Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2020

Lord Tunnicliffe Excerpts

Thursday 18th June 2020 Lords Chamber

[Lord Tunnicliffe (Lab) [V]]

My Lords, I am grateful to the Minister for her introduction of this measure, which is the latest in a long line of statutory instruments to amend EU-derived legislation so that it continues to function correctly following the conclusion of the transition period at the end of December. With the events of the past few months, I had forgotten just how many Treasury SIs we dealt with as part of the Brexit process. Indeed, paragraph 6.2 of the Explanatory Memorandum lists a dozen relating to this area alone.

As the Minister outlined, this SI expands the UK’s existing supervisory framework for central counterparties to cover third-country CCPs, to ensure that the Bank of England is able to undertake the necessary supervisory responsibilities required under the EMIR 2.2 framework. It transfers a number of functions currently carried out by the European Commission to domestic bodies, including the Treasury and the Bank, and makes minor amendments to deficiencies in other Brexit financial services SIs.

My right honourable friend Pat McFadden MP asked the Commons Minister a number of questions during the debate there on this measure, including whether the Government think that they can achieve an equivalence decision in the timeframe envisaged in the political declaration. Mr Glen simply said that the Government were “working through” the process. I hope that the noble Baroness the Minister can go into slightly more detail today.

We remain deeply concerned about the future impact of our changing relationship with the EU on the success of this country’s financial services sector. Financial services contribute significantly to Britain’s exports. In 2016, they were worth about £61 billion, with a surplus of £51 billion over imports. More than 300 firms in Britain have opened EU hubs to ensure single-market access, while £1 trillion of City assets and 7,000 banking jobs have been transferred to the eurozone. London has been supplanted by New York as the world’s leading financial centre in the Global Financial Centres Index and is close to being overtaken by Hong Kong. EU officials have insisted that at the end of the transition period the UK, as a third country, must abide by equivalence—a guarantee that its financial regulations meet European standards—and there are additional risks to access, as equivalence status can be revoked at any time.

While we cannot and must not rely on financial services to bring home the bacon, they will have an important role to play in returning the economy to growth once the coronavirus pandemic has been brought under control. We on this side accept that negotiations with the EU are ongoing. I hope that the Minister will note that our concerns have been heard and are shared.

Finally, can the Minister indicate how many further SIs are expected before the end of the transition period? This may be dependent on the number of open legislative files in Brussels but, as I have said on previous occasions, financial services regulation is complicated enough without multiple measures being brought forward to correct deficiencies in instruments that themselves amend other regulations. I trust officials at the Treasury, the Bank of England and the Financial Conduct Authority to ensure that we have a functioning statute book on exit day. However, given the challenging times we find ourselves operating in, I hope that Ministers will do their best to make officials’ lives and the work of your Lordships’ Secondary Legislation Scrutiny Committee as straightforward as possible.