Public Record, Disclosure of Information and Co-operation (Financial Services) (Amendment) (EU Exit) Regulations 2019
(Limited Text - Ministerial Extracts only)
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Lord Bates
That the draft Regulations laid before the House on 21 January be approved.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, as a great deal of financial services activity takes place across borders and across regulatory regimes, the ability of national regulators to co-operate with each other and to exchange information is vital if they are to discharge their supervisory functions effectively. As noble Lords will know, an important function performed by financial services regulators is the gathering of supervisory information from firms. Regulators use this information so they can ensure that regulated firms are operating in a way consistent with regulatory requirements so that they are alerted to any development that may need supervisory intervention.
The information gathered by regulators is often confidential and commercially or market-sensitive, so it is right that there are strict rules and safeguards on how regulators share such information with other regulatory authorities. EU law currently plays an important role in setting these rules. In order to ensure the effective functioning of the single market in financial services, the EU has developed a joint supervisory framework for national regulators and supervisory bodies in the EEA. This makes co-operation and the sharing of certain supervisory information between EEA national regulators mandatory. In addition to that, the EU has established the European supervisory authorities—ESAs—which are responsible for co-ordinating the approach of EEA national regulators. Co-operation and the sharing of certain information with the ESAs is also mandatory for EEA national regulators.
As well as setting out what information should be shared, EU rules include restrictions and safeguards. In the UK, these rules are implemented by Part 23 of the Financial Services and Markets Act 2000—or FiSMA, as it is known—and the Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 2001. For third-country authorities, there are additional restrictions when disclosing confidential information. The UK regulator may need to be satisfied that the third-country authority has protections for confidential information in place that are equivalent to those of the EU. There may also be a requirement to enter into a co-operation agreement with the third-country authority. In addition, if the UK regulator is disclosing confidential information to a third-country authority which originated from an EEA authority, the UK regulator may need to seek the consent of the EEA regulator which originally disclosed the confidential information.
Lord Tunnicliffe (Lab)
My Lords, looking through this statutory instrument to see whether there were any policy shifts, as far as I can understand it, the EEA countries have better protection for their confidential information than third countries do. This statutory instrument takes that special protection away and then requires agreements to be concluded. That would seem to be the wrong way around. I would have thought that the protection which the EEA states have—that before the information can be passed on, permission must be sought from the originating country—would be better extended to other third countries. This would be a better position for the management of confidential information than what is referred to in the Explanatory Memorandum as a series of agreements, followed by instructions to staff. It is a bit late to have a debate on such an obscure point but if the Minister were to read Hansard tomorrow and send me a letter on this point, I would value that.
Lord Bates
Again, I thank noble Lords for their scrutiny and questions. I give notice that I may need to write on one or two of them, if they would accept that, but I will say a little about how the negotiations are going. In my enthusiasm to communicate the details of this instrument to the House, I perhaps went a bit fast but I did indeed say that the negotiations were going well.
UK and EU authorities have made good progress in their discussions on a memorandum of understanding, which includes essential provisions for confidential information-sharing and co-operation. It is our hope that these will be in place by exit day. Both UK and EU regulators recognise the importance of effective co-operation and are working hard to finalise co-operation agreements. We fully expect these agreements to be in place by exit day, as part of preparations to deal with a no-deal scenario. More broadly, Members will be well aware of the top priority we have attached to putting in place a range of transitional arrangements, designed to mitigate the impact of no deal.
The noble Lord, Lord Sharkey—eagle-eyed as ever—spotted the gap between 5 pm and 11 pm. I am guessing that it is a standard cut-off point—a sort of close-of-business setting on the day in question—but perhaps that is not the case. I am told that exit day is defined in the EU withdrawal Act as 11 pm on 29 March, specifically; yes, I am aware of that. I think the point was made that it says 5 pm but there might be something else winging its way to me.
The noble Lord, Lord Sharkey, also mentioned confidential information and made a good point on that. Under Section 348 of FiSMA, “confidential information” means information which,
“relates to the business or other affairs of any person”,
that was received by the FCA, the PRA, the Bank of England, the Secretary of State or specified people instructed or employed by them for the purpose of discharging their functions; and it is not prevented from being confidential information because, for example, it has already been made available in public.
I will take advice from my noble friend Lord Young and perhaps just pause there with the assurance that I will write and follow up on this, and thank noble Lords for their contributions.
Lord Adonis
At this late and extreme hour, the noble Lord, Lord Sharkey, seems to have discovered a missing six hours in the regulatory regime that is going to govern the financial services industries of the United Kingdom and Europe, and what might happen for the exchange and disclosure of confidential information. Assuming that those six hours can be repaired overnight, I beg leave to withdraw.