FINANCIAL SERVICES (ELECTRONIC MONEY, PAYMENT SERVICES AND MISCELLANEOUS AMENDMENTS) (EU EXIT) REGULATIONS 2019

John Glen Excerpts

Monday 7th October 2019 General Committees

[The Economic Secretary to the Treasury (John Glen)]

I beg to move,

That the Committee has considered the Financial Services (Electronic Money, Payment Services and Miscellaneous Amendments) (EU Exit) Regulations 2019 (S.I. 2019, No. 1212).

It is a pleasure to serve under your chairmanship, Ms Buck. As the Committee will be aware, Parliament has now approved well over 50 exit statutory instruments for financial services. They have included three on miscellaneous provisions, which are sometimes necessary to make isolated deficiency fixes, which do not fit easily into more thematic instruments. Those miscellaneous SIs have sometimes been used to correct minor errors or omissions made in earlier exit legislation. The one before the Committee also makes some minor corrections, as well as updating some earlier exit provisions to account for the article 50 extension.

Some hon. Members have been critical of the SIs, arguing that the correction of errors shows that we are putting rushed, poorly drafted legislation before Parliament. I want to make it clear that that is not the case. Errors have been few and minor and I applaud and thank my colleagues in the Treasury—particularly Lee O’Rourke and his team—for the work that they have undertaken in difficult circumstances over many months.

Financial services onshoring has been an unprecedented legislative challenge and I think we should acknowledge the constructive and effective collaboration that has taken place between the Treasury, our regulators and our industry stakeholders. I can tell the Committee that the regulators and the industry do not think our legislation has been poorly thought through—quite the opposite. In my time as Minister responsible for financial services exit legislation, the message from our regulators and from the industry has been clear: the legislation is essential to ensure that our regime is prepared for exit in any scenario and it is vital to underpin confidence in our regulatory regime.

In contrast to the previous miscellaneous provisions instruments, the SI makes substantive changes to earlier exit legislation in two key areas: the contractual continuity and temporary permissions regimes for payment services; and transitional arrangements for financial benchmarks. Those changes are not to correct errors but to strengthen our readiness for exit, and I make no apology for that. We are continually reviewing our exit arrangements to ensure that they are as robust as they can be. In those two areas, we decided that it is right to do more to protect UK consumers of payment services and to prevent disruption to firms and markets that rely on financial benchmarks.

First, an important part of our onshoring programme is to provide a range of temporary permissions and contractual continuity schemes to minimise disruption to UK consumers and businesses currently serviced by European economic area firms. Part 3 of the instrument supplements provisions for the temporary permissions and contractual continuity regimes for EEA payments and e-money firms. A review of that legislation has identified a limited number of provisions that should be amended to ensure that the temporary regimes are as robust as possible.

The amendments fall into two categories. The first category is to ensure that EEA firms in contractual run-off can continue to carry out various payment-related activities, as intended. That will include provision of payment and e-money services by EEA credit institutions such as banks. The second category of amendments applies to the temporary regimes for EEA payments and e-money firms. Those amendments clarify and make more explicit the full range of permissions and obligations of firms that enter those regimes. For example, the amendments make it explicit that an EEA firm in a run-off regime can legally redeem outstanding electronic money. That clarifies the fact that they can return any balance on an account to UK e-money holders.

Also, in a limited number of areas, the instrument makes Financial Conduct Authority powers more consistent with the powers it has with respect to credit institutions in the run-off regimes, such as by making it explicit that the FCA may publish a register of firms in contractual run-off. Those changes ensure that the FCA has proportionate powers to take action to protect UK consumers.

The second substantive set of provisions in this SI covers changes being made to the onshored benchmarks regulations. As they currently stand, those regulations contain a transitional regime for third-country benchmarks, allowing UK entities to use non- registered third-country benchmarks up until 31 December 2019. However, since the regulations were made it has become clear that there will be a damaging cliff-edge when the transitional regime expires at the end of 2019—a point highlighted by the Secondary Legislation Scrutiny Committee in its report published on 3 October. Very few third-country benchmark administrators have made applications to be registered, and only two equivalence determinations have been made by the European Commission, covering only seven third-country benchmarks.

If we leave the EU without a deal on 31 October, benchmark administrators outside the UK will have insufficient time to make an application under the UK regime by 31 December 2019. That would mean that UK firms would no longer be able to use those benchmarks for new contracts and products, causing considerable market disruption. For example, loss of access to third-country foreign exchange rate benchmarks could prevent firms from carrying out important risk management functions, such as hedging their currency risk. This SI extends the period in which the transitional regime applies by three years, from the end of 2019 to the end of 2022, ensuring that benchmark administrators outside the UK have an appropriate period of time to make an application under the UK’s onshored third-country regime.

I also want to explain the amendments that the SI makes to our onshored equivalence framework. Those amendments are purely for legal clarity and do not change the policy approach to equivalence that Parliament has already approved. When making an equivalence determination after exit, the law needs to be clear on the aspects of the UK regime for which a third country has equivalent provisions. If Parliament approves a decision on a third country having equivalent insurance regulation to the Solvency II directive, UK law will be clear that that refers to the UK’s implementation of Solvency II as it stands when the equivalence decision is made.

Before I conclude, it is important that I address the procedure under which this statutory instrument has been made. This, along with three other financial services exit SIs, were laid before Parliament on 5 September, under the “made affirmative” procedure provided for in the European Union (Withdrawal) Act 2018. This is an urgent procedure that brings an affirmative instrument into law immediately, before Parliament has considered the legislation. The procedure also requires that Parliament must consider and approve a “made affirmative” SI if it is to remain in law.

The Government have not used that procedure lightly. It must be remembered that, across Departments, we have already laid over 600 exit SIs under the usual secondary legislation procedures. But as we draw near to exit day, it is vital that we have all critical exit legislation in place, including legislation necessary to ensure that our financial services regulatory regime continues to function effectively from exit. It would have been reckless to leave that until the last minute: industry and our financial regulators need legal certainty on the regime that will apply from exit. Without addressing the deficiencies covered by this SI, there would be significant legal uncertainty for firms and our regulators.

To conclude, this statutory instrument makes important additional deficiency fixes that will improve our state of readiness for exit. Regulators and the industry support our approach. This SI will help reinforce the message that Government and Parliament will not take any chances with the safe and effective operation of the UK’s regulatory regime. I hope that colleagues will join me in supporting these regulations, which I commend to the Committee.

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[John Glen]

I would like to respond to the points made by the hon. Member for Stalybridge and Hyde, and I thank him for the typical courtesy and care in his remarks with respect to this process. He made a number of points around the challenges of this approach, and I think we could both agree that this has not been an ideal process. We have worked through it, as a Committee, on probably nearly 40 occasions over the last 12 months.

The hon. Gentleman raised concerns around, in essence, the mistakes. I reassure him that there is no casualness to our approach. All SIs pass through quality control procedures, and we have engaged extensively with regulators and industry, where appropriate, in drafting them. We publish them in advance of laying them, in order that a degree of familiarity can be gained. However, as with all legislation, drafting errors occur from time to time, and we put them right as soon as they are discovered. When considering the volume and complexity of the financial services legislation made under the European Union (Withdrawal) Act 2018, drafting errors have been minor and small in number. We have grouped them under the miscellaneous provisions and have worked closely with regulators to get them right.

The hon. Gentleman asked me to speculate on the nature of future amendments, should any be needed. Obviously, I cannot give an absolute assurance. He asked about the inclusion of the capital requirements regulation in this particular instrument. That is so because this is a collective, miscellaneous capturing of small and essentially legally significant but inconsequential changes.

The hon. Gentleman asked about the benchmarking issue. Not many firms have gone through the process of applying, which is why so few have gained permission. We have aligned the instrument with what we have done with many of the transitional regimes by making a three-year provision. That will allow greater certainty in the marketplace. I acknowledge his broader concerns about the process, but we have done all that we can to ensure that we are in the best possible position in the undesirable outcome of no deal at the end of October. I think that I have dealt substantively with the hon. Gentleman’s points.

I accept that the supplementary measures and provisions included in the instrument will help to ensure that the UK’s financial services regulatory regime remains prepared for withdrawal from the EU in any scenario. I recognise that considerable work will need to be done if we leave with no deal, and that we would have to bring that before the House. I hope that the Committee has found the sitting informative and will join me in supporting the regulations.

Question put and agreed to.

Bilateral Loan to Ireland

John Glen Excerpts

Thursday 3rd October 2019 Written Statements

[The Economic Secretary to the Treasury (John Glen)]

I would like to update Parliament on the loan to Ireland.

In December 2010, the UK agreed to provide a bilateral loan of £3.2 billion as part of a €67.5 billion international assistance package for Ireland. The loan was disbursed in eight tranches, and the final tranche was drawn down on 26 September 2013. Ireland has made interest payments on the loan every six months since the first disbursement.

On 30 September, in line with the agreed repayment schedule, HM Treasury received a total payment of £406,324,326.08 from Ireland. This comprises the repayment of £403,370,000 in principal and £2,954,326.08 in accrued interest.

HM Treasury has today provided a further report to Parliament in relation to the loan as required under the Loans to Ireland Act 2010. The report relates to the period from 1 April 2019 to 30 September 2019. It reports fully on the three principal repayments received by HM Treasury during this period, and sets out details of future payments up to the final repayment on 26 March 2021. The Government continue to expect the loan to be repaid in full and on time.

A written ministerial statement on the previous statutory report regarding the loan to Ireland was issued to Parliament on 1 April 2019, Official Report, column 29WS.

[HCWS1849]

Draft Local Loans (Increase of Limit) Order 2019

John Glen Excerpts

Thursday 3rd October 2019 General Committees

[The Economic Secretary to the Treasury (John Glen)]

I beg to move,

That the Committee has considered the draft Local Loans (Increase of Limit) Order 2019.

It is a pleasure to serve under your chairmanship, Mr Gray. Parliament is asked periodically to raise the limit on lending by the Public Works Loan Commissioners to local authorities. The draft order, which is being introduced under the Finance Act 2014, will raise the limit on the sum of loans that may be outstanding at one time from the Public Works Loan Commissioners, from £85 billion to £95 billion. The procedure is well established: it has been done approximately 20 times since the limit was established in 1968. The commissioners currently have £2.3 billion available to lend before they reach the existing lending limit of £85 billion. Demand for this lending can be volatile and is heightened in periods when the Government’s cost of borrowing is low, as it is now.

The draft order will ensure that councils can continue to build and maintain infrastructure and other capital projects, such as local roads and maintained schools. It does not authorise any increase in the capital expenditure of local authorities or in the amount that they may borrow. Borrowing and investment decisions are subject to statutory guidance that applies at the level of the individual authority. Decisions about whether and how to borrow are a matter for each local authority’s elected council, which is accountable to its electorate. Local authorities may borrow from any willing lender, provided that the authority’s finance director is satisfied that the borrowing complies with relevant law and is affordable from the authority’s revenues.

Whether local authorities meet their borrowing needs from the commissioners or from the private lending market, the effect on public spending, borrowing and debt is broadly the same. There are two advantages of the Public Works Loan Board, however: quick access to PWLB loans gives local authorities long-term certainty in their capital plans, and the interest paid on them stays in the public sector and is recycled into spending on public services.

I hope that the whole Committee will join me in thanking the Public Works Loan Commissioners for the services that they render, on an entirely voluntary basis, to the benefit of the citizens of this country, as well as the staff of the Public Works Loan Board who support their work.

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[John Glen]

I want to say from the outset that the draft order does not affect the amount that local authorities can spend or borrow. It simply makes money available for the Public Works Loan Commissioners to lend if local authorities wish to borrow. The service is valuable and the Government recommend that it continues to be available.

The hon. Gentleman made two substantive points and I am happy to respond to then. He made a general point about the resource needs of local authorities, and then, in an era of seeking a yield, he referred to the research paper on property and other investments. The Government are helping to support the financial sustainability of local councils. The spending round a few weeks ago in respect of the local government settlement provided the largest increase in spending power since 2010, increasing core spending power by £2.9 billion, or 4.3% in real terms. It includes an additional £1 billon of grant funding for adult and children’s social care on top of maintaining £2.5 billion for existing social care grants.

As I have made clear, the SI relates to the rules of capital expenditure through the Public Works Loan Board. Borrowing can be used only for capital investment. Both I and my right hon. Friend the Chief Secretary keep the expenditure of local government under close review.

On the hon. Gentleman’s assertions about where the search for yield can go, local borrowing and spending decisions are made at a local level. They are subject to the prudential code of the Chartered Institute of Public Finance and Accountancy and to statutory guidance from the Ministry of Housing, Communities and Local Government. That guidance was updated in 2018 and makes clear that local authorities that borrow more than, or in advance of, their needs solely to generate profit are not acting in accordance with the prudential framework. MHCLG is currently reviewing the impact of the revisions to the prudential framework.

When local authorities borrow, they must have regard to the prudential framework as set out by the aforementioned bodies. Borrowing and capital spending decisions are devolved to local councils, but it is expected that they should not take on disproportionate levels of financial risk, especially where it is funded by additional borrowing. PWLB finance continues to play a critical role in helping local authorities transform services and realise broader objectives, such as local growth regeneration via their capital strategies. I hope that those two clarifications meaningfully meet the concerns raised by the hon. Gentleman, and I hope the Committee has found this morning’s sitting informative and will join me in supporting the draft order.

Question put and agreed to.

Oral Answers to Questions

John Glen Excerpts

Tuesday 1st October 2019 Commons Chamber

[The Economic Secretary to the Treasury (John Glen)]

The UK has an extensive and internationally enviable free ATM network. We know that many people still use cash day to day, and we have committed to safeguarding cash for those who need it. I am delighted that UK Finance and LINK are leading industry efforts to protect free cash access. That culminated in UK Finance launching the Community Access to Cash initiative just yesterday.

[Mrs Hodgson]

The Minister says that, but news that NoteMachine is to convert 3,000 of its 7,000 free-to-use cash machines to pay-to-use machines is of great concern to my constituents. According to Which?, we have lost 15% of our free-to-use ATMs over the past year alone. The previous Labour Government formed an agreement with ATM operators and the Treasury to plug gaps in financially deprived areas where people had to pay to access their cash, so what are this Government going to do to prevent people being charged just for trying to access their own money?

[John Glen]

Use of cash has reduced significantly faster than expected over the past 10 years. I am meeting UK Finance and LINK tomorrow to ensure that their mechanism is good for the current situation. The new initiative to which I referred in my previous response will give communities up and down the country the opportunity to engage with UK Finance on better and new solutions.

[Several hon. Members rose—]

[Sir Gary Streeter (South West Devon) (Con)]

Is not the closure of ATMs linked to the decision by high street banks to close their branches left, right and centre? Will the Minister, in his regular meetings with the chief executives of high street banks, remind them that they do have some duty to elderly customers and small businesses?

[John Glen]

I do that regularly. We are also trying to ensure that the transfer of responsibility to the Post Office runs smoothly, because 99% of people live within 1 mile of a post office, so it is a very good alternative for the vast majority of their banking services.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

Hull’s high street is still very cash-reliant, and I am really worried about the blow that this reduction will give to an already struggling high street. Will the Economic Secretary please speak directly to the Payment Systems Regulator about what further measures can be taken to prevent the reduction in free-to-access cash machines?

[John Glen]

Yes, I am very happy to continue to engage with the regulator, and I noted the hon. Lady’s urgent question application earlier today. Digital payment alternatives improve local cash recycling and support cashback initiatives. Mastercard and Visa have a number of initiatives under way, and I am determined to see progress in this area.

[Mr Philip Dunne (Ludlow) (Con)]

With a third of banks, many of which had ATMs, closing in rural areas, and with very poor mobile connectivity in those areas meaning that digital payment schemes are not possible, I was very pleased to learn of yesterday’s announcement by UK Finance on Community Access to Cash, to which the Economic Secretary referred. That is the way forward, but what can he do to reassure business providers that if they provide ATMs, they will be safe from break-in?

[John Glen]

We have to ensure that there is a wide range of options in rural areas. A number of trials are under way to provide solutions, underpinned by the investment in gigabit infrastructure that my right hon. Friend the Chancellor announced yesterday, which will ensure that we have even better connectivity in remote rural areas.

[Neil Coyle (Bermondsey and Old Southwark) (Lab)]

7. What recent discussions he has had with the Secretary of State for Housing, Communities and Local Government on the adequacy of funding allocated to tackling rough sleeping.

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[Kevin Hollinrake (Thirsk and Malton) (Con)]

I welcome the introduction of the new business banking resolution service that will start to hear cases of historical problems later this year. In the previous Chancellor’s letter of 19 January, he stated that that scheme should carefully consider all cases that come before it. How is that possible when the research of the all-party parliamentary group on fair business banking determined that 85% of cases are excluded?

[The Economic Secretary to the Treasury (John Glen)]

I thank my hon. Friend for his question. He is a powerful advocate for this redress scheme and I thank him for the work that he has done. In our conversation on 10 September, I reiterated the Government’s position that the scheme should not reopen complaints that have sometimes gone multiple times through the courts, but I welcome the fact that the new scheme will give access to 99% of those claims going forward, and I will continue to engage with him where I can to provide solutions on individual cases.

[Sarah Jones (Croydon Central) (Lab)]

T6. Westfield and Hammerson are due to build a new shopping centre in my constituency. Westfield has been bought by Unibail-Rodamco, which is a large French developer, and it has concerns about the state of retail and Brexit, obviously. The previous Chancellor had just agreed to meet the chief exec of Unibail-Rodamco. Will the current Chancellor honour that commitment and meet them?

Asset Sale Disclosure: Kaupthing Singer and Friedlander

John Glen Excerpts

Monday 9th September 2019 Written Statements

[The Economic Secretary to the Treasury (John Glen)]

I am informing the House of the sale of the remainder of a claim against Kaupthing Singer and Friedlander Limited (in administration) (“KSF”) acquired by the Government during the 2007-08 financial crisis. The Government’s claim was held by the financial services compensation scheme (“FSCS”) which compensated KSF depositors at the time of the financial crisis. This sale to Tavira Securities Limited generates proceeds of £17.8 million for the Exchequer.

Rationale

The Government acquired their claim in KSF to preserve financial stability. The administration of KSF has now been running for over nine years and there is comparatively little value remaining in the residual assets. The Exchequer has received £421 million of dividends prior to this sale. In addition, FSCS has repaid to the Exchequer £2.6 billion (plus interest of £146 million) which it borrowed at the time of the financial crisis to enable it to pay compensation for covered deposits in KSF.

Continuing to hold the claim until the administration of KSF concluded was considered, but this option was discounted as the analysis suggested a sale could achieve value for money and would free up FSCS and HM Treasury capacity previously used to manage the claim to pursue other work.

FSCS discussed the sale with a number of potential counterparties, having previously examined the market for selling claims. The counterparty selected offered the highest price.

The proceeds from this sale will reduce public sector net debt. This marks the conclusion of the Government’s and FSCS’s involvement in KSF.

Format and timing

The Government and FSCS concluded that this sale achieves value for money for the taxpayer having (i) conducted an analysis of whether market conditions were conducive for the sale of this asset; and (ii) conducted an assessment of the fair market value for the asset. The sale made use of a third party broker experienced in selling claims against insolvent companies, which was done to create competitive tension among potential ultimate buyers of the asset.

Fiscal impacts

I can confirm that the sale proceeds of £17.8 million are within the hold valuation range. In 2019-20 the sale reduces public sector net debt (PSND) by £17.8 million and public sector net liabilities (PSNL) and public sector net financial liabilities (PSNFL) by £2.3 million.

The impacts on the fiscal aggregates, in line with fiscal forecasting convention, are not discounted to present value. The net impacts of the sale on a selection of fiscal metrics are summarised as follows:

Draft Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 3) Regulations 2019

John Glen Excerpts

Monday 9th September 2019 General Committees

[The Economic Secretary to the Treasury (John Glen)]

I beg to move,

That the Committee has considered the draft Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 3) Regulations 2019.

It is a pleasure to serve under your chairmanship once again, Sir Edward. The Government previously made all the necessary legislation under the European Union (Withdrawal) Act 2018 to ensure that, in the event of a no-deal exit on 29 March 2019, there would have been a functioning legal and regulatory regime for financial services from exit day. Following the extension to the article 50 process, the Treasury has used the additional time to review existing EU legislation, in line with the Government’s commitment to take all necessary steps to ensure our regime remains prepared for exit.

The statutory instrument fixes deficiencies in new EU legislation that will become part of UK law at exit on 31 October and amends some EU exit provisions that have been made already to account for the extension. The review identified a number of minor errors in earlier EU exit instruments, which are corrected in this SI. I note that the Secondary Legislation Scrutiny Committee’s report on 25 July highlighted this SI as an “instrument of interest” for what it called the “range and magnitude” of changes it makes. The Committee also expressed concern about the scale of the challenge facing financial services firms in adjusting to the changes being made to financial services legislation generally.

Although the SI amends 15 pieces of legislation, the number of amendments is modest and the nature of the amendments is minor. They follow the same approach to fixing deficiencies in EU legislation as approved by Parliament in previous financial services EU exit SIs. They do not change policy or alter requirements on firms. The SLSC is right to raise the challenge that financial services firms will face in adjusting to changes introduced by exit legislation, but I can reassure the Committee that minimising this challenge for industry has been central to the onshoring project from the beginning.

Under other SIs approved by Parliament, the Treasury has introduced a variety of measures to smooth the transition for businesses in adjusting to changes in EU exit legislation, and to changed circumstances generally. Those measures include a range of temporary permissions and transitional regimes for European economic area firms and funds. Parliament has also granted the UK financial services regulators powers to phase in requirements that change as a result of EU exit legislation, giving firms the time they need to adjust in an orderly way. The regulators have consulted on their approach to phasing in these requirements, which involves broad use of their transitional powers, and have received a very positive response from the industry. We have also engaged with the industry on the development of all our SIs, to give it as much time as possible to become familiar with the legislation. Given the minor and technical nature of the amendments in this SI, I will not cover every provision in my opening remarks, but I am happy to take questions on any of the individual provisions.

The provisions in the SI cover three broad areas. First, the instrument amends a number of pieces of EU legislation that have become applicable in the period since the article 50 extension and will therefore form part of UK law on exit day, but that are not substantive enough to warrant separate additional instruments. For example, the European Commission recently introduced measures to further promote the use of small and medium-sized enterprise growth markets. Those trading platforms are subject to more proportionate regulation, making it easier for SMEs to raise finance. The SI makes minor amendments to the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018, to fix deficiencies in the new EU legislation and ensure it continues to function in UK law after exit. Following the approach approved by Parliament in previous financial services exit SIs, this SI gives UK regulators the job of fixing deficiencies in the new technical standards that have been adopted by the EU since 29 March.

Secondly, the SI amends existing EU exit legislation that is required to take account of the article 50 extension process. For example, the instrument makes a change to the Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019 by amending the date from which the Prudential Regulation Authority will be obliged to publish certain technical information that insurance and reinsurance firms must use to value their liabilities. Previously, the PRA had been required to begin publishing this information from 10 April 2019. The SI amends that date, so that the obligation on the PRA does not commence until an appropriate date after the UK has left the EU.

Finally, I will address the corrections that this instrument makes to earlier EU exit SIs. All the legislation laid under the European Union (Withdrawal) Act 2018 has gone through the normal rigorous checking procedures. However, as with any legislation, errors are made from time to time and it is important that they are corrected. Previously, when we found errors in financial services onshoring SIs, we sought Parliament’s approval to correct them as soon as possible, and we are doing the same now.

Although it is always regrettable when errors in legislation are made, it is important to keep them in perspective. The financial services onshoring effort has been an unprecedented legislative challenge for the Treasury, involving 53 SIs that make amendments to more than 500 pieces of EU and UK financial services legislation. These SIs have been positively received—indeed welcomed—by the regulators and industry, and they have provided reassurance that the UK financial services regime will continue to operate effectively from day one after exit day. In that context, the errors that we are seeking to correct are extremely minor and very small in number.

For example, the SI makes an amendment to the Criminal Justice Act 1993 to ensure that UK individuals trading financial instruments in the European economic area or Gibraltar are not guilty of insider dealing, which is a criminal offence, if they are compliant with the market abuse regime as it applies in those territories. This is not changing the criminal offence of insider dealing, but ensuring that the scope of the offence remains the same and operates effectively in UK law after exit.

As I explained in my opening remarks, the Treasury and Parliament have already completed the vast bulk of the legislative work that is necessary to ensure that our financial services regulatory regime is ready for exit. However, in line with this Government’s commitment, we continue to do all we can to ensure that our regime remains prepared. This SI makes additional fixes that will improve our state of readiness.

I know that regulators and the industry support our effort to address every legislative deficiency, and the SI helps to reinforce the message that the Government and Parliament will not take any chances with the safe and effective operation of the UK’s regulatory regime. I hope that colleagues will join me in supporting these regulations, which I commend to the Committee.

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[John Glen]

I acknowledge the dissatisfaction of the hon. Members for Stalybridge and Hyde and for Glasgow Central with this process. As I have always stated when I bring these statutory instruments to the Committee, we have tried throughout to ensure that we are in the best possible state in the outcome of no deal. As my hon. Friend the Member for Poole rightly set out, my colleagues in the Treasury have used the time during the extension to address the elements that were deemed to be defective. We have worked with the regulators and industry and we are continually testing our exit preparations. Both industry and the regulators are reassured that only minor errors have come to light, and this process is about correcting those errors.

I will address the specific points raised by Opposition spokesmen. On the principle of amending so many pieces of legislation in one instrument, although the SI amends 15 pieces of legislation, the number of amendments is not high and their nature is minor. I have set out the categories, and the amendments are routine and minor deficiency fixes, which are required to ensure that the UK regulatory regime for financial services continues to be ready for exit. For that reason we brought them together in this single SI this afternoon.

The hon. Member for Stalybridge and Hyde raised the issue of legislative gaps in the contingency plans: for example, in the in-flight files. I assure him that the Government have ensured that all cliff-edge risks are addressed in exit legislation. There is now no immediate need for further in-flight files legislation. He also asked about the extension of ministerial direction and power. European central banks are exempt from EU regulations under the markets in financial instruments directive—MiFID. In the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019, Parliament approved a power for Treasury Ministers to determine that the EU would be equivalent or exempt under the equivalence regimes that will form part of EU law at exit, including equivalence or exemption under MiFID. Because the agreement between the EU and the European economic area on the implementing of MiFID has not been fully ratified, any UK decision would not cover EEA central banks or Norway and Iceland, so this SI also ensures that the new EU MiFID equivalence decision for Singapore made by the Commission in April works as intended in UK law after exit.

The hon. Gentleman talked about the impact on and substantive challenge for industry. As I tried to outline in my opening remarks, minimising the challenge of adjustments to industry to the changes brought by these SIs has been central to the onshoring project. We engaged extremely closely with industry representatives, particularly CityUK as the convening body, and the regulators on the development of the SIs. We published on the website numerous SIs in advance of laying them, to give as much opportunity as possible for feedback and so that firms could become familiar with them. We also introduced a variety of measures to smooth the transition for business, including a range of temporary permissions and transitional regimes for EEA firms and funds; those measures have been approved by the House. Parliament also granted powers to the regulators to phase in requirements on firms, again to minimise disruption and to ensure that any adjustments would be carried out in an orderly way, and that has been hugely welcomed by industry.

The hon. Member for Glasgow Central raised the issue of longer term challenges. I recognise that there is urgent work to do to optimise the competitive positioning of financial services, which, as she rightly said, is a hugely important industry across the United Kingdom, but this SI is not concerned with that. The hon. Gentleman made a point about the authorisation of payment services firms. Firms that enter the temporary permissions regime will be able to continue to provide the full range of services that they do now. That is the purpose of the scheme. On the hon. Lady’s point about how we will update legislation in the future, the aim of the onshoring legislation has always been to ensure that we have a functioning regime in all scenarios. Onshoring is designed to provide continuity and minimise disruption at exit, as well as to provide for Government and Parliament to design a regulatory framework fit for the future, and that remains the case. The Treasury introduced a call for evidence document on 19 July. It set out the context for a long-term review of the regulatory framework and the key issues that we will need to consider for a regime that operates outside the EU. The call for evidence closes on 18 October, and we will report back on that.

On the PRA and the appropriate date, I sought to make the point that we moved the date from 10 April because that related to the previous exit point. The PRA will publish the dates in due course, based on the date on which we leave the EU, which is yet to be determined.

I hope that the additional measures and corrections in the instrument will ensure that the UK’s financial services regulatory regime remains prepared for withdrawal from the EU in any scenario. I hope that I have responded adequately to the points raised and that the Committee will support the regulations.

Question put.

Loans to Ireland Act: Bilateral Loan

John Glen Excerpts

Wednesday 4th September 2019 Written Statements

[The Economic Secretary to the Treasury (John Glen)]

I would like to update Parliament on the loan to Ireland.

In December 2010, the UK agreed to provide a bilateral loan of £3.2 billion as part of a €67.5 billion international assistance package for Ireland. The loan was disbursed in 8 tranches. The final tranche was drawn down on 26 September 2013. Ireland has made interest payments on the loan every six months since the first disbursement.

On 30 July, in line with the agreed repayment schedule, HM Treasury received a total payment of £404,642,604.73 from Ireland. This comprises the repayment of £403,370,000 in principal and £1,272,604.73 in accrued interest.

As required under the Loans to Ireland Act 2010, HM Treasury laid a statutory report to Parliament on 1 April 2019 covering the period from 1 October to 31 March 2019. The report set out details of future payments up to the final repayment on 26 March 2021. The Government continue to expect the loan to be repaid in full and on time.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment data/file/791132/Ireland loan statutory report April 2019 web.pdf

The next statutory report will cover the period from 1 April to 30 September 2019. HM Treasury will report fully on all repayments received during this period in the report.

[HCWS1812]

Counter-terrorist Asset Freezing Regime: January-March 2019

John Glen Excerpts

Wednesday 4th September 2019 Written Statements

[The Economic Secretary to the Treasury (John Glen)]

Under the Terrorist Asset-Freezing etc. Act 2010 (TAFA 2010), the Treasury is required to prepare a quarterly report regarding its exercise of the powers conferred on it by part 1 of TAFA 2010. This written statement satisfies that requirement for the period 1 January 2019 to 31 March 2019.

This report also covers the UK’s implementation of the UN’s ISIL (Daesh) and al-Qaeda asset-freezing regime (ISIL-AQ), and the operation of the EU’s asset-freezing regime under EU regulation (EC) 2580/2001 concerning external terrorist threats to the EU (also referred to as the CP 931 regime).

Under the ISIL-AQ asset-freezing regime, the UN has responsibility for designations and the Treasury, through the office of financial sanctions implementation (OFSI), has responsibility for licensing and compliance with the regime in the UK under the ISIL (Daesh) and al-Qaeda (Asset-Freezing) Regulations 2011.

Under EU regulation 2580/2001, the EU has responsibility for designations and OFSI has responsibility for licensing and compliance with the regime in the UK under part 1 of TAFA 2010.

EU regulation (2016/1686) was implemented on 22 September 2016. This permits the EU to make autonomous al-Qaeda and ISIL (Daesh) listings.

The annexed tables set out the key asset-freezing activity in the UK during the quarter.



The attachment can be viewed online at: http://www. parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2019-09-04/HCWS1813/.

[HCWS1813]

Counter-terrorist Asset Freezing Regime: April-June 2019

John Glen Excerpts

Wednesday 4th September 2019 Written Statements

[The Economic Secretary to the Treasury (John Glen)]

Under the Terrorist Asset-Freezing etc. Act 2010 (TAFA 2010), the Treasury is required to prepare a quarterly report regarding its exercise of the powers conferred on it by part 1 of TAFA 2010. This written statement satisfies that requirement for the period 1 April 2019 to 30 June 2019.

This report also covers the UK’s implementation of the UN’s ISIL (Daesh) and al-Qaeda asset-freezing regime (ISIL-AQ), and the operation of the EU’s asset-freezing regime under EU regulation (EC) 2580/2001 concerning external terrorist threats to the EU (also referred to as the CP 931 regime).

Under the ISIL-AQ asset-freezing regime, the UN has responsibility for designations and the Treasury, through the office of financial sanctions implementation (OFSI), has responsibility for licensing and compliance with the regime in the UK under the ISIL (Daesh) and al-Qaeda (Asset-Freezing) Regulations 2011.

Under EU regulation 2580/2001, the EU has responsibility for designations and OFSI has responsibility for licensing and compliance with the regime in the UK under part 1 of TAFA 2010.

EU regulation (2016/1686) was implemented on 22 September 2016. This permits the EU to make autonomous al-Qaeda and ISIL (Daesh) listings.

The annexed tables set out the key asset-freezing activity in the UK during the quarter.

The attachment can be viewed online at: http://www. parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2019-09-04/HCWS1814/.

[HCWS1814]

Senior Managers and Certification Scheme: Extension to Financial Conduct

John Glen Excerpts

Thursday 18th July 2019 Written Statements

[The Economic Secretary to the Treasury (John Glen)]

Today the Bank of England and Financial Services Act 2016 (Commencement No. 6 and Transitional Provisions) Regulations 2019 (SI 2019/1136 C. 35) are published.

In my Written Ministerial Statement of 3 July 2018 [HCWS823] I announced that the senior managers and certification regime would come into force for financial services firms regulated by the Financial Conduct Authority only—also known as solo-regulated firms—from 9 December 2019.I would like to update the House that, in these regulations, there will be two exceptions to the commencement date, for newer categories of solo regulated firms.

The first are benchmark administrators. This is a new category of authorised firm introduced by the EU benchmark regulation, which came into force on January 1 2018. The benchmark regulations included a transitional period such that these firms have until the end of 2019 to become FCA authorised. The SM&CR will commence for benchmark administrators on 7 December 2020 to allow the FCA to carry out a dedicated consultation for benchmark administrators before making final rules for the sector.

The second are claims management companies (CMCs). The Government have already legislated to bring CMCs within the FCA’s regulation, and applications for authorisation are currently being considered by the FCA. Firms awaiting full authorisation, but previously regulated by the Ministry of Justice will have temporary permission to operate. Not all CMCs will have gained full authorisation by December 9 this year, so the commencement regulations confirm that the SM&CR begins for these firms on December 9 this year, or at the date at which they receive full authorisation if this is later.

[HCWS1743]