Mini-tender Offers: Protection for Shareholders

Debate between Baroness Kramer and Lord Stockwood

Wednesday 15th July 2026 Lords Chamber

[Lord Stockwood (Lab)]

My Lords, I will of course be happy to meet the noble Baroness. As I hope we are showing through the process on that Bill, we are trying to rightsize our regulation to ensure that it is appropriate.

I will not comment too much on this particular case. The CEO of the FCA is committed to doing a thorough assessment. We have to be careful about what is regarded as a fair market price for products. The market assessment and the ability to make an offer, and making sure that those financial promotions are appropriate, should be absolutely clear and within the remit of the FCA. An under market price could sometimes be appropriate if there is no liquidity in that market, but I agree with the noble Baroness: we need to look at this specific instance to make sure that there is no wrongdoing. We believe that the FCA has the right process to be able to do that.

[Baroness Kramer (LD)]

My Lords, mini-tenders, even by firms otherwise authorised by the FCA, fall below the FCA’s regulatory threshold. In the future, can the Financial Ombudsman require remedy for an investor caught in a mini-tender bait and switch, or do the clauses in the new financial services Bill requiring the FOS to conform to FCA rules in effect permit the mis-selling?

[Lord Stockwood (Lab)]

The noble Baroness is correct, of course. Mini-tenders are not a distinct regulatory category. However, we believe that the activities associated with them currently fall within in the existing regulatory framework, including financial promotion rules and market abuse legislation. Where those communications are misleading, the regulator absolutely has to act. Again, we remain open-minded. It is only right that the FCA does this assessment, then we will take it in to see whether regulation is appropriate.

Financial Services and Markets Bill [HL]

Debate between Baroness Kramer and Lord Stockwood

Committee stage
Wednesday 8th July 2026 Grand Committee

[Lord Stockwood (Lab)]

My Lords, Amendments 155 to 158 and 160 all relate to Clause 40. As I set out in the previous debate, Clause 40 makes the ring-fencing regime more flexible and proportionate by allowing the PRA to take account of protections already delivered elsewhere in the prudential and resolution framework, when considering whether ring-fencing rules are required. The clause is intended to reduce unnecessary duplication, while maintaining the core protections and purposes of the ring-fencing regime. We have already debated this, and it was clear that there were a wide range of views.

The noble Baroness’s amendments focus principally on shared services arrangements, operational continuity and cross-border group structures. The Government recognise the importance of these issues and we have spoken to a couple of outside parties on this topic. Ensuring the continuity of critical services and managing operational dependencies are important objectives of the ring-fencing regime.

However, I am not persuaded that these amendments are the right route forward. They would introduce detailed statutory tests governing when the PRA may rely on protections delivered elsewhere in the prudential and resolution framework, particularly for shared services arrangements involving cross-border or non-consolidated groups. Their practical effect would be to make it harder for the PRA to rely on equivalent protections elsewhere in the framework, increasing the likelihood of additional ring-fencing rules, greater complexity and additional compliance burdens, even where the PRA considered that the relevant outcomes were already being achieved.

In contrast, Clause 40 is intended to make the regime more flexible, streamlined and proportionate by reducing unnecessary duplication while maintaining core protections. It does not allow the PRA simply to assume that protections provided elsewhere in the framework are sufficient. The PRA may rely on those protections only where it considers that there is sufficient provision to achieve the relevant ring-fencing purposes and ensure the effective provision of services and facilities to ring-fenced banks.

For example, the noble Baroness, Lady Kramer, asked whether the OCIR framework can be replaced by the PRA’s rule 9.1. This is a matter for the PRA, but it has indicated that it intends to consider these issues through consultation. Where the PRA does not consider that sufficient provision exists, including in relation to shared services arrangements or cross-border groups, it must act, including through making ring-fencing rules where necessary. The clause therefore preserves key protections.

If further details are required, I am more than happy to follow up before Report, but, for those reasons, I ask the noble Baroness to withdraw her amendment.

[Baroness Kramer (LD)]

I am happy to withdraw.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, I suspect that nobody in this Room would not speak out very strongly in favour of financial education and that, in this House, we would be really grateful if there were some capacity for it, particularly in the ever-changing world that we are dealing with today, with all its complexity. I sign up totally to that underlying concept, although I think that the noble Lord, Lord Davies, alighted on an important point. I know that my noble friend Lady Tyler speaks a lot on financial inclusion and always talks about financial education as part of that, but she becomes extremely frustrated when people seem to think that, somehow, financial education is a substitute for the other actions that are needed, such as access to cash or to personal services. The noble Lord is completely right that we want financial education, and it is brilliant if we have good financial education, but that does not take away from the need to make sure that our financial services sector delivers proper, safe, first-class services, appropriately regulated.

Of all the bodies to choose to provide financial education, the FCA would be right at the bottom of my list. This is a body that has so many responsibilities already, and to take on another absolutely massive task—communicating with the ordinary person on the street, among other things—would be way beyond its capacity. It has plenty to do without this. Also, has anybody read letters from the FCA? It does not write human in its general communication. I think this is probably a government responsibility, and to me it makes a whole lot more sense to fund someone—I am picking this out of the blue—such as Citizens Advice, with people who speak with normal people and understand the issues they face and how they face them, if we are going to look for a financial education champion. I am sure people will come up with others.

I want to address Amendment 171 in the name of the noble Lord, Lord Holmes, because it is very important. It would provide a right of action to SMEs for breaches of the FCA handbook. I have from time to time, in this House and even in this series of debates, expressed my very deep frustration with the regulatory perimeter: the consumer protections that the FCA provides are limited to individuals—consumers. It now includes very small micro-businesses, but it does not include small businesses. Bad actors in the industry completely exploit that. We have seen that in example after example of mis-selling, whether back in the days of asset stripping or the mis-selling of derivatives or a play with mini-bonds. That perimeter has been used as a mechanism, because, on the far side of the perimeter, from the FCA perspective, there is not protection: it is entirely caveat emptor. In the complex world of today, where small businesses have to deal with so much and compete on a scale that they never had to if you go back a generation or so, I think it is wrong not to recognise that they will not have the capacity to be able to deal with some of that financial complexity.

I have always been keen on a right of private action; it is a very old and core tradition in British common law. One of my frustrations with the FCA has been that, in a sense, it went down the path of adopting the consumer duty to avoid doing what this House had intended it to do: look for a duty of care—because embedded in a duty of care is a right of private action. The FCA opted for a tick-box approach, rather than the principled approach that lies with a duty of care and the right of an individual citizen to get redress through the court system if they feel they have been damaged. For small businesses to now have a right of private action when they deal with the regulator seems to be an important step forward and a recognition of the reality of the challenges that small businesses face today.

[Lord Stockwood (Lab)]

My Lords, I am grateful to noble Peers for raising the important issues of financial education and the right of action for SMEs. On financial education, Amendment 167 would place a statutory duty on the FCA to promote financial capability, and Amendment 170 would require the FCA to publish a national financial education strategy. I am clearly supportive of the motivation, but I do not believe that new statutory duties on the FCA are the right way to achieve it.

The noble Baroness has already mentioned some of the good work that is being done by the Government on financial capability as part of their financial inclusion strategy, such as the work the Department for Education is doing in schools. The Government are also taking steps to improve financial education for adults. For example, we have announced the expansion of the Money Guiders programme, which is run by the Money and Pensions Service. This helps front-line workers, such as nurses and social workers, to have conversations about money with those they support. Fair4All Finance is also deploying £50 million funded by dormant assets in England to support financial capability initiatives. I assure the noble Baroness that the Money and Pensions Service already has a statutory function to develop and co-ordinate a national strategy to improve financial capability and education, as set out in the Financial Guidance and Claims Act 2018, and the FCA also carries out substantial work in this space. Helping consumers navigate their financial lives is already one of the FCA’s four priorities for 2025 to 2030.

Amendment 171 relates to SMEs and would significantly extend private rights of action. The Financial Services and Markets Act 2000 already draws a clear and deliberate distinction between general private law claims available to all parties, including SMEs, and the specific statutory right of action under Section 138D, which is limited to “private persons”—generally individuals and persons not acting in the course of a business. That reflects Parliament’s long-standing judgment that FCA rules are primarily regulatory and supervisory standards, rather than offering a comprehensive basis for civil liability for all market participants. SMEs can and do bring claims under contract, misrepresentation, negligence and other established causes of action.

I understand why the noble Lord is motivated to extend the right of action to SMEs for regulatory breaches. Historically, SMEs were often left with little option outside litigation, and I agree that those firms have fewer resources to seek redress. This was deliberately addressed in 2019 with the significant expansion of the Financial Ombudsman, which is now accessible to 99% of the UK’s small businesses.

I hope I have gone some way to reassuring noble Lords on the action the Government are taking on these important issues, and I therefore ask the noble Baroness to withdraw her amendment.

Financial Services and Markets Bill [HL]

Debate between Baroness Kramer and Lord Stockwood

Committee stage
Wednesday 1st July 2026 Grand Committee

[Lord Stockwood (Lab)]

My Lords, I am grateful to the noble Baroness for raising this important issue. Prudential capital requirements play a vital role in ensuring that our banking system remains resilient, supports sustainable lending and underpins confidence in the wider economy. We have heard a range of views on capital requirements today. The UK’s framework is internationally respected and has been carefully designed to balance growth with financial stability.

Amendment 120 would require HM Treasury to publish within 12 months a report reviewing the impact of capital requirements on lending, borrowing costs, competition and economic growth, alongside financial stability, drawing on consultation with the Bank of England and the regulators. I genuinely recognise the intent behind the amendment. However, it is unnecessary, as the Financial Policy Committee is already undertaking a comprehensive review of the UK’s bank capital framework through precisely the lens that the amendment seeks, including the impact on lending, growth and financial stability.

[Baroness Kramer (LD)]

Can I just check whether it is looking through the lens of treating financial stability as only a “have regard”? Is that what the Minister is saying? The amendment says “considering”. It is a “have regard” statement.

[Lord Stockwood (Lab)]

No.

The FPC has been tasked by Parliament with responsibility for the stability of the financial system overall. It is the right body to carry out this review, which needs to balance the economic impacts of capital requirements against the protections that they may offer. Getting the balance right in the prudential framework and bank capital requirements has been a key priority for the Chancellor and an issue she discusses frequently with the industry.

The noble Baroness, Lady Neville-Rolfe, raised the issue of international comparisons. The FPC set out its assessment of international comparisons when it reviewed this in December 2025. It found that the requirements are broadly in line with international comparators. In some areas, such as leverage requirements on domestic firms, the FPC noted that the requirements may be higher. However, I assure the noble Baroness that it noted leverage as an area for further reform that it plans to cover in next week’s update.

As noble Lords may be aware, the Chancellor sets out the annual remit and recommendations for the FPC. The most recent remit letter was sent last November and sets out clearly that the UK must regulate for both risk and growth, and remain competitive in a changing world. As part of that, the Chancellor recommended that the FPC’s review should ensure the UK’s capital framework strikes the optimal balance to deliver resilience, growth and competitiveness. I assure the noble Baroness that the FPC understands this balance. In December 2025, the Financial Policy Committee reassessed the optimal level of system-wide bank capital, reducing its benchmark from 14% to 13% of risk-weighted assets.

For these reasons, while I understand the objective, this amendment is unnecessary and risks undermining the clarity and credibility of the current regime. We will come back to this discussion over the coming weeks. I therefore ask the noble Baroness to withdraw her amendment.

Financial Services and Markets Bill [HL]

Debate between Baroness Kramer and Lord Stockwood

Committee stage
Monday 29th June 2026 Grand Committee

[Baroness Kramer (LD)]

Is the Minister suggesting that, in dealing with the long-term strategy, there will be the same level of detail as is normally provided in guidance? I am somewhat confused when he explains that one is a substitute for the other.

[Lord Stockwood (Lab)]

Could you repeat the question?

[Baroness Kramer (LD)]

If I understood the Minister correctly—do correct me if I am wrong—the FCA or the PRA will have the opportunity to provide guidance if they deem it necessary. But if they choose not to, that should not be worrying, because the equivalent statement will occur either in the five-year strategy or in a report on how the FCA is achieving its five-year strategy. Is he suggesting that that will be at the same level of detail as the guidance that is required today? That is what I am trying to understand.

[Lord Stockwood (Lab)]

I believe that they still have to publish the full guidance, but let me come back with a written response on that.

Turning to Amendments 90 and 92, the Government recognise the impact that changes in rules and guidance can have on firms, particularly smaller firms and regulated persons trying to understand what is expected of them. The government reforms are intended to avoid imposing full consultation and cost-benefit analysis requirements where proposals are genuinely minor or low impact, while preserving the wider consultation framework for substantive changes. Minor changes to rules include corrections, clarifications or minor technical updates, and it will be for the regulators themselves to determine whether a rule change meets this definition, as they are best placed to assess the impact of such changes. For example, last year, the FCA consulted on reducing late filing charges from £250 to £100. Under this provision, the FCA would not be obliged to consult and could make these changes faster.

[Baroness Kramer (LD)]

What if the change had been in the other direction and had added an additional £100 pounds? Would the FCA have been in a position to decide that that was not material for consultation?

[Lord Stockwood (Lab)]

I think there is a broad principle: we are trying to give the FCA the power to make those small changes in both directions.

Financial Services and Markets Bill [HL]

Debate between Baroness Kramer and Lord Stockwood

Committee stage
Wednesday 24th June 2026 Grand Committee

[Baroness Neville-Rolfe (Con)]

My Lords, I am grateful to all who have taken part in this short debate. We are sympathetic to the broad purpose of requiring regulators to think strategically, but, if the regulatory strategies are to be meaningful, they must not simply become static documents published every few years then left on the shelf. As my noble friend Lady Noakes said, that is not the way we do it in business. Common practice is for five-year strategies, reviewed annually, and annual plans.

The amendment tabled by my noble friend Lord Ashcombe would reduce the strategy period from five years to three years. He is right that markets can change very quickly, as we keep hearing. A five-year strategy risks being set in stone for too long, unless the Minister is able to clarify that the plans will be updated regularly. If not, a shorter period, such as three years, would have real benefits. Perhaps the Minister can explain why the period of five years has been chosen and how he believes the strategies will remain agile and flexible.

I am delighted that the Minister said that he was prepared to accept Amendment 70 on competitiveness and growth. As I have said several times, the growth of the UK financial services sector is key to growth more generally. Regulation should say how the Government—or the regulator—understand that objective, how they are giving effect to it and how their regulatory approach is supporting growth in the market, because the UK has a large and dynamic financial services sector. My noble friend Lady Lawlor emphasised that point, which we should not forget, and we cannot assume that its international position is guaranteed. Regulation has a direct effect on investment, innovation, listings, lending and market depth, as well as on the attractiveness of the UK as a place to do business, so, if regulators are not required to think explicitly about this, the growth objective risks being honoured in theory but neglected in practice.

Amendments 71 and 74 on consultation are very welcome. As we have said in our debates on previous groups, bringing experts into the room in a timely way is a vital part of the regulatory process.

In my view, the boards of regulators have a part to play in the strategic plans, but my recollection is that those engaged in regulated companies were excluded from the non-executive roles on the PRA and the FCA. Is this still the case? My own board experience is that conflicts of interest can be managed. I believe that regulators will benefit from current knowledge from the industry, particularly given these new statutory strategies, the digital changes to which we keep referring and the expansion of the scope of the FCA. I would like to hear from the Minister what the current rules are—perhaps in a letter, as I have not raised this point with him before.

I also support the principle behind Amendments 72 and 75 in the name of the noble Baroness, Lady Bowles. They would require the FCA and the PRA to review their rulebooks and explain how they will simplify or remove rules that are outdated, unnecessary or duplicative. Regulation, as has been said, tends to accumulate. New rules and duties are added, but old rules are not always removed. Guidance, expectations and supervisory practice develop over time. A long-term strategy is not only about what new initiative the regulators want to pursue; it should also be about what the regulator can simplify. If a regular rulebook review is done with a view to making regulation less burdensome, cheaper to operate and supportive of growth, that will be a very positive step.

The amendments on Treasury recommendations also raise a serious question around accountability and regulator independence. There is, of course, a balance to be struck. We do not want day-to-day political interference in regulatory decisions but nor should independent regulators operate without clear strategic accountability to Parliament and the Government of the day, as my noble friend Lord Massey and the noble Baroness, Lady Kramer, explained better than I can. The Government should explain why the Treasury’s recommendation-making power is framed as it is, why it is limited in the way proposed and how Ministers expect it to operate in practice.

Finally, on the Clause 16 stand part notice, I understand the concerns raised in the debate. The value of that clause will depend entirely on whether the strategies produced are meaningful, responsive and capable of being scrutinised. If they become generic documents with broad statements of aspiration, they will add little. If they provide clear commitments, measurable priorities, proper engagement with growth and competitiveness, and a disciplined approach to reviewing the rulebook, they will be useful.

I very much look forward to a full response from the Minister to the points that have been made.

[Lord Stockwood (Lab)]

My Lords, I begin by explaining the Government’s purpose behind Clause 16 and why it should stand part of the Bill.

The Government have often heard feedback calling for the regulatory system to have an overall long-term strategy with clear goals, where the regulators consider the cumulative impacts of their policies and the interaction between supervision and rule-making. The reforms introduced by Clause 16 are intended to address this feedback and will improve transparency around the regulators’ long-term direction and focus, which the Government consider will support effective oversight and scrutiny of the regulators.

Clause 16 requires the FCA and the PRA each to prepare and publish long-term strategies so that stake- holders, including regulated firms, can better understand the regulators’ approach to the sector, and so that the Government and Parliament fully understand the regulators’ priorities and can more effectively hold them to account on how they are translating their objectives into actions and results. When the Government consulted on this proposal, it received strong support: 83% of respondents supported it and agreed that the regulators taking a more strategic and cohesive approach would benefit the sector by helping firms know what to expect.

I have listened carefully to the concerns raised by noble Lords. However, the Government remain firmly of the view that Clause 16 will support scrutiny. By requiring a clear long-term strategic overview, Clause 16 will help the sector understand and plan more effectively for regulatory initiatives and will help interested parties engage with the regulators at a strategic level. Without Clause 16, there would be no requirement for the regulators to set out, in one place, their long-term priorities and approach in advancing their objectives. The aim of the strategies is to make it easier, not harder, for Parliament and stakeholders to scrutinise whether the regulators’ actions are coherent and aligned with the framework that Parliament has set.

On Amendment 70, the Government agree with the noble Baroness, Lady Noakes, that the FCA’s secondary international competitiveness and growth objective should be central to the formulation of its long-term strategy. Growth is the number one priority for this Government and the financial services sector, as many have noted, is key to delivering this. The Government always intended the FCA’s long-term strategy to set out its priorities for advancing our international competitiveness and growth objective. We are looking into this point to determine if this is fully clear within the drafting of the clause, and we are open to tabling an amendment on Report should we determine that it is needed. I thank the noble Baroness for bringing this to my attention and commit to keeping her and other noble Lords informed as this consideration progresses.

I turn to Amendments 69B and 73A. The noble Lord, Lord Ashcombe, and the noble Baroness, Lady Neville-Rolfe, asked me to explain the Government’s thinking behind the time periods here. The Government have set the length of this strategy as five years because, as has been noted, it is the standard time period for organisational strategies and is very common in the business world, as many noble Lords will appreciate. It also aligns with standard parliamentary terms and therefore the requirement for the Treasury to issue recommendations to the regulators at least once per Parliament. However, the Government recognise that financial services markets can evolve quickly and it is important that the regulators’ strategic documents remain current and useful.

The noble Baroness, Lady Noakes, asked me how the strategies would be kept under review. The Bill provides flexibility for the regulators to revise or publish a new strategy within the five-year period if circumstances require it, or to publish a strategy for a shorter period of time than five years. If they do the latter, it will need to be with an explanation about why this is appropriate. Five years is therefore a maximum interval, not a requirement to wait five years before making a change. For example, the Bill requires the regulators to consider whether they need to update their strategy or issue a new one whenever new Treasury recommendations are issued. The Government’s view is that this strikes the right balance between providing a long-term, stable framework and allowing regulators to respond when market, economic or regulatory conditions change.

On Amendments 73 and 76, the Government’s approach here is deliberate. The need for the regulators to take account of Treasury recommendations at a strategic level, rather than at the level of general functions, has been carefully considered. Under the new framework, the Treasury’s recommendations to the regulators regarding its economic priorities will inform the development of their strategic priorities. This is aligned with the change to the way that the regulatory principles will be applied, and I hope it demonstrates the Government’s confidence that influencing the regulators’ strategies is an effective mechanism for ensuring that they have an appropriate focus and are performing well.

Further to this, the framework has been carefully designed to ensure that Treasury recommendations are taken fully into account. As I mentioned earlier, regulators must consider updating or producing a new strategy whenever the Treasury sends a new recommendation letter. The regulators will continue to be obliged to respond annually to the Treasury on their actions in response to the recommendations separately from the strategy document. This will support continued transparency and accountability regarding how the regulators are taking government recommendations into account.

[Baroness Kramer (LD)]

I just ask for clarification. The Minister talked about the way in which the Treasury will make recommendations and the regulator must take them into account. I did not hear the word “Parliament” anywhere in that. Where is the capacity for parliamentary recommendations and oversight to make sure that they are taken into account? Or is the purpose of this legislation to make sure that that does not exist?

[Lord Stockwood (Lab)]

I think this is part of a broader discussion. I am informed that this takes into account existing practices for how the reviews and overviews take place. Unless we decide, in the following debates, that we need an amendment to provide parliamentary overview, this will apply to the current regulatory framework as the oversight currently exists.

[Lord Stockwood (Lab)]

I do not want to get confused about this. My understanding is that this is already existing practice, but I will take this away and write to the noble Baronesses just to confirm that this is exactly correct. We are trying not to defer from the practice as it exists today, but I will write to clarify that.

[Baroness Kramer (LD)]

I just add that the point of the principles is that they are, in effect, Parliament’s recommendations set in law. I am struggling to see how that fits into the question of who can recommend from this point in time.

[Lord Stockwood (Lab)]

I will write to the noble Baroness to clarify that.

--- Later in debate ---

[Lord Stockwood (Lab)]

There is a broad philosophical point being made about trusting the FCA and the regulators. Again, we will come back to this in further debates. It is a view that I understand, and we need to develop this through the process of the debate, but it is definitely not the intention to give them free rein to make laws randomly. I think we will have to come back to that later in Committee, if that is okay.

[Baroness Kramer (LD)]

My Lords, I ask for some clarification on this complex area. Under Clause 16, new Section 1JZA(7) states:

“A strategy may be revised by publishing a revised version of the strategy”.


Is the Minister confirming that, as it says in the Explanatory Notes, no consultation goes with that revision process?

[Lord Stockwood (Lab)]

That is correct.

Amendments 71 and 74 seek to require the FCA and the PRA, when preparing or revising their long-term strategies, to consult persons they consider would be affected, including those they regulate. The Government have a clear expectation that the regulators’ strategies will be informed by engagement with industry, consumer representatives and other stakeholders. However, adding a statutory consultation requirement could lead to long delays between a new Government setting direction through a recommendation letter and the regulators putting a strategy in place.

The noble Baronesses, Lady Kramer and Lady Noakes, asked how the Government’s remit will work under the new system. The FCA and the PRA will now be required to have regard to their remit letters when producing or updating long-term strategies. The regulators will continue to be required to respond annually to remit letters, setting out the actions to which they will respond. The noble Baroness, Lady Neville-Rolfe, asked about non-executive directors; I will write to her on that as I do not have the answer to hand.

The accountability of the financial services regulators is clearly an important matter of huge interest to the Committee. I have heard a range of views today on exactly what this should look like, and we will continue to debate this issue in relation to subsequent clauses. However, regardless of views on the wider matters of transparency and accountability, I am confident that the majority will agree that long-term strategies will add to our understanding of the regulators’ strategic priorities and approach, which must be a good thing. I therefore ask that Clause 16 stands part of the Bill.

--- Later in debate ---

[Lord Stockwood (Lab)]

My Lords, I welcome the focus of the noble Baroness, Lady Kramer, on the vulnerabilities in the private credit system.

Although the Government are clear that the growth of private credit has brought benefits to the real economy, we and the financial regulators are very conscious of the potential vulnerabilities in this sector. Just last month, the Chancellor and the Governor of the Bank of England joined their fellow G7 Finance Ministers and European Central Bank governors in agreeing that potential risks in the private credit ecosystem call for continued monitoring, including that of the interconnections with banks and insurers.

The amendment from the noble Baroness, Lady Kramer, would require the PRA and the FCA to consider private credit’s interactions with the wider financial system in all cases where the regulatory principles are engaged, or else their decision-making could be unlawful. I assure her that the regulators are already working to understand these vulnerabilities deeply and to address them where necessary. This work does not require placing additional duties on the regulators.

I will highlight the existing work of those regulators. First, the Bank of England’s Financial Policy Committee has been focused on the risks of private markets for many years, and the Chancellor’s most recent remit letter to the FPC asks that that work continues. I specifically note the Bank’s system-wide exploratory scenario on private markets, the SWES—as if we needed another acronym. It is examining how a stress scenario could affect the UK’s private markets ecosystem and interconnected banks, insurers and pension funds, with significant participation across the industry. The UK’s system-wide regulator, the Bank of England’s Financial Policy Committee, is the right authority to carry out this work, and its findings will be laid before Parliament when it is complete.

For its part, the FCA also maintains a close focus on these risks, including in its firm-level supervision. Where specific issues are identified, targeted interventions follow. We also welcome the FCA’s work to improve the visibility of risks and data availability through its reviews of the alternative investment fund managers directive framework, and its efforts to raise standards on conflicts of interest, valuation practices and risk management.

I note the noble Baroness’s concerns about the FCA’s regulatory perimeter, but I emphasise that the marketing of funds in the UK is indeed subject to UK regulatory requirements, protecting UK investors. Further, the PRA continues to assess and mitigate risks from private markets to the banks and insurers it regulates. This includes its 2024 thematic review of private equity-related financing activities with banks.

Finally, given the cross-border nature of the private credit ecosystem, the Bank and the FCA are actively engaged in international work, including at the Financial Stability Board, which is chaired by the Governor of the Bank of England. The Government believe that, under our regulatory framework, vulnerabilities in private credit are being understood and addressed where needed, but there is of course much room to improve. I therefore ask the noble Baroness to withdraw her amendment.

[Baroness Kramer (LD)]

My Lords, I will of course withdraw this amendment, but I wanted to get this issue on the agenda, and we need to continue to do so. I say to the Government: do not be complacent in this situation. A few weeks before the crash in 2008, everybody in government would have told you how well the financial sector was functioning. Being a cynic can be quite helpful.

I am particularly concerned about the impact on small businesses when we run into the next financial shock, because there will be one. That regulatory perimeter is a serious issue that the Government should be looking at. I do not know whether you can get the regulators to look at it voluntarily. As far as they are concerned, you go to Parliament only to explain; it is not where you take instruction. I am concerned about these issues. I look forward to the amendment in the name of the noble Baroness, Lady Noakes, on private credit, which will come later. With that, I beg leave to withdraw my amendment.

Financial Services and Markets Bill [HL]

Debate between Baroness Kramer and Lord Stockwood

Committee stage
Monday 22nd June 2026 Grand Committee

[Baroness Kramer (LD)]

My Lords, I have only a few comments on this group. As I listened to the comments on Amendment 17A, particularly those of my noble friend Lady Bowles and the noble Baroness, Lady Altmann, I understood what reminded them of mortgage prisoners. In that case, people who held mortgages with banks that failed, and who were rescued by the Treasury, were then sold on to private holders who were not themselves lenders of mortgages. In effect, they lost the ability to refinance, and so they remained imprisoned in very high-rate mortgages at a time when everyone else was able to remortgage. We can see echoes of that in some of the limitations that would be introduced by these amendments. I am therefore always concerned about those time limitations, particularly in situations where assets can be sold on, as they often and increasingly are today.

Amendment 44, from the noble Baroness, Lady Neville-Rolfe, seeks to deal with the issue of consumer redress. If a consumer has been abused in some way and has a moral right to redress—a right in law—should that be lost simply because we have a regulator that fails to act promptly and within a reasonable time? I understand that it is tough for the industry, because it leaves it with uncertainty, but some of these products are life-changing for individual consumers and have life consequences. That is what made me think of mortgage prisoners; their lives were completely ruined by that process.

Where there are such consequences for the individual, it is very concerning to take away the right to redress because there was a delay in the functioning of the regulator. I understand that it means that the industry has to live with uncertainty, but my advice to it is to behave well to your customers. That really is the very best way not to get into these issues.

[Lord Stockwood (Lab)]

My Lords, I begin by considering Amendments 17A and 44. The Government’s reforms to the FOS are aimed at ensuring that the legislative framework in which it operates supports it to perform effectively the role that it was established to do, providing quick, informal and impartial dispute resolution between financial services firms and their customers.

Given the nature of the FOS and the way it operates, it can be effective at resolving the majority of disputes between customers and financial services firms, but it cannot do everything, and some things are more suited to other routes. The alternative routes include the courts and a consumer redress scheme established by the FCA. These routes are more appropriate when addressing systemic issues, such as widespread mis-selling. The reforms that the Bill makes to Section 404 of the Financial Services and Markets Act 2000 are designed to enable the FCA to act quickly to prevent disruption and uncertainty when it finds that a mass redress event has occurred.

Turning to Amendment 17A, I thank the noble Baroness for raising this important issue. I recognise that there have been questions about the time limits that apply to claims brought under Sections 140A to 140C of the Consumer Credit Act 1974 in the light of the Zedra ruling. The Government understand that there is an interest in and desire for clarity in this area. The noble Baroness, Lady Neville-Rolfe, asked me about the Government’s position following the Zedra ruling and its implications for the Consumer Credit Act 1974. The Government’s position remains that the limitation period runs from the end of the credit agreement. That approach provides legal certainty and reflects the nature of these claims. That understanding is consistent with existing case law, including the Supreme Court’s judgment in Smith v RBS.

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[Lord Stockwood (Lab)]

I was coming on to that point. The noble Lord asked what the power can do and how that scrutiny can take place. It allows the Government to introduce targeted secondary legislation or to confer functions on the FCA, including the power to make rules in the future. When using this power, the Treasury must have regard to the recommendation made by the Lloyd review.

I think the noble Lord made a point about what legislation could be amended. I can only answer this in part at this time: the Treasury expects to use the power if needed to amend relevant legislation, for example, financial services legislation.

[Baroness Kramer (LD)]

I would just like to clarify this. Is the Minister saying in effect these powers are going to be one time only? Is that the implication?

[Lord Stockwood (Lab)]

No, that is not what I am concluding.

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[Lord Stockwood (Lab)]

My Lords, Amendments 28, 29 and 30 are aimed at increasing access to finance and ensuring that the customers of financial services firms are protected. I recognise the intention behind these amendments. However, I do not believe that either solution is workable.

On Amendments 28 and 29, I agree that data on access to finance and holding the sector to account are important. However, these proposals would introduce a new, prescriptive and burdensome framework on the FCA and firms that I am not persuaded would deliver the desired output.

Amendment 28 would require the FCA to establish a framework to monitor, assess and publicly report on certain banks’ and building societies’ performance in providing access to affordable credit. Amendment 29 would require the FCA to take action against firms that do not meet a minimum standard. As the noble Baroness, Lady Kramer, said, this approach resembles the United States’ Community Reinvestment Act 1977, but we should not assume that it would have the same effect here. Our starting point is different: we are working nearly 50 years later, in a digital age, with a far more diversified credit market. In any case, lenders already publish significant data. Chapter 7 of the FCA’s Conduct of Business Sourcebook requires extensive disclosure on personal and business current accounts. We also have the FCA’s Financial Lives Survey, the SME Finance Monitor and the British Business Bank’s annual SME finance publications, among others.

Amendment 29 would require the FCA to act against firms that do not meet a minimum lending standard. Striking the right balance on access to credit has long been a challenge. We want consumers to be able to access credit where it supports financial resilience and businesses to secure the finance needed to grow, but inappropriate credit can lead to overindebtedness, with serious consequences. The amendment could, in effect, compel lending to more vulnerable groups or SMEs. Even a well-designed regime could be a blunt instrument, with a risk of unintended outcomes. It would also represent a significant intrusion into firms’ commercial decisions.

More fundamentally, it is difficult to see how firms could increase lending and take on greater risk without raising prices to reflect that greater risk. If firms do not price risk appropriately, it opens us up to financial stability risks. The FCA would be placed in the invidious position of having to mandate affordable credit, while the mechanism required to expand provision could increase costs and potentially increase risk for the borrower and the firm. That runs directly counter to the intended objective for vulnerable customers and SMEs.

Although I cannot accept these amendments, I stress to noble Lords that the Government are not complacent about financial inclusion or the availability of SME finance. The noble Lord, Lord Altrincham, asked me to set out what the Government are doing, and I am happy that noble Baroness, Lady Kramer, mentioned several of these interventions already. The Government published their Financial Inclusion Strategy last autumn, and we are supporting practical interventions for consumers, including a small sum credit pilot enabling mainstream lenders to test lending to customers outside their usual risk appetite. Monzo was announced as the first participant in the scheme earlier this month.

We have launched a transformation fund for credit unions, alongside common bond reforms in this Bill, to strengthen their lending capacity. We are also advancing targeted SME finance measures to improve competition and supply, including enhancing the consumer credit data sharing scheme through Clauses 41 and 43 of this Bill. We are supporting up to £150 million of lending through the Community ENABLE funding programme over the next two years. We are establishing a CDFI taskforce and working with industry to improve bank referrals. Indeed, tomorrow I am meeting several large asset managers as chair of the place-based impact investment scheme. We will set out next steps on open finance later this summer. This has significant potential to support SME lending across a wide range of providers, alongside broader work with the Bank of England on capital and ring-fencing.

I highlight community development finance institutions, which I know are a priority for the noble Baroness, Lady Kramer. In addition to the CDFI taskforce and the Community ENABLE funding programme that this Government have funded, the sector benefits from Fair4All Finance’s affordable credit scale-up programme, which has committed more than £40 million in social investment in England to date. The financial inclusion strategy further includes measures to strengthen community finance, including promoting partnerships with mainstream lenders. Taken together, these measures support access to finance in the UK in an appropriate and responsible way.

Amendment 30 would introduce a new fiduciary duty on firms when carrying out FCA-regulated activities. It would place specific legally binding requirements on firms. I agree with the noble Baroness that it is vital for firms to act in a way that delivers good outcomes for consumers. However, I believe that FCA regulation is able to achieve this, and I am concerned that this new duty would risk creating overlapping requirements, causing confusion and reducing consumers’ access to finance.

The FCA’s consumer duty is designed to set a high standard of protection for retail customers by requiring firms to act to deliver good outcomes in line with the outcome sought by this amendment. It requires firms to put consumers’ needs at the heart of their business, including by acting in good faith, avoiding foreseeable harm and supporting consumers to pursue their financial objectives. In practice, this means that firms must design products and services that meet consumers’ needs, provide fair value, communicate clearly and offer effective support.

I am concerned that the requirements set out in this amendment would risk making more vulnerable customers more expensive and risky to serve, which would reduce their access to products such as credit and insurance. Introducing a novel statutory fiduciary duty, the precise scope of which would fall to be settled through litigation over a number of years, would create significant legal uncertainty. That uncertainty would carry a cost, which firms would be likely to manage by withdrawing from, or repricing, services for higher-risk customers. I recognise that there is some precedent for a fiduciary duty in trust-based pension schemes. However, the dynamics of the market are very different from wider consumer financial services. Typically, employer pension schemes do not choose which individual customers to serve, and the fiduciary duty applies at the membership level.

I genuinely understand the importance of lending for all parts of the economy, and I understand the need for borrowers to be protected, but I am convinced that the Government are taking the right set of actions, and I am afraid that Amendments 28, 29 and 30 would bring significant unintended consequences. I therefore ask the noble Baroness to withdraw her amendment.

[Baroness Kramer (LD)]

I thank the right reverend Prelate the Bishop of Manchester for signing Amendment 28 and for speaking so eloquently in this debate. The noble Lord, Lord Massey, and the noble Baroness, Lady Noakes, are both involved in the world of finance and meet international financiers. I will give them a challenge. When they meet American financiers and bankers, whether here or in the United States, will they please raise CDFIs? The noble Lord, Lord Massey, will find that basically everything he said flies completely in the face of the US experience, and I say the same thing to the noble Baroness, Lady Noakes.

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[Lord Stockwood (Lab)]

My Lords, as we have heard today, the Financial Ombudsman Service—the FOS—plays a vital role in providing quick, informal and impartial dispute resolution between customers and their financial services providers. It offers an accessible route for dealing with complaints that is designed to act as an alternative to resolving cases through the courts, which can be costly, lengthy and a process that often does not work for firms and consumers. The Government are clear that an effective ombudsman provides consumers with confidence in our financial services sector and is a key element of an effective system.

The Government’s review of the FOS found that, although the FOS fulfils its role in the majority of cases, in a small but impactful minority of cases, it has acted as a quasi-regulator. That conclusion was supported by the Financial Services Regulation Committee, chaired by the noble Baroness, Lady Noakes, in its report, Growing Pains: Clarity and Culture Change Required, which was published in June 2025. It recognised that the FOS’s

“actions have regulatory impacts by creating precedents that the FCA requires firms to follow”,

and that this

“generates an unacceptable level of uncertainty for firms, stakeholders, and investors”.

I want to be clear that the review was not suggesting that the FOS was acting improperly; rather, it concluded that the way in which the legislative framework operates made such issues unavoidable by creating a disconnect between the FCA’s rules and the FOS’s decisions, giving rise to unpredictability and a lack of certainty across the regulatory environment. That unpredictability is damaging for everyone and harms consumers’ confidence in the financial services products and services they rely on, as well as firms’ confidence to invest and innovate in the UK.

There is a large number of amendments before us. I will start with Amendment 31. This proposal would substantially extend the timeframe for bringing complaints to the FOS and would require the FOS to spend even more of its time and resources investigating, considering and attempting to resolve historic cases than it does today. We know from current experience that this would substantially increase costs while delivering comparatively limited increases in redress awarded. Further extending the timeframe beyond 10 years in an open-ended way to accommodate a complainant’s reasonable awareness of an issue would increase uncertainty for firms around historic liabilities, reducing appetite to invest in the UK’s financial services businesses.

The Treasury’s analysis of data from the FOS on historic cases is clear: they are more likely to be withdrawn or abandoned and have lower success rates than the average, often due to limited evidence and information being available. The Government’s analysis concluded that complaints to the FOS that are over 10 years old cost firms, on average, more than £18 million per year in case fees but deliver only £600,000 per year in redress for consumers. This is not a proportionate or balanced approach, nor is it consistent with the FOS’s quick and simple purpose. Extending the timeframes would slow down the FOS’s resolution of cases that are more recent and have a higher chance of being upheld, delaying consumers access to the redress they are owed.

Turning to Amendment 32, the Government considered carefully the options for different time limits to be set in legislation, including a six-year limit, and published their analysis in the impact assessment. Although this is a matter of judgment, the Government concluded that a 10-year time limit would strike the appropriate balance between consumer protection and providing certainty to firms, with a six-year limit resulting in too many people losing access to redress. However, I assure the noble Baroness and the noble Lord that the new limit introduced by the Bill is designed to act as a backstop to the existing limits set in rules made by the FCA. In most cases, the time limit will remain at the existing six years, with the 10-year backstop kicking in for cases where the customer could only reasonably have become aware of the problem at a later date.

On Amendments 33 and 35, the Government agree that, where the cause for complaint may take longer to come to light, such as with pensions, it is important that complaints can continue to be brought to the FOS. This is why the Bill gives the FCA discretion to make exceptions to the time limit in specified circumstances, where it is appropriate to do so. The Government carefully considered their approach to defining these exceptions and determined that the FCA is best equipped to develop proportionate and fair exceptions and to define these in its rules, given the FCA’s supervisory role and oversight of the sector and the level of technical detail that is required for the definitions.

The noble Lord is right to recognise the careful balance needed between ensuring that we do not undermine the certainty that this reform is intended to deliver while maintaining consumers’ trust and confidence that they will have access to redress when things go wrong. The Government are working closely with the FCA as it develops these exceptions and the FCA will set out its proposals in due course.

Amendment 34 relates to cases where there is an ongoing relationship between the consumer and a firm. Some complaints may be about acts or omissions that continue to occur or have effect in the context of an ongoing relationship between a consumer and a firm. The Financial Services and Markets Act 2000 does not place a restrictive definition on “acts” or “omissions”, so there is no reason why such an ongoing act or omission could not be the basis for a complaint within the time limit. The Government’s reforms in the Bill will not change the FOS’s discretion to identify the act or omission to which a complaint relates for the purposes of applying relevant time limits. It will continue to be for the FOS to make those judgments, based on the circumstances of the case and in line with the rules set by the FCA.

I will now explain the Government’s purpose behind Clause 8 and why it should stand part of the Bill. The noble Lords, Lord Davies of Brixton and Lord Sharkey, asked about the evidence base behind the Government’s policy. The Government’s review found that, in a small but significant minority of cases, the FOS has acted as a quasi-regulator. This means that, in some cases, the FOS has held firms to a standard that is different from those set by the FCA. The majority of responses to the Government’s consultation on the proposals to reform the legislative framework in which the FOS operates were broadly supportive of aligning the FOS’s fair and reasonable test with the FCA rules.

[Baroness Kramer (LD)]

Can the Minister clarify something? Is he saying that, provided you comply with an FCA rule, you are then always fair and reasonable? That is what I am taking away from this. I can list so many examples, such as Libor and mini-bonds—all kinds of things—where the perpetrators ticked every single compliance box. I am curious to know.

[Lord Stockwood (Lab)]

I apologise for taking a moment to ask my officials a question; I want to make sure that I give the right answer. Where the FOS has complied with the FCA rules, it still has the discretion to make judgments, as long as it believes them to be fair and reasonable.

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[Lord Stockwood (Lab)]

Certainly. We are trying to align the FOS’s “fair and reasonable” test with the FCA rules, but it retains some discretion.

I apologise for taking another moment to consult my officials. For clarity, where the FOS has aligned with the FCA rules, it has to believe that that is the case, and that determination has to be upheld.

[Baroness Kramer (LD)]

For absolute clarification, “fair and reasonable” must be interpreted by the FOS as a standard that is met if there is compliance with FCA rules. I just want to understand because we can then go back historically and see where FCA rules might not have been perceived as fair and reasonable. It is interesting.

Employee Car Ownership Schemes

Debate between Baroness Kramer and Lord Stockwood

Monday 8th December 2025 Lords Chamber

[Lord Stockwood (Lab)]

I thank the noble Lord for the question. As I stated previously, as part of our modern industrial strategy we are committed to the automotive sector. Our ability to defer the start date for this particular policy shows that we are in open dialogue. We will continue with that dialogue.

[Baroness Kramer (LD)]

My Lords, I recognise that there has been an element of contrivance in the usage of the present employee car ownership schemes which the Government are closing down, although the delay is welcome. Right now, so many businesses are under stress, as well as the automotive sector generally. Will the Government be providing some sort of road map for those who are not using this in a contrived way but have a legitimate practice to be able to find a new mechanism to enable them to keep their businesses going? For example, would he find the salary sacrifice scheme approach an acceptable one?

[Lord Stockwood (Lab)]

The Government are committed to fairness in our tax system, so we are open to all those conversations. At the moment, we have set out the policy we intend to commit to.