Financial Services and Markets Bill [HL]

Lord Altrincham Excerpts

2nd reading
Monday 8th June 2026 Lords Chamber

[Lord Altrincham (Con)]

I thank the Minister for hosting this debate with such courtesy and speaking so well at the start. I declare my interest as a director of South Molton Street Capital and also as former director of the Co-operative Bank. I follow the words of my noble friend Lady Neville-Rolfe in saying that we welcome this Bill. It addresses a widespread sense that financial regulation has become a little too complex. We have heard that this evening in debate, but that sense also seems to be held by the Treasury, the National Audit Office and, clearly, by the Government. The Government have generated multiple reviews and inquiries that underpin the clauses in the Bill.

To look at just a few of them, Clause 26 follows the committee on banking standards. This is the clause that looks at the senior management regime, where there is a huge need for reform and a reduction in bureaucracy. The Government have asked for a 50% reduction in bureaucracy, which we would welcome. The senior management regime itself is really quite a complex thing, and it probably does not quite do what Members of your Lordships’ House would expect—partly because some of the people who participate in it do not fully understand the regime themselves or what their obligations are.

Clauses 16 and 17 are the two quite controversial clauses that were spoken about today. One is on the five-year plan—the unsupervised five-year plan at the FCA—and the other is on weakening the link to the regulatory principles. Noble Lords have spoken today about the importance of oversight and of keeping an eye on what the FCA is up to. But going right back to the beginning of how the regulator was set up—the noble Lord, Lord Eatwell, reminded us of his participation in that, along with the noble Lord, Lord Burns—when the Financial Services and Markets Act 2000 set it up, it established that there would be a cost-benefit analysis that would essentially hold the regulators to account to be honest in how they develop regulation.

The FCA is running a review at the moment of cost-benefit analysis with Dr Felix Martin. We might, at the very least, hold the regulators to that part of their own obligation: proper cost-benefit analysis, and proper supervision of that analysis. That is even before we get to proper supervision in Parliament, which we have only just managed to put into the last Bill, as your Lordships know.

Clause 39 is on the ring-fence. It was interesting to hear the noble Lord, Lord Tunnicliffe, on that. The ring-fence clause also sits on a variety of reviews, in particular the Keith Skeoch review of 2022. It is worth remembering that his review in 2022 said that it supported the ring-fence but was very explicit on a few other points, one of which was that it is very expensive. There is an economic burden to running this ring-fence regime, in the order of £1.5 billion a year. But Skeoch also said that the benefits of the ring-fence regime would be diminishing, for the reasons we have just heard: because of the strength of the regulatory regime elsewhere, in particular the resolution regime. Then he added that the ring-fence might lead to ossification—quite a strong word—in retail bank services.

We might hope that that has not quite happened, but we know that there have been closures of hundreds of bank branches, so we might expect that all those closures would suggest at least a moderate reduction in retail bank services. That is before we even get to the provisions in Clause 3, which themselves are underpinned by a review into what is happening in retail banking at the moment. We might take quite a hard look at that, because it touches on the issues raised by my noble friend Lord Kamall—access to banking services for more vulnerable people—and by the noble Baroness, Lady Morgan: financial abuse and what is happening in the retail bank market. It just underpins the fact that so many of these clauses sit on quite careful inquiry.

This pattern, whereby there is a review and a recommendation, and it winds up in consequential legislation, means that the FCA acquires more powers every single time. Then we come back to why the FCA has all these powers, what it is doing with them and what we can do in Parliament about it, which is why in debating the last financial services Bill we spent so much time on oversight and accountability, so I will start there.

Oversight in Parliament for financial regulation has been improved with the previous Financial Services and Markets Act and, to the credit of Parliament and the Government, there have been quite important changes with the increase in the MREL threshold in September and the deposit threshold for the leverage ratio in November, and a reduction—for the first time since the financial crisis—in the Tier 1 capital ratio by the Bank of England in December. Oversight in Parliament was at least part of the reason for the change but, as a number of noble Lords have said, this Bill removes significant parts of the existing regulatory architecture. That was specifically of concern to my noble friend Lord Howard and mentioned by the noble Baroness, Lady Bowles.

In doing so, the Bill transfers considerable power to the Treasury, the FCA and the PRA to design and implement the new regime. Clause 3 adds Henry VIII powers that might create quite unintended consequences. Clauses 16 to 18 specifically tend to weaken supervision. We understand the argument the Minister is likely to make, which is that placing more of the framework outside primary legislation can allow for greater flexibility, speed and responsiveness. But flexibility must not come at the expense of accountability, and simplification must not become a means of transferring major policy choices away from Parliament and into the hands of regulators without proper oversight.

The FCA and the PRA rightly enjoy statutory independence from the Chancellor, but that independence makes parliamentary accountability even more important. Their principal democratic accountability is not to Ministers but to Parliament, and in practice that accountability is exercised largely through committees in both Houses.

I turn to regulatory proportionality. The second key concern I have is proportionality, which was discussed extremely clearly by my noble friend Lady Noakes and also by my noble friend Lady Lawlor. My noble friend Lady Noakes is right to say that proportionality needs to be uppermost in the minds of the regulators. It is the detail of rules, guidance and decisions that matter, not the broad-base strategies. Of course, lack of proportionality can arise for lots of reasons, perhaps starting with legislation itself, but it suggests a lack of regulatory judgment, which is rather unlucky.

Anti-money laundering rules have reached the furthest corners of English life. Alas, as we guard against wickedness in very small financial transactions in this country, there is a degree of quite significant capital flight out of the country going on. The timing of the Bill suggests that it may be the last chance for Parliament to set clear guidelines on proportionality before the next Government. Only Parliament can do this, because financial regulation will default to maximum caution in most instances, with consequences very clearly identified by noble Lords in the debate.

Clause 14 on AML, Clause 39 on ring-fencing, Clauses 16 and 17 on the five-year plans, and Clause 26 on changes to the senior management regime are all about proportionality. The Government’s own 2025 action plan recognises:

“Regulation can be too complex and duplicative”,


and that the cumulative effects of individually rational rules can impose significant burdens on business, smaller banks, challenger firms, wholesale firms and those caught by overlapping conduct and redress frameworks.

Your Lordships’ Financial Services Regulation Committee has also raised important concerns about whether aspects of the PRA’s capital approach may limit

“the commercial incentives and capital available to provide finance for growth”.

Overcalibration can reduce lending, particularly for SMEs, and productive investment, especially where requirements bear down on smaller, growth-oriented lenders.

The Bill touches on some of these issues of proportionality: reform of the Financial Ombudsman Service; simplification of the senior managers regime; faster application deadlines; and the consolidation of the Payment Systems Regulator into the FCA. Those are welcome steps.

We welcome the Bill. We hope that, through our deliberations in this House, we can help shape a Bill that restores confidence, competitiveness and momentum in our financial services industry for the wider benefit of our economy and our country.

Listed Investment Companies (Classification etc) Bill [HL]

Lord Altrincham Excerpts

2nd reading
Friday 15th November 2024 Lords Chamber

[Lord Altrincham (Con)]

My Lords, I thank the noble Baroness, Lady Bowles, for all she has done on this topic and for bringing forward the Bill. I also thank the noble Baroness, Lady Altmann, for her work on this.

It is remarkable, as the noble Lord, Lord Hodgson, pointed out, that we need to look at the fees and how they are shown for these kinds of investments. After all, we have a very traditional structure of investing in this country, and they have wound up being compared to exchange-traded funds, which come from a totally different history of regulation, as they come from the mutual fund industry. It is exactly as the noble Baroness, Lady Kramer, said: it is just a mistake how we come to be in this position. We thank the Government for taking things forward.

We discussed the importance of promoting economic growth within the financial regulations as part of the Financial Services and Markets Act last year. The importance of long-term investment is clearly an objective of the current Government. Listed investment companies are of course in part investment vehicles for longer-term investments, like infrastructure. They give investors exposure both to other listed companies and to unlisted investments. They were historically and substantially owned by insurance companies but, over time, have become attractive forms of investment for private client investors. Therefore, the fee comparison issue matters and must be disclosed properly. Some of these disclosures have been attempted in the accompanying information disclosures, but comparison is then difficult. While this may be a technical disclosure issue, it inevitably becomes a cost of capital issue and an example of where regulation weighs on investment.

The Bill will be very helpful in addressing a real issue right now in asset management. The Bill should reinforce the United Kingdom’s financial markets, increase transparency and protect the interests of both institutional and retail investors. The Bill allows individuals, pension funds and other stakeholders to align their investments with their goals, values and risk tolerances.

The UK’s financial sector has long been one of the cornerstones of our economy and an attraction for global capital. This Bill, in creating, clearer guidelines and definitions, will not only protect investors but enhance the credibility of UK-listed investment companies, and strengthen a form of investing that can benefit the UK economy more broadly.