Secondary International Competitiveness and Growth Objective (FSR Committee Report)

Lord Hill of Oareford Excerpts

Wednesday 11th March 2026 Grand Committee

[Lord Hill of Oareford (Con)]

My Lords, I declare an interest as a board member of Intercontinental Exchange in the United States, and as an adviser in Europe to Santander and Visa Europe. This enables me to see the very different regulatory approaches in different jurisdictions, which is, indeed, one of the themes that we have already referred to today.

I am very grateful to my noble friend Lady Noakes—in keeping with tradition, I almost called her Lady Bowles, an in-joke among committee members—for setting out the range of issues so clearly at the beginning and for taking on the burden of chairing us. I much enjoyed the comments from the noble Lord, Lord Kestenbaum. How sad we are that he is no longer with us—on the committee, I mean; it is not that the noble Lord sits before us as a hologram, or agentic AI as I believe it might be called. I want to highlight a couple of points from the deliberations of the committee and the report.

First, as I think the noble Lord, Lord Vaux, has already said, the secondary international growth and competitiveness objective has made and is making a difference. I admit that when it was introduced I was initially sceptical and thought it might just be a piece of window dressing. But in fact, in the hands of motivated Ministers—which I am glad to say we have had—it has turned out to be of real use. It has helped us open up a more intelligent discussion about risk. Direct parliamentary accountability through our committee, backed up by a system of metrics, has also given us some scaffolding, off which we have been able to build a better debate and a better system of holding regulators to account. I think we have seen how the regulators themselves—it must be said that they were initially extremely doubtful about this requirement, if not resistant to it—have started to warm to it. Indeed, they now argue that it is helping them to improve both their regulatory and their supervisory practice. So far, so good.

But as our report points out, and as my noble friend Lady Noakes has already said, we should think of this whole area as a work in progress, not as a fixed point. After all, our own risk appetite as a society is not fixed, nor is that of our international competitors. Indeed, we have only to look at recent regulatory developments in the United States since we started our inquiry to see just how dynamic and competitive that landscape is.

Therefore, as the report argues, we need to keep the metrics by which we judge the performance of the regulators under constant review. We should seek to tighten them, to be more ambitious, to raise the bar and to keep on pushing for better performance. Here, as we have already heard, the Government’s response to the committee’s recommendations was, I have to say, disappointing. Metrics may not sound very dramatic or poetic, but they are the means by which we can shine a light into the world of regulation and supervision. I argue that the Government should be more ambitious here, and so should our regulators.

I will draw attention to one other area: the question of whether we could do more to differentiate between how we think about regulating wholesale and retail markets. We raised this in the report, and we heard evidence that suggested that attitudes of mind developed in the field of consumer protection are, as it were, leaking across into the regulation of wholesale markets. Here, obviously, risk appetite and sophistication of investors are completely different, and it is in wholesale markets that London’s claim to be a global financial centre will be won—or lost. Ministers have given us hints that they think it is worth thinking more carefully about this wholesale/retail distinction, and perhaps the Minister might feel able to give us another hint today.

I have a final word for the financial services sector itself. Just as we want to prevent mission creep from regulators and supervisors, so the sector needs to prevent it in its own compliance departments, legal advice and board discussions. If we want to have a new attitude in Britain that is more accepting of risk, we cannot just blame everything on the poor old regulators. Yes, they have their share of responsibility, but the primary responsibility surely rests with the politicians, who have for too long outsourced the management of risk.

I believe that this report starts to unpack many of these issues, and it helps us in the long march of improving how we regulate and supervise financial services, unlocking more innovation and, ultimately, more capital to invest in our economy.