Financial Services and Markets Bill Debate

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Department: HM Treasury
Lord Grimstone of Boscobel Portrait Lord Grimstone of Boscobel (Con)
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My Lords, it is a special pleasure to follow my noble friend Lord Remnant. His eloquent maiden speech clearly demonstrates his deep expertise in financial services. This should be of no surprise to your Lordships, because the City is truly part of his DNA. I had the pleasure of serving on the board of the Shareholder Executive under my noble friend’s chairmanship, and I have witnessed at close quarters his knowledge and integrity. His presence in your Lordships’ House will contribute massively to our wisdom and expertise. I welcome him.

This is an important Bill. The financial services industry is our most important industry. It is a huge driver of economic activity, it creates high-quality jobs throughout the UK and the taxes it pays underpin our ability to provide public services. It is therefore even more remarkable that Governments have paid so little attention to the City in recent years. For example, too little priority was given to the City in the Brexit negotiations, and in general Ministers have shown a marked reluctance to support the industry through either words or deeds. At times, I have even felt that Ministers were almost ashamed of the City’s existence. Partly as a consequence of this, it is no longer the global force it was. This decline will continue unless something is done about it. Action is urgently needed. Speaking as a former chair of TheCityUK and of two of our largest financial services firms, I have to say that this is a very sorry state of affairs.

This Bill provides the potential to remedy matters. Whether it succeeds in this will depend critically on whether the secondary legislation and rulebooks which will come in its wake, as well as ensuring financial stability and consumer protection, will allow the industry to flourish and remain globally competitive.

Enacting this Bill will, though, mean that the success of our most important industry will rest more than ever on the shoulders of its myriad regulators. The challenge is that our regulatory regimes are not best in class and, despite the many talented people who work for them, neither are our regulators. We have to do something about this. We have created a culture, not just in financial services but elsewhere in our economy, that too often has allowed and, indeed, encouraged regulators to operate in a bubble of their own making. This has no doubt often been rather convenient for Ministers because they have been able to hide behind this bubble.

Your Lordships know what a strong supporter I am of regulatory autonomy, but that autonomy must be exercised within an envelope set by Parliament, with proper accountability and transparency and subject to strong and continuous independent oversight by people who know what they are talking about. No regulator is an island.

Late last year, the Economic Secretary to the Treasury exchanged letters with the CEOs of the PRA and the FCA about the need for world-leading levels of regulatory operational effectiveness. I congratulate him on this initiative. It is interesting that, in his reply, the CEO of the FCA highlighted that it is the FCA board that has statutory responsibility for overseeing the effective use of the FCA’s resources. As an exemplar, this caused me to look at the membership of that board. Although I have no doubt that its independent members fulfil their roles diligently and exercise due care and attention, it is striking that, according to their bios on the FCA website, not one seems to have served on the board of any UK-listed company. I also note that the incoming chairman of the FCA, who again is no doubt very able, has spent the last 20 years of his professional life in Hong Kong—a city I know well, but which is, to say the least, a rather different environment from the City. It is all rather surprising.

I would be very interested if my noble friend the Minister, in responding to this debate, could let us know whether she is satisfied that the FCA board and the other boards that oversee our regulators have the firepower to carry out their appointed tasks.