, a new business comes in that will fill a gap.
We will regulate them appropriately. That's our contribution. That's to encouraging, uh, players to come in and fill the space where there is market failure. And one very good example is lending to small businesses, but there are many more sort of market failures that, that the, that the FCA will very happily acknowledge, but then say, but it's not my job to get that gap filled. Now, the US regulators take a very different view. If there is a market failure, they will they will take they will be proactive in trying to design incentives and opportunities to go out and in effect, market to relevant players so that the gap is then in turn filled.
A very simple example is in the United States, thanks to the regulators, something that I call bank in the box. And I've got to be careful because there is a company of that name was actually devised to enable small players to come into the lending space, because in that box were all of the regulatory pieces that a banking service needed to offer, so that it would be very simple for a new player to simply plug in the investors at one end of the particular customer base at the other. And it also meant that in time of means that in time of failure, that that small bank can very easily be recovered because all of the complex content of regulation and compliance is in the box, that in a way that is understood by, um, by a, by, by the others within the system.
It's a small I've talked to the FCA about what about bank in the box. If somebody comes forward with it, we will very gladly regulate it, but we will not take a step that would encourage the provision of some such, uh, service. So I would love to see that incorporated in the innovation discussion that this approach to market failure regulators were incredibly influential. And it's amazing what a few words from regulator that or a proposal from a regulator will do to make sure that action actually happens.
And I hope that that's a correct assessment. And in other places, this bill continues to assist that particular process. It's absolutely logical that entities looking for financial services and going to one provider that they presumably know or can access, that that's a but failing to find a satisfactory answer that can't then avail themselves of the ability to talk to the rest of the, uh, the financial services provider world and open banking and open finance provide those mechanisms that I do have. One caveat that I want to add, which is, um, that in section C of one, two, six, uh, Lord Holmes, that's a.
Explains that the framework needs to provide for interoperability between different categories of financial service providers, including digital asset providers. Now, I agree completely with that. But the question is who pays?And traditionally it's always been the banks that have paid. And I have taken a position earlier in this bill and continue to take it that all those users of the payment system should be contributing. There shouldn't be something that falls on the banks, and the tech companies in particular, end up with a free ride that will leave us with an unsustainable system and with the system is far less effective than it could be if it had the full resources of all of those who participate and potentially benefit from it.
And it was also engaged them in some of the innovation that is, uh, addressed in one, two, seven, again, one, two, seven. I can see the advantages that are presented here by the content of one, two, seven. But there's just one more feature that I would like to add. One of my permanent frustrations with the regulator has been that they do not step in when there is market failure. They always say if a new company comes in, a new business comes in that will fill a gap.
We will regulate them appropriately. That's our contribution. That's to encouraging, uh, players to come in and fill the space where there is market failure. And one very good example is lending to small businesses, but there are many more sort of market failures that, that the, that the FCA will very happily acknowledge, but then say, but it's not my job to get that gap filled. Now, the US regulators take a very different view. If there is a market failure, they will they will take they will be proactive in trying to design incentives and opportunities to go out and in effect, market to relevant players so that the gap is then in turn filled.
A very simple example is in the United States, thanks to the regulators, something that I call bank in the box. And I've got to be careful because there is a company of that name was actually devised to enable small players to come into the lending space, because in that box were all of the regulatory pieces that a banking service needed to offer, so that it would be very simple for a new player to simply plug in the investors at one end of the particular customer base at the other. And it also meant that in time of means that in time of failure, that that small bank can very easily be recovered because all of the complex content of regulation and compliance is in the box, that in a way that is understood by, um, by a, by, by the others within the system.
It's a small I've talked to the FCA about what about bank in the box. If somebody comes forward with it, we will very gladly regulate it, but we will not take a step that would encourage the provision of some such, uh, service. So I would love to see that incorporated in the innovation discussion that this approach to market failure regulators were incredibly influential. And it's amazing what a few words from regulator that or a proposal from a regulator will do to make sure that action actually happens.
19:30
Speaker 9
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Speaker 9
My Lords, I am grateful to my noble friend, Lord Holmes. And for his rather delicate comments on the pale and male, uh, for bringing forward these amendments. An important set of questions about open finance, innovation, emerging technology, and the extent to which regulatory framework is preparing for the financial services market of the future. We welcome the spirit of this group, my noble friend, Lord Ranger of Northwood has tabled amendments in later groups which address digital assets specifically. So I will not preempt that debate now.
But the broader question raised by this amendment is vital how are we preparing for financial technologies on their way, and in many cases are already here?Regulation cannot be developed only for the market we have today. It must be developed with the market of tomorrow in mind. We need a forward facing regulatory framework, not one that is constantly trying to catch up after innovation has already moved elsewhere. That means anticipating new technologies, understanding how firms are using them, and creating a clear and proportionate regime before uncertainty drives businesses out of the United Kingdom.
And it is worth just reflecting, as we close the committee day today, that this amendment actually touches on a very fundamental change that might be coming to financial regulation, because all the earlier amendments really do concern. How is credit distributed within the UK in our current structure and our current structure?Remember, does rest on fractional reserve banking. It rests on very large customer deposits. Lloyds Bank is holding $600 billion of customer deposits currently. And these this mixture of innovations in open banking and open finance and digital currency, they would completely upend the regulatory environment in which finance is operating at the moment.
So while it might feel rather sort of edgy to sort of talk about an innovation, unit, is that completely and fundamentally at the heart of where financial regulation is going, and many of the things we've been talking about might find themselves quite out of time quite quickly if some of these technologies were to advance. Uh, if firms developing digital assets, tokenization, AI enabled financial services, open finance tools, or new payment systems cannot get clarity in the UK, they will go to jurisdictions where the rules are clearer, faster, more supportive of innovation.
We have already seen concerns that the UK risks falling behind in some of these areas. We want the United Kingdom to be a place where financial innovation can thrive, but that requires clarity, leadership and a regulatory framework that is designed for the future. I hope the Minister can provide reassurance that this is the direction in which the government are moving and the nature of drivers for innovation, as he sees it.
But the broader question raised by this amendment is vital how are we preparing for financial technologies on their way, and in many cases are already here?Regulation cannot be developed only for the market we have today. It must be developed with the market of tomorrow in mind. We need a forward facing regulatory framework, not one that is constantly trying to catch up after innovation has already moved elsewhere. That means anticipating new technologies, understanding how firms are using them, and creating a clear and proportionate regime before uncertainty drives businesses out of the United Kingdom.
And it is worth just reflecting, as we close the committee day today, that this amendment actually touches on a very fundamental change that might be coming to financial regulation, because all the earlier amendments really do concern. How is credit distributed within the UK in our current structure and our current structure?Remember, does rest on fractional reserve banking. It rests on very large customer deposits. Lloyds Bank is holding $600 billion of customer deposits currently. And these this mixture of innovations in open banking and open finance and digital currency, they would completely upend the regulatory environment in which finance is operating at the moment.
So while it might feel rather sort of edgy to sort of talk about an innovation, unit, is that completely and fundamentally at the heart of where financial regulation is going, and many of the things we've been talking about might find themselves quite out of time quite quickly if some of these technologies were to advance. Uh, if firms developing digital assets, tokenization, AI enabled financial services, open finance tools, or new payment systems cannot get clarity in the UK, they will go to jurisdictions where the rules are clearer, faster, more supportive of innovation.
We have already seen concerns that the UK risks falling behind in some of these areas. We want the United Kingdom to be a place where financial innovation can thrive, but that requires clarity, leadership and a regulatory framework that is designed for the future. I hope the Minister can provide reassurance that this is the direction in which the government are moving and the nature of drivers for innovation, as he sees it.
19:32
Speaker 15
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Speaker 15
My Lords. I'm grateful for the noble Lord, Lord Holmes of Richmond for amendments one, two, six and one, two, seven, and for raising the important issues of innovation, inclusion and the future shape of financial services. I indeed spent ten years building a business in this space for the insurance sector. So it's something that's dear to my heart. The government recognised the importance of these themes, and as I said, a second reading, this bill is intended to modernise the way the sector is regulated, to help it grow and lend more to businesses and to make consumer protections fit for the digital age.
To turn to amendment one, two, six, the government fully recognised the potential of smart data schemes, including open banking and open finance. The wide range of benefits from smart data were set out in the government's Smart Data Strategy, published in March this year by the Department of Business and Trade and the FCA's Open Finance Roadmap, published in April this year, sets out steps for collaborating across industry and the wider ecosystem to explore extending the principles of open banking to a much broader range of products. We've already made it clear that the long term regulatory framework for open banking will help to secure the foundations for open finance, and that our ambition is for the UK to remain a world leader in this area.
The government will be consulting on the long term regulatory framework for open banking in the coming weeks, and intends to lay a statutory instrument by the end of this year. The FCA's roadmap is an important step in exploring what is needed to support the development of open finance. The noble Lord, Lord Holmes, has noted that the government already has powers under the data Use and Access Act 2025. This power enables the government to create a framework for open finance, including a wide range of financial data, not just the current account data.
This includes the power to require the FCA to regulate for open finance, including making rules about the sharing of customer data with financial services providers through interoperable interfaces. And the government has already committed to set out further data on this approach to open finance during the summer. On amendment one two, seven, the government agrees that regulators must have access to the right expertise as financial services evolve, and innovation and financial inclusion should be embedded in the approach that regulators take. The FCA's Innovation Hub, which includes both the regulatory and digital sandbox designed to support firms to launch innovative products and services and on payment systems.
The bill provides the FCA with objectives and powers that are generally equivalent to those of the Payment services regulators, including innovation and competition objectives, alongside a broad service user objective. This will allow the FCA to respond to the interests of service users as markets and technologies evolve, and the FCA is already well versed in considerations of competition, innovation and the interests of consumers and businesses due to its wider role as a regulator for financial services. As the committee discussed on Monday, financial inclusion is a key priority for this government, and we continue to work closely with the FCA to ensure individuals get the right support with their financial products and services.
This includes working with the FCA on the delivery of the financial inclusion strategy. The FCA already uses its innovation services to further innovation, which supports financial inclusion. For example, the FCA ran a tech sprint which supported firms to develop innovative services such as brand new apps to support people when they are declined for credit, and AI tools to spot scams and simplify terms and conditions. The government considers the FCA must have the flexibility to determine how best to reflect expert input across its functions to deliver on its objectives in a fast moving landscape.
The government is supportive of the broad objectives the noble Lords are pursuing innovation, inclusion and a regulatory framework that keeps pace with the change. But we do not consider these amendments to be the right mechanisms for achieving those aims. The reasons I've set out. I therefore respectfully ask the noble Lord to withdraw his amendment.
To turn to amendment one, two, six, the government fully recognised the potential of smart data schemes, including open banking and open finance. The wide range of benefits from smart data were set out in the government's Smart Data Strategy, published in March this year by the Department of Business and Trade and the FCA's Open Finance Roadmap, published in April this year, sets out steps for collaborating across industry and the wider ecosystem to explore extending the principles of open banking to a much broader range of products. We've already made it clear that the long term regulatory framework for open banking will help to secure the foundations for open finance, and that our ambition is for the UK to remain a world leader in this area.
The government will be consulting on the long term regulatory framework for open banking in the coming weeks, and intends to lay a statutory instrument by the end of this year. The FCA's roadmap is an important step in exploring what is needed to support the development of open finance. The noble Lord, Lord Holmes, has noted that the government already has powers under the data Use and Access Act 2025. This power enables the government to create a framework for open finance, including a wide range of financial data, not just the current account data.
This includes the power to require the FCA to regulate for open finance, including making rules about the sharing of customer data with financial services providers through interoperable interfaces. And the government has already committed to set out further data on this approach to open finance during the summer. On amendment one two, seven, the government agrees that regulators must have access to the right expertise as financial services evolve, and innovation and financial inclusion should be embedded in the approach that regulators take. The FCA's Innovation Hub, which includes both the regulatory and digital sandbox designed to support firms to launch innovative products and services and on payment systems.
The bill provides the FCA with objectives and powers that are generally equivalent to those of the Payment services regulators, including innovation and competition objectives, alongside a broad service user objective. This will allow the FCA to respond to the interests of service users as markets and technologies evolve, and the FCA is already well versed in considerations of competition, innovation and the interests of consumers and businesses due to its wider role as a regulator for financial services. As the committee discussed on Monday, financial inclusion is a key priority for this government, and we continue to work closely with the FCA to ensure individuals get the right support with their financial products and services.
This includes working with the FCA on the delivery of the financial inclusion strategy. The FCA already uses its innovation services to further innovation, which supports financial inclusion. For example, the FCA ran a tech sprint which supported firms to develop innovative services such as brand new apps to support people when they are declined for credit, and AI tools to spot scams and simplify terms and conditions. The government considers the FCA must have the flexibility to determine how best to reflect expert input across its functions to deliver on its objectives in a fast moving landscape.
The government is supportive of the broad objectives the noble Lords are pursuing innovation, inclusion and a regulatory framework that keeps pace with the change. But we do not consider these amendments to be the right mechanisms for achieving those aims. The reasons I've set out. I therefore respectfully ask the noble Lord to withdraw his amendment.
19:36
Speaker 4
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Speaker 4
My all noble lords who've taken part in this short debate and to the points raised by Baroness Kramer in terms of who pays, I agree entirely, I think, to the noble ladies earlier. Amendment on app. I agree. I think when we have variety now of participants in this market, it's right that if you're in the market, you pay alongside all the other participants rather than the asymmetry which currently exists of banks being on the hook. And others, shall we say, swimming freely.
I also agree with the main thrust of all of her other points, none of which made me queasy at all. Can I thank the Minister for his response?I agree largely with his comments. I just delicately say that. Bringing in expert, independent voices in a more formalized but flexible structure would further empower the FCA to take the excellent work that they're doing in innovation and go broader and go faster. I minister to reflect on that. If there's more the government can do in concert with them without in any sense fettering their discretion, I believe it would give them even even more power to increase the fantastic work they're doing across all of these emerging technologies.
But for now, I beg leave to withdraw the amendment.
I also agree with the main thrust of all of her other points, none of which made me queasy at all. Can I thank the Minister for his response?I agree largely with his comments. I just delicately say that. Bringing in expert, independent voices in a more formalized but flexible structure would further empower the FCA to take the excellent work that they're doing in innovation and go broader and go faster. I minister to reflect on that. If there's more the government can do in concert with them without in any sense fettering their discretion, I believe it would give them even even more power to increase the fantastic work they're doing across all of these emerging technologies.
But for now, I beg leave to withdraw the amendment.
19:38
19:38
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19:39