Draft Capital Requirements (Amendment) (EU Exit) Regulations 2018 Draft Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018

Richard Bacon Excerpts

Wednesday 12th December 2018 General Committees

[John Glen]

I acknowledge how it sounds, but this is a regulatory change to enable the discretionary power. The Government’s intent is to make prudential assessments in a non-politicised way.

[Mr Richard Bacon (South Norfolk) (Con)]

May I say how delighted I am that the Government are taking an approach that allows discretion? That was one enormous problem at the time of the financial crash, which was also a sovereign debt crisis. The hon. Member for Stalybridge and Hyde forgot to mention who was in charge at the time. That crisis was exemplified perhaps most clearly by Gordon Brown standing outside the shiny new Lehman Brothers office when it opened, shortly before the crash. The capital regime was so inadequate at the time under that regime—

[Jonathan Reynolds]

In America?

[Mr Bacon]

In London. The point I was going to make, and why I am so glad that the Minister is introducing provisions for discretion, is that part of the problem of the sovereign debt crisis was that—

[The Chair]

I urge the hon. Gentleman to remember that interventions should be brief.

[Mr Bacon]

Yes indeed. Part of the problem with the sovereign debt crisis—perhaps the biggest problem—was the equal treatment of lots of different kinds of sovereign assets, such as Greek Government bonds, when in fact they were nothing like equal. That led to the distortion that helped to cause the problem.

[John Glen]

The Government and regulators are clear on the imperative to work closely with industry to ensure that change is not disruptive for firms. UK regulators will be given the ability to phase changes in over the next two years. We will treat all third countries similarly, which means, to answer the point made by the hon. Member for Glasgow Central, continuing to co-operate through international crisis management groups to plan and resolve issues with cross-border firms. The UK’s participation, and enthusiasm to participate, in such forums will be undiminished. Nothing in the draft regulations will change how the UK co-operates with third countries.

The hon. Member for Stalybridge and Hyde raised the bank recovery and resolution SI and concerns around the appearance of disengagement. There is no intention whatsoever for the UK Government or regulators to be isolated in any way. We will continue to participate. However, these steps are necessary to domesticise our regulations in the context of a no-deal scenario.

The hon. Member for Glasgow Central has on several occasions, and perfectly sensibly, mentioned the regulatory burden and additional costs. She is right to draw attention to the £1.7 million assessment for the capital requirements SI and the £400,000 for the bank recovery SI. I point out to her that those are one-off familiarisation costs. For the 1,000 companies she mentioned, they are one-off costs of around £1,700 and £1,200 for some of the very biggest institutions. I accept that it would be desirable for them to not have those costs, but it will be necessary in a situation in which we do not secure a deal.