Draft Financial Services and Markets Act 2023 (Mutual Recognition Agreement) (Switzerland) Regulations 2025

Mark Garnier Excerpts

Monday 27th October 2025 General Committees

[Mark Garnier (Wyre Forest) (Con)]

I will not keep the Committee for too long. I thank the Minister for her kind words about the work of the previous Government in this area. As she rightly said, the regulations originate from the Berne financial services agreement, signed back in 2023, so it is something we have worked on. As somebody who worked in financial services for 27 years before coming to Parliament—I worked for two Swiss banks, had clients in Switzerland and did this kind of cross-border business—I can attest that this is a fantastic opportunity for our financial services sector. Anything that formalises the arrangement and makes transactions less sticky and easier to do can only be a good thing, so we will certainly be supporting the proposal 100% this evening. I thank the Minister for her excellent speech and her kind words about the work of the previous Government—I think she forgot to add “Strong and stable for 14 years”, but still.

Question put and agreed to.

Draft Financial Services (Overseas Recognition Regime Designations) Regulations 2025

Mark Garnier Excerpts

Wednesday 22nd October 2025 General Committees

[Mark Garnier (Wyre Forest) (Con)]

We welcome the general thrust of the regulations, which are all about the internationalisation of our financial services market, continuing our moving on from a post-Brexit Britain. I was not a fan of Brexit, but we are where we are. It is incredibly important that our financial services centre remains internationally competitive, and the regulations support that. I will not detain the Committee any longer—I can see smiles on Government Members’ faces. [Laughter.] Let us hope the Liberal Democrats continue in that spirit.

Question put and agreed to.

Oral Answers to Questions

Mark Garnier Excerpts

Tuesday 9th September 2025 Commons Chamber

[Mr Speaker]

I call the shadow Economic Secretary.

[Mark Garnier (Wyre Forest) (Con)]

I also congratulate the hon. Member on her elevation to Economic Secretary to the Treasury; I am sure she will do very well.

The UK banking sector provides a valuable service to our economy, keeping money in circulation, funding business and mortgages and all the rest of it. The financial services sector is the UK’s biggest export sector. According to UK Finance, UK banks generate around £45 billion in tax every year, but because of things like the bank levy, UK banks now pay an effective rate of around 46%, which is higher than competitors in New York, Frankfurt, Dublin and Singapore. The Chancellor of the Exchequer has managed to dig her own £30 billion black hole in the economy, but can the Minister reassure the City of London and this House that there are no plans to increase taxes on our banking and wider financial services sector in the upcoming Budget in November?

[Mr Speaker]

Order. The markets will be closed soon. I call the Minister.

Draft Markets in Financial Instruments (Miscellaneous Amendments) Regulations 2025 Draft Financial Services and Markets Act 2023 (Capital Buffers and Macro-prudential Measures) (Consequential Amendments) Regulations 2025

Mark Garnier Excerpts

Monday 8th September 2025 General Committees

[Mark Garnier (Wyre Forest) (Con)]

It is a great pleasure to speak in this incredibly dry debate about incredibly technical aspects of regulation. I am only disappointed not to see the new Economic Secretary to the Treasury make her debut today, although it is always nice to see the Chief Secretary.

[James Murray]

It’s too much excitement for day one.

[Mark Garnier]

Quite right. The hon. Gentleman’s leader is with the parliamentary Labour party right now, I think, which will be very exciting.

The regulations are technical, dry but welcome changes to the detailed firm-facing regulations and definitions in the MiFID organisational regulations and capital buffers regime. They follow the comprehensive changes to regulation and tax that the last Government introduced through the Edinburgh reforms, while helping to implement the announcements the Chancellor set out in her 2024 Mansion House speech.

We on the Conservative Benches will always support reforms that aim to make the UK financial market more competitive and growth-oriented. Our financial services are our biggest export and it is vital that we do everything we can to ensure we keep them competitive with their counterparts in Europe and the rest of the world, while at the same time ensuring the UK is a principal destination for international capital. Let me be clear that we support the considered approach being presented, which will allow us to embrace the regulatory autonomy that Brexit provides while keeping us relatively aligned to EU frameworks such as MiFID. That is important because although we need to innovate to maintain our competitive advantage, we must equally avoid trying to reinvent the wheel on financial services regulation.

I push the Minister to look at the wider regulatory burden that MiFID II has placed on UK financial firms. Many in the sector think the reporting obligations, investor protection rules and governance standards have imposed significant compliance costs and operational complexity. Although the intention is noble, we can over-regulate and we must remember that risk will always be something that we cannot remove completely. That was highlighted in a submission by UK Finance to a recent House of Lords Committee inquiry that showed that the rules have constrained the City’s ability to innovate and grow capital markets.

Although we welcome the regulations, the Government now have the freedom to go further and simplify the onerous rules MiFID II introduced. Doing so would unlock growth in our financial services sector and help us to regain ground lost to competing hubs such as New York and to emerging financial centres in the EU. Nevertheless, we have to accept that the EU is our largest trading partner, so it is right that the changes do not significantly deviate from what was in place before. As I said, the UK deviating to a new regulatory regime would not necessarily help our cause.

We also welcome the fact that the changes will help to make the UK more responsive to emerging trends and risks. That is crucial as we seek to be competitive in an ever more volatile world and it would be remiss of me not to mention that many stakeholders feel the regulatory burden placed on them by the FCA and PRA is already too high and, in some instances, unnecessary. Although the changes should not increase that burden significantly, I hope the Minister and Treasury officials will be mindful of that when making changes in the future.

All together, we broadly welcome the technical changes that the regulations introduce as they will help to streamline capital market regulation and ensure legal coherence. I was going to ask some questions, but I think in the interests of time we can probably pass on that—we do not want to keep anybody waiting. I will leave it at that.

Financial Services Reform

Mark Garnier Excerpts

Wednesday 16th July 2025 Commons Chamber

[Mark Garnier (Wyre Forest) (Con)]

I am very grateful to the Minister for advance sight of her statement. There is much in these Leeds reforms—many of which were formerly known as the Edinburgh reforms—that can be welcomed, and some of the details were laid out by the Chancellor in her Mansion House speech last night.

The Conservatives will always support reforms to our financial sector that ensure that the City of London remains a global powerhouse, but the Chancellor’s rhetoric last night about growth and stability obscures the truth of this Government’s record of delivery. Inflation is now at 3.6%—the highest in the G7—and growth has all but stalled. Despite yesterday’s fanfare for reform, the reality is that having run short on other ideas, the Government are now forced to turn once again to the City of London for inspiration—a last throw of the dice, hoping that it will provide an engine for the growth that their policies are stifling.

Last night the Chancellor described her Government as a “beacon of stability”, but let us not forget the actual legacy that was handed over to her. We enjoyed near record levels of employment. Unemployment was at historic lows, and inflation was under control. That is the stable foundation on which this Government were handed the keys, yet they now preside over instability. The Office for Budget Responsibility, the OECD and the Bank of England have all sounded the alarm that our growth prospects have collapsed. The Government claim to be cutting red tape for industry, but let us remember that their plan to make work pay would in fact burden employers with over 70 new regulations, reminiscent of the 1970s.

The Chancellor’s talk of unleashing the power of the City comes even as her party threatens to smother businesses in paperwork and expense. When it comes to proposals for financial services, the Conservatives welcome much that gives the sector confidence and clarity, but warm words must be matched by careful delivery. On reforms to the Financial Ombudsman Service, there is agreement that it should return to its impartial roots as a fast and effective dispute resolution service, not a quasi-regulator, but so many business and consumers are awaiting clarity, so can the Minister confirm whether these changes will limit the FOS’s power to make backdated legal determinations, and what impact will the reforms have on ongoing legal proceedings, such as the crucial car finance case before the Supreme Court?

Streamlining the approach of the FCA and the PRA may remove unnecessary friction, but we must ensure that this does not become window dressing while critical challenges remain. The FCA and the PRA must accept that stability in the markets is not the only way to deliver growth. Both their objectives must be aligned and equally ambitious in their drive for reform.

The Chancellor trumpeted reforms to ISAs, including new rules for long-term asset funds, which we welcome if that broadens access to higher-return assets for ordinary savers, but there is still no certainty on the future of the cash ISA. Without clarity, the Government risk undermining their own ambition to promote home ownership and inclusive investment, which again was trumpeted by the Chancellor during her Mansion House speech last night.

On capital investment policy, we welcome MREL reform, which was a change I championed during the recent passage of the Bank Resolution (Recapitalisation) Act 2025. This will help challenger banks to compete and expand lending.

We cautiously welcome the Government’s review of ringfencing rules, but will they confirm that all options are being considered, including alignment with the US and the EU, which, as the Minister knows, never implemented ringfencing rules?

More broadly, the history of the last Labour Government reminds us that good intentions are never enough. The Financial Services and Markets Act 2000, introduced by the then Chancellor, along with the tripartite system, was well conceived but badly implemented, contributing to the events of the 2008 financial crisis. It falls to this Government now to demonstrate that they will not repeat those mistakes.

Finally, at Mansion House last night the Chancellor missed a crucial opportunity to be straight with the British people and rule out further tax rises. Will the Minister guarantee that working families and businesses will not face more tax increases? Will she rule out any further surprise raids on the British taxpayer?

Britain’s financial services sector has always thrived when reforms are clear. The test of these reforms will come when the full details emerge, but ultimately growth will come only when the Chancellor realises that hard-working people and businesses across the country are the real engines of economic growth.

[Emma Reynolds]

Well, half of that was all right, I suppose. I do want to start constructively and thank the hon. Member for his welcome for some of the reforms. I will answer some of his specific questions before I come to the wider points.

On the Financial Ombudsman Service, we have set out in great detail what we will do. As he will be aware, some of the changes require primary legislation. We are proposing an absolute time limit of 10 years, but with discretion for the FCA to give longer periods in the case of products with a longer lifetime. I cannot comment on the ongoing car finance issue, which as he knows is working its way through the courts.

The hon. Member talked about the regulators’ different objectives. We have been very clear with the regulators that we expect them to embed their secondary objective to facilitate economic growth and competitiveness while obviously complying with their other objectives. He will see that in the remit letters that the Chancellor sent to the regulators at the last Mansion House speech last November.

On ISAs, I welcome what the hon. Member said about long-term asset funds, which we think will unlock great opportunities for savers. We continue to consider reform to ISAs. We would like to ensure that more people have the opportunity and confidence to invest, which is why we hope that targeted support, which will be introduced by firms by the end of this tax year—we have worked at pace on this—will really shift the dial and give people that confidence to invest.

I think the hon. Member said he was in favour of what we are doing on MREL, and I know that he agreed with the Bank Resolution (Recapitalisation) Act, which we put through the House and is coming into force today. I thank him for his support on that.

On ringfencing, we have detailed which areas we will look at. I am happy to write to him further on that, but one area, for example, is sharing resources across the ringfenced and non-ringfenced parts of banks. We want to ensure that we strike the right balance between growth and stability.

I turn to the hon. Member’s points about economic stability. I will take no lessons from the Conservatives—I hate to say it. We had inflation at 11%, people paying extremely high mortgage rates and debt rising year after year. The only thing that was stable under their Government was wages, which were flatlining.

Oral Answers to Questions

Mark Garnier Excerpts

Tuesday 1st July 2025 Commons Chamber

[Mark Garnier (Wyre Forest) (Con)]

In her Budget last year, the Chancellor tucked away about £10 billion over the next couple of years from reform to the non-dom tax regime. It is important to remember that the OBR said in its fiscal outlook that that figure was “highly uncertain”, and a high-level survey by Oxford Economics found that fully two thirds of non-doms are considering leaving the country in the next couple years as a direct result of those policies. That implies not an increase of £10 billion but a decrease of £8 billion. The Chancellor has created a fiscal black hole of £18 billion with just one policy alone. In this week of heroic U-turns from the Government Front Bench, will the Minister confirm whether they will be axing this tax? When will it finally be condemned to the history books?

[James Murray]

I am not really sure whether there was a policy suggestion in that comment or not. As the shadow Minister will know, the fiscal black hole that we had to address when we won the general election was the £22 billion black hole that the Conservatives left after their mismanagement of the economy. As I said, the Office for Budget Responsibility has confirmed that our reforms to the non-dom regime, with our removal of non-dom tax status, will raise £33.8 billion over the five years of the forecast. It is the OBR’s figures that we will trust in that regard.

Access to Banking Hubs: Hertfordshire

Mark Garnier Excerpts

Wednesday 25th June 2025 Westminster Hall

[Mark Garnier (Wyre Forest) (Con)]

It is a great pleasure to serve under your talented leadership, Sir Desmond. It is very good to be here. I also congratulate my hon. Friend the Member for South West Hertfordshire (Mr Mohindra). This may be his debut debate in Westminster Hall, but I am sure that it is the first of many. He has always been a champion for his constituency and I am surprised that he has not been here a thousand times before. As he eloquently put it in his opening remarks, banking hubs show why banking must remain at the heart of all our communities, and we should cherish the role of banks in our society.

I have long been a huge fan of the banks, having been on the banking commission, which was a great opportunity to see just how important they are. We all talk about their importance for banking local businesses and local communities, but banks perform two extraordinarily complicated functions. The first is taking money from where it has accumulated and delivering it to where it is needed—for loans for businesses and all the rest. But they also do something else—they are almost like Doctor Who in their ability to transform time. They take money that has been put on deposit overnight and turn it into a 25-year mortgage that pays for all our constituents to buy their homes and bring up their families. We must never forget how incredibly important banks are.

The previous Government recognised the importance of maintaining essential banking services as a foundation for public confidence in the sector. We provided a system of free and convenient access to banking through Post Office’s branch network. The banking framework partnership between Post Office and more than 30 of the UK’s banks and building societies means that consumers and businesses can access banking services through the Post Office network where there is not an alternative bank. Post Office now has more branches than all the banks and building societies combined. I hope the Minister agrees that the banking framework was a real success story—one of many success stories, by the way—of the previous Government.

However, we in the previous Government also recognised that post offices do not completely fill the hole left by the loss of the high street bank. That is why we also introduced banking hubs, as we have heard today, which have been a successful concept where they have been delivered. I welcome the fact that the new Government have now embraced the idea and set an ambition to deliver hubs across the country by 2030—I understood it to be 500, although the Liberal Democrat spokesperson, the hon. Member for St Albans (Daisy Cooper), said that it was 350, so it would be helpful if the Minister clarified exactly how many the Government are hoping to have.

The new hubs, whether there are 350 or 500, are a new solution to meet wider banking needs, particularly in communities where the last bank branch has closed. Members have made many eloquent points about the decline of banking services in their constituencies. In my constituency, adjacent to that of my hon. Friend the Member for South Shropshire (Stuart Anderson), Stourport-on-Severn, my second biggest town, has just one bank left—a TSB—and Bewdley, the third biggest town, now has no banks at all.

I hope the Minister will address how Members could be more involved in deciding where new banking hubs will be located—that is an important point. I am sure that all Members would like to have input and make representations to get these services in every constituency. Local knowledge and community engagement must be at the heart of these decisions. That is why Members of Parliament, as the elected representatives of these communities, must be part of that process.

Banking is rightly a commercial sector, so I would also like to hear how the Minister can encourage banks to deliver their own innovations. For instance, the multi-bank kiosk proposed by the Building Societies Association has already been piloted. With a cost of just one third of a traditional banking hub, the kiosks offer a cost-effective, building society-led solution that could work alongside banking hubs in areas that have a strong mutual presence but lack a high street bank. Will the Government support the expansion of the kiosks and encourage more private sector innovation alongside banking hubs?

I do not want to hold the room for too long, so I will draw my words to a close. Today’s debate and the recent Backbench Business debate on high street banks have shown just how much Members support high street banking services. I look forward to hearing from the Minister how the Government will support our high street banking services. Once more, I thank my hon. Friend the Member for South West Hertfordshire for the extraordinary hard work he does for his constituents.

Bank Closures and Banking Hubs

Mark Garnier Excerpts

Thursday 5th June 2025 Commons Chamber

[Mark Garnier (Wyre Forest) (Con)]

I also congratulate the hon. Member for Blyth and Ashington (Ian Lavery) and my right hon. Friend the Member for Tatton (Esther McVey) on securing this debate.

A great strength of feeling about banks has been evident in this debate, and it is important to remember the importance of banks not just to our communities but to the wider economy. Banks provide services for businesses and individuals, but they also provide two other fundamental services. First, banks and building societies take money from where it has accumulated and distribute it to where it is needed for investment in infrastructure, businesses and jobs. Secondly, banks take overnight deposits and turn them into 25-year mortgages—so that our constituents can create a home and build a family—which is quite difficult for banks to do.

The hon. Member for Blyth and Ashington made a couple of important points that I would like to address. The first was about the profits that banks make, and the second was about the policing of banks and the fact that banks apparently police themselves.

Following the 2008 financial crisis, there was obviously a huge number of problems in the banking system. The Financial Services Act 2012 created two regulators, the Financial Conduct Authority and the Prudential Regulation Authority, both of which—and particularly the PRA—are responsible for making sure that our banking system is sound. Banks need to have strong balance sheets, and to do that they need to make profits to a certain extent. I agree that some of those profits look obscene, and perhaps some banks could put some of that money back into our communities. None the less, if banks spend their money unwisely, we potentially run the risk of another banking crisis.

Along with the right hon. Member for Wolverhampton South East (Pat McFadden), I am one of only two Members left in this House who sat on the Parliamentary Commission on Banking Standards from 2013 to 2015. Our work on that commission underlines the importance of banks in modern life, about which we have heard so much today. The commission found that holding and operating a bank account is now essential to participate in society and the economy, whether it is receiving wages, paying bills or accessing benefits. But we also found that people’s views on banks are shaped by their direct experiences. The more a person knows their bank, the more likely they are to have confidence in it. That means that if banks want to retain their customers, they must provide good, wide-ranging services. An inability to access banking services risks eroding that trust and confidence, as we have heard today, especially among the most vulnerable.

[David Mundell]

Does my hon. Friend understand that people are very angry about bank closures, and about the fact they feel that the banks just do not listen to them when they go through some consultation exercise? That is why in Moffat, at 2 pm tomorrow, there will be a protest outside the closing Bank of Scotland.

[Mark Garnier]

I agree 100%. My right hon. Friend is absolutely right.

Let us be clear that the decline of our high streets and the decline of bank branches have run concurrently as behaviour has changed over the last couple of decades and retail activity has increasingly moved online. Banks are, of course, commercial entities, and their decisions to close branches are often driven by commercial imperatives, which is not necessarily what we want to hear in this debate. Falling footfall, the rise of digital banking and the need to be cost-effective are just some of those reasons.

As we have heard so often, there are now just 3,000 bank branches remaining in the UK, and that number is expected to drop even further in coming years. ATM numbers, especially free-to-use machines, have also declined. Only 14% of payments in the UK were made with cash in 2022, and withdrawals from the Link network are down 50% on pre-covid levels.

[Sir John Hayes]

The clue is in the phrase “banking service”. It is about providing a service to people. As the hon. Member for Lichfield (Dave Robertson) said, banks dignify communities too. This is about personal interactions, trust and building relationships. That is what we do when we go into a bank, and we could never do that in the same way online.

[Mark Garnier]

My right hon. Friend makes a good point. This is about face-to-face relationships, not something done through an app.

Behind the statistics I cited are real people and real communities. The digitally excluded, older people, those in poor health and people with lower financial resilience mostly rely on cash. Small businesses and rural communities are hard hit. The question for Members who want to compel banks to keep branches open is how much digital-first customers should be charged to retain loss-making branches—notwithstanding, of course, that profit question.

Of course, the answer cannot simply be to do nothing and to walk away from our responsibilities to those who are left behind. The previous Government recognised the importance of maintaining essential banking services as a foundation for public confidence in this sector. Through the post office network, we provided a system of free and convenient access to banking services, and the banking framework partnership between the Post Office and over 30 of the UK’s banks and building societies means consumers and businesses can access basic banking services through the post office network. The Post Office now has more branches than all the banks and building societies combined, and according to the Financial Conduct Authority, post office branches make up more than 66% of all branch-based cash access points in the UK. The last Government also introduced banking hubs, which we have heard a great deal about.

I am conscious of time, and I do not want to incur your wrath, Madam Deputy Speaker, so although I have a lot more to say, I think it would be prudent for me to step aside and allow the Minister to face up to the passion about this issue from Members representing their communities.

Draft Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025

Mark Garnier Excerpts

Wednesday 4th June 2025 General Committees

[Mark Garnier (Wyre Forest) (Con)]

It is a pleasure to serve under you, Mr Mundell. Congratulations on your tennis match this morning; I am glad it went well. Lawn tennis—you can’t beat it.

This SI started its life in the previous Government and has come through more or less untouched. It is almost as if the general election never happened—it is extraordinary; we seem to have swapped sides somehow. On the basis that the SI was started in the previous Government, the Opposition will support the new rules.

It is absolutely right that people and businesses have access to bank accounts. While the Farage-NatWest scandal brought the issue of debanking into the national spotlight, the statistics show that the scale of the problem is far wider. Nearly 400,000 bank accounts were closed last year, according to figures obtained by The Daily Telegraph via a freedom of information request. Many of those closures will of course have been for legitimate reasons such as financial crime, fraud or dormant accounts. For people and businesses that are impacted, often unfairly, the new rules will be very helpful. These are sensible steps that will improve transparency and give customers more time to find alternatives if their accounts are closed.

However, the deal does not include a statutory review clause, which is possibly a mistake, and there has rightly been feedback. David Hamilton, a partner at Howard Kennedy, warns:

“If customer exits are more onerous in terms of disclosures and potential FOS challenges, it may give banks pause to consider whether they want to onboard certain types of customers at all.”

In other words, there is a real risk that the banks will simply become more cautious at the account opening stage, and they could make it harder for those perceived as higher risk, such as politically exposed persons—everybody in this room—or certain business sectors, to access basic banking services at all, which brings me on to my next point.

The new rules on politically exposed persons have not yet been publicised. The Financial Conduct Authority’s consultation on the issue closed in October 2024. Its initial findings asked banks and financial institutions to do more to ensure that UK lawmakers and their families are not treated unfairly. It is essential that the new rules on debanking and PEPs are aligned and implemented at the same time to give both customers and banks clarity and consistency.

Although we support the new rules, I would like the Minister to address the following key questions. First, why has the statutory review clause not been included in this SI, given the risk of unintended consequences for account holders? Secondly, what assessment has been made of the impact on people who may now find it harder to open a bank account in the first place? Thirdly, when will the new rules on politically exposed persons be published? Will the Government commit to aligning their implementation with the debanking reforms? Also, how will the Government monitor the impact of the changes, particularly on small businesses and vulnerable customers, and what steps will be taken if there is evidence that banks are becoming more risk-averse and excluding legitimate customers from the banking system?

As I said, access to bank accounts is a basic necessity in modern Britain. Under the previous—might I say brilliant?—Government, we made it a fundamental right to have access to basic banking services. These rules are a step forward, but it is vital that we remain alert to making sure that they do not become another barrier put in place to stop businesses and consumers accessing banking services. The Minister might not have enough time to get an answer to my questions, but if she could perhaps write me a letter, that would be fantastic. As I said, we will support this measure.

[Emma Reynolds]

It started so well—I am slightly confused by the hon. Gentleman. On one hand he says it is as though nothing changed, and did we need a general election to get to this point? On the other hand he calls into question the provisions of the SI and what impact they might have. I will come to his questions in turn. First, there has been a big change since the election. I was not here in the last Parliament, so there has been a welcome change from my point of view and on the Labour side of the House, where we have a quite hefty majority, in case he had not noticed.

The reforms were consulted on and thought about in the last Government—the hon. Gentleman was right to make that point. We consider, as did the previous incumbents in my role and the Conservatives in government, that the current notice period of 60 days is simply not adequate for customers who have their accounts closed to either make a complaint or seek an alternative provision, and that is bad for individual customers, but particularly bad for businesses. As he set out, it is crucial that businesses and individual customers have access to bank accounts.

We do not think, although I can write to him with more evidence, that this measure will make banks more reluctant to open bank accounts in the first place. The balance that we are striking in this statutory instrument is on the one hand enhanced consumer protection and on the other hand ensuring that we do not place unnecessary and disproportionate burdens on banks and other providers—it is not just about banks; it is about other payment providers, too. We have not included a statutory review clause, but that does not mean that we cannot review the legislation. We do not judge that this provision will make banks more reluctant to open bank accounts for people in the first place.

The shadow Minister asked more broadly about access to banking services, which is something that we are monitoring. As he said, that is crucial to both the operation of a business and customers. In our financial inclusion strategy, we are looking at access to banking and the relationship between financial exclusion and digital exclusion. We are doing broader work in this area to understand not only the root causes from providers but why individuals have perhaps had their accounts closed and not sought alternative provision.

We are doing broader work on financial provision, as the hon. Gentleman knows, and we will produce a strategy by the end of the year on this vital issue. I know that many of my hon. Friends will welcome that, as well as other Members across the House, because financial inclusion is something that we all care about and this Government are very committed to. I believe that I have answered all the questions.

[Mark Garnier]

Not mine, perhaps.

[Emma Reynolds]

Sorry; could the hon. Gentleman remind me of the specific question?

[Mark Garnier]

It was to do with the assessment being done of the impact on politically exposed persons. When can we expect that report to come out?

[Emma Reynolds]

I thank the shadow Minister for that question. As he will know, changes were brought into force in January 2024 under the previous Government that ensured that domestic PEPs, as they are called, were not deemed to be on the same level of risk as non-domestic PEPs. That SI was introduced under the last Government and FSMA—the Financial Services and Markets Act 2023—committed to bringing forward that legislation.

It also committed the FCA to doing a review of so-called PEPs and debanking. That review concluded that banks were not necessarily taking the wrong approach, but it said that there needs to be more proportionate application of rules. Therefore, the FCA will bring forward updated guidance on this issue, and I am happy to write to the shadow Minister in more detail on the timing of that and what will be included.

Question put and agreed to.

Draft Pension Fund Clearing Obligation Exemption (Amendment) Regulations 2025

Mark Garnier Excerpts

Wednesday 14th May 2025 General Committees

[Mark Garnier (Wyre Forest) (Con)]

Yet again, we are in glorious agreement on both sides of Committee Room 9, which is rather fun. The Opposition absolutely agree with the draft regulations; as the Minister rightly says, the work was started under the last Government, and it is important that we continue to support it. However, we recognise the critical role that central clearing plays in safeguarding financial security.

The Pensions and Lifetime Savings Association, which represents schemes with more than £1.3 trillion in assets, acknowledges that there are benefits: clearing reduces counterparty risk, increases transparency and, in normal times, helps to protect members’ savings. However, the evidence from the sector and, importantly, the experience of the liability-driven investment crisis in 2022 show that mandatory clearing presents a real challenge for pension funds. Most UK schemes do not hold large cash reserves, nor should they: the money should be invested for long-term returns for their pensioners.

The need to raise cash quickly to meet central counterparty margin calls can force schemes to sell assets at precisely the wrong moment, undermining members’ returns and potentially undermining market stability. The LDI crisis in 2022 made things pretty clear; I remind hon. Members that the then Chancellor of the Exchequer and Prime Minister were sacked for creating that chaos. [Interruption.] It’s a fact of life.

In the consultation undertaken by the previous Government, many stakeholders argued that a permanent exemption is the only way to provide certainty and avoid undermining the Government’s own ambitions in the Mansion House reforms. If the exemption were removed, schemes would be forced to hold more liquid, low-return assets, including cash, which would reduce the capital available for long-term investment in the economy. I am therefore delighted to support the draft regulations, but I have a couple of questions.

First, on divergence from the European Union, the UK has opted for an indefinite exemption period, whereas the EU has allowed it to lapse, so clearing is now in place there, as it is in the US. Respondents to the call for evidence highlighted structural differences between the UK and the EU and US markets. Have the Government looked at the effect that that divergence might have on the competitiveness of the UK pension industry and on the relative stability of markets?

My second question is about the long-term intentions as to mandatory clearing. I completely understand that the motivation behind the change is to remove the two-yearly uncertainty. However, the draft regulations provide for a permanent exemption, rather than ruling out clearing in permanency. The difference is a very subtle one, but have the Government considered ruling it out rather than having a permanent exemption? As we are looking at stability for pension funds, I would be interested to hear the Government’s point of view. However, the Opposition certainly do not seek to divide the Committee on this very good policy, which was initiated by the previous Government in one of their more glorious moments.