Financial Services Bill

Lord Blackwell Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Thursday 28th January 2021 Lords Chamber

[Lord Blackwell (Con) [V]]

My Lords, as well as adding my congratulations on the two excellent maiden speeches, it is customary to start by declaring my interests. Since I retired as chairman of Lloyds Banking Group at the beginning of the year, I am pleased to say that, for the first time in many years, I can address the House with no active interests other than as an ordinary shareholder. With that freedom, I welcome all the measures in the Bill, but I will comment on two that are particularly important.

First, it is essential to help provide more certainty on Libor contracts at this stage. In his opening remarks, my noble friend gave mortgages as an example. While I welcome the measures in the Bill, do the Government believe that the measures that enable the FCA to replace Libor in benchmark contracts are sufficient to apply to mortgages and commercial loans? Might my noble friend also consider some kind of safe harbour for banks if they suffer litigation from clients as a result of FCA instructions?

Secondly, I welcome the enabling legislation for the Statutory Debt Repayment Plan scheme, but note that, in developing the regulations later this year, it will be important to ensure that all the customer’s debts can be looked at holistically, and that the proposed plan is offered to customers only where it is the right and best solution for their particular needs.

More broadly, as the Minister made clear, many of the measures in the Bill are to establish UK-based regulations to replace those previously enacted through the European Union. I welcome the principle the Bill establishes that, unlike EU regulations, the UK should keep the primary legislation limited to the overall framework for regulation, with the Treasury providing necessary secondary legislation, with the regulators then given freedom to apply that in proportionate and flexible rules.

As the noble Lord, Lord Butler, pointed out in respect of MiFID, experience has shown that attempting to legislate in detail on the regulation of financial services can create unintended anomalies that the regulators are then powerless to address. It also inhibits their freedom to shape rules to reflect varied industry circumstances, or to adapt to market innovation, and those companies that seek to innovate. So, I also welcome the Government’s ongoing review and consultation on the future regulatory framework, which is looking at going much further in transferring responsibility for detailed rule-making back to the PRA and FCA.

While there will be debate on the initial measures covered in the Bill, the point I want to focus on, like other noble Lords, is what is missing from it on the effective governance of the regulators in exercising those increased powers. I recognise these are matters that have been subject to consultation, but they are nevertheless germane to many of the delegated powers in this current legislation. As I said, I believe it is right to give the PRA and FCA the responsibility and powers to make, adapt and apply regulations to promote the stability of our financial markets and protect the interests of consumers within the framework of laws passed by Parliament. Between them they have the expertise to do that and, as with the Bank of England, we should expect them to undertake their role with an objective independence—independent, that is, of short-term political pressures.

I welcome the fact that this Bill also introduces, for the first time, the obligation on the FCA and PRA to consider the international standing of the UK investment and credit institutions in making their rules. Like my noble friends Lord Hunt and Lord Bridges, I believe that, post Brexit, it should be part of their formal objectives to promote a healthy UK industry that can compete successfully on the global stage. To do that, there may also need to be a greater requirement for them to ensure that the two regulators have complementary rule-making and supervision without, at this stage, seeking to recreate the single FCA.

In delegating those powers to the FCA and PRA, Parliament needs to ensure that there is an effective way to scrutinise their work and hold them to account for their actions. I do not believe that the Treasury Select Committee, while it has an important and critical role, is the right or adequate forum to provide that detailed and apolitical oversight. By contrast, having served in the past on a Joint Committee on rewriting tax laws, I believe that Joint Committees of both Houses can bring greater experience and expertise to bear in a more considered and less political environment.

So, I join the noble Baroness, Lady Falkner, in proposing, as a complement to this Bill, that Parliament establishes a new purpose-built Joint Committee that I would call the financial services regulatory oversight committee. It would be supported by appropriate technical experts whose role would be to provide detailed scrutiny of new regulations—I stress not to give ex ante approval, but simply to review them after the event. The committee could also take evidence from those in the industry on the implementation of financial regulations and any concerns that raised. If necessary, the committee could then have the power to propose statutory instruments to Parliament where amendments were required.

The Bill may or may not be the right place to introduce provision for this kind of oversight. I recognise that the Government’s consultation has only just closed, but I would welcome any early thoughts my noble friend can give on how the Government see this oversight issue being addressed and what their timetable is for doing so. I look forward to the Minister’s response.