Bank of England and Financial Services Bill [HL]

Debate between Baroness Noakes and Lord Sharkey

Monday 9th November 2015 Lords Chamber

[Lord Sharkey]

I thank the Minister for that response. There is no argument about the value of the CEO of the FCA being on the FPC. I fear that I was completely unconvinced by the argument that one more external member would make the FPC collapse into chaos and disorder; that seems a bit far-fetched.

The difference between us is whether the independence that the noble Lord maintains that the CEO of the FCA has is true independence. The test he seems to apply is simply that, well, the FCA itself is kind of independent, so she is obviously independent. In fact, the Minister did not mention my major concern, which is the influence that the Bank itself has over the CEO of the FCA. I give way to my former noble friend.

[Baroness Noakes (Con)]

My Lords, can the noble Lord explain why he thinks that the Bank has any influence whatever over the chief executive of the FCA? There are no provisions in statute that give any sense of influence, even, and I struggle to find where in practice you could point to where that influence could be deemed to exist.

[Lord Sharkey]

There are two partial answers to the noble Baroness’s question. The first is, as I mentioned, that the chief executive of the FCA can be summarily dismissed, presumably either at the instigation of the governor or at least with his permission and consultation—

[Baroness Noakes]

I ought to say two things to that. The chief executive of the FCA was not summarily sacked; as I understand it, he was informed that his contract would not be renewed, and there is a world of difference. As far as I am aware, there is no practical issue of the Governor of the Bank of England or any other senior official of the Bank of England having any locus in the decision whether to renew the chief executive’s contract. If the noble Lord has evidence of that, I should be happy to see it.

[Lord Sharkey]

The fine distinction between being summarily dismissed and not having his contract renewed temporarily escapes me, but I am sure that it will come to me. The point I am trying to make is that I believe that the Bank has influence over the CEO of the FCA. I was asking the Minister—because he did not deal with this—to explain why he clearly believes that it does not have influence over the head of the FCA.

I also point out, as I did in my initial speech, that the PRA itself can act to restrain and constrain the activities of the FCA, as I am sure the noble Baroness knows. The PRA is an organ of the Bank, so the actual independence of the FCA is somewhat compromised by that arrangement. That was the point that I was trying to make.

However, having said all that, and not being terribly convinced by the Minister’s arguments—I am sure that we will want to return to this later—in the mean time, I beg leave to withdraw the amendment.