Financial Services Bill (First sitting)

Abena Oppong-Asare Excerpts

Committee stage & Committee Debate: 1st sitting: House of Commons
Tuesday 17th November 2020 Public Bill Committees

[Ms Eagle]

Thank you, Chair.

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

Q Thank you for taking the time to speak to us. I know that you are in favour of the Bill, as it will give you greater agility and flexibility to deal with things. Going back to some of the comments you made earlier about the consultation process, in which you were clearly fully engaged, one of the things I want to find out relates to the consultation discussions, and obviously you have more responsibilities. Will you shed some light on what came out of those discussions in terms of making sure that there is effective accountability and oversight in relation to the additional powers that you are likely to be given?

Sheldon Mills: I will go first and then pass over to Vicky. It is useful to start with our current accountability, because the Bill and future regulatory frameworks being consulted on by the Government deal with that issue. We wish to be accountable. As an independent regulator, an important part of our process is for us to have public accountability. We serve the public and ultimately are scrutinised by Parliament. Our main form of scrutiny is that of the Treasury Select Committee, but we attend many other Committees. Explaining our activity to Parliament is an important part of our work. Below that, within the Financial Services and Markets Act for the FCA specifically, are our statutory panels. They are there to scrutinise our work in a much closer engagement with the organisation. Then we have the consumer panel, the practitioner panel and the small business practitioner panel, as well as the advisory panel on markets and listings. They are able to make public their views, and—believe me—they do very often make public their views on our activity. In addition to that, we will consult on our policies when we do policy-making work ourselves, as do other public authorities. We will also provide access to non-confidential information and data so that all interested parties can make their views known to us.

We also evaluate our work to ensure that it meets its intended outcomes. We already have an existing accountability framework that would sit well with the additional rule-making powers we may get through the Bill and as we move forward with the proposed reform to the financial services regulatory regime. The future regulatory framework is out for consultation, so I will not say much in relation to it, but we of course acknowledge that there may need to be adjustments to the accountability framework to accord with the additional powers that we are getting. We look forward to seeing the responses to the Government’s consultation in relation to that.

[Abena Oppong-Asare]

Q Just for clarification, during the consultation period there was no analysis looking, in terms of the additional powers, at how the accountabilities need to be changed. My understanding, from what you have just told me, is that it is very much reliant on the processes you think you have got already, which I have concerns about, if I am honest, because the current processes do not appear to take into consideration the additional powers.

Sheldon Mills: As I said, we acknowledge that we will be getting additional powers and there may need to be changes to that accountability framework. Within the Bill, you see the foundational approaches in terms of how things may change. Within each of the specific policy areas, if we take the investment firms prudential regime review, there are certain “have regards” obligations that we will need to take account of in that regime. I think that is a sensible approach to take as you bring in onshored regulation. There are specific needs that Parliament considers it is appropriate for us to consider for that onshored regulation. Then, that “have regards” mechanism of pointing that out to us and us being accountable for meeting those “have regards” in accordance with our statutory objectives is a sensible approach and adds an additional layer of accountability and scrutiny for us.

There are other mechanisms within the future regulatory framework, which is out for consultation. Again, I do not have a strong view on them. I recognise that we are getting more rule-making powers and we may need to have more strengthening of the accountability framework.

[Abena Oppong-Asare]

Q I put the same question to the other witnesses.

Victoria Saporta: To response to your question directly, yes, from the very beginning we had discussions with Treasury colleagues about how, within the narrow confines of this Financial Services Bill—I can talk about the related but quite distinct issue of the future regulatory framework—we could be more accountable, given that the Bill effectively gives the Government powers to revoke particular narrow areas of what will become, on 1 January, primary legislation, and then asks the regulators to fill in those particular gaps. The Government were keen that the process should be part of an enhanced accountability framework.

As Sheldon has said, within the confines of this Bill, the enhanced accountability framework applies to the updating of the rulebook to take into account the new Basel III provisions and the investment firms regulation, and three new “have regards” regulatory principles, which are set out in the relevant schedule and refer to us having to take regard of relevant standards recommended by the Basel Committee on Banking Supervision. That applies obviously to the PRA. We need to take the likely effect of the rules on the UK’s relative standing as a place for internationally active credit institutions and investment firms to carry on activities. Also, we need to take into account the likely effect of the rules on the ability of firms to continue to provide finance to households and businesses. This is an enhanced accountability framework, and the Bill also obliges us to publish how we have taken into account these “have regards”.

Those measures are within the proposals in the Bill to enhance our accountability publicly. There is the separate issue of the consultation that the Government are currently doing on how the future regulatory framework will look, what the enhanced accountability provisions within that are and how they should apply. I would not want to pre-empt that consultation but, clearly, the Government are interested and are trying to look at ways of keeping our feet to the fire, and that is absolutely appropriate.

[Harriett Baldwin (West Worcestershire) (Con)]

Q My questions are for the FCA. In terms of the impact of the Bill on the end consumer and the end user of financial services, what impact assessment has the FCA done on the potential regulatory cost and how that might affect the consumer? We hear a lot from financial services firms about the cost to them, not only of regulations, but also of the fees that they have to pay to the FCA. What business plan and cost assessment has the FCA done on the impact that the measures and the responsibilities in the Bill will have on the industry, which will then be passed on to the consumer, or will it be a reduction in cost?

Sheldon Mills: We have not undertaken a cost-benefit assessment of the Bill. That would be a matter for the Government. We have considered, as we discussed in response to earlier questions, the impact on resources within the FCA. Our current intention is to keep that within our current financial envelope, so we are not predicting at this stage an increase in fees or levies to take account of the Bill. That is all I can say at this stage.

In terms of the impact of the Bill and the onshored legislation, when we review the regulations on the investment firms prudential regime and so on, we will do a cost-benefit analysis of the rules and regulations that we are proposing at that stage. At this stage, we will not be doing that—that would be a matter for the Government, not for us.

In terms of the impact on consumers more generally, as I said, there are aspects of the Bill that are very consumer enhancing. I do not think they came up very much on Second Reading, but the provisions in relation to breathing space will be very helpful for consumers facing issues around statutory debts, which we are interested in as a financial regulator. The issues in relation to the register will be extremely helpful for us in terms of tackling fraud and scams. There are many elements of the Bill that are helpful. It is complicated, but the investment firms prudential regime is also consumer enhancing; currently, the capital requirements facing investment firms are those for the systemically important banks, and they are not fit for purpose. This regime will help us have a capital and prudential regime that is fit for investment firms. So there are a whole host of aspects of the Bill that are supportive of consumer interests and will not necessarily increase costs in a way that will be inimical to their interests.