Draft Capital Requirements (Amendment) (EU Exit) Regulations 2018 Draft Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018

Alison Thewliss Excerpts

Wednesday 12th December 2018 General Committees

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Ms Buck.

I want to pick up where my colleague the hon. Member for Stalybridge and Hyde left off. This week, we have lurched closer to the prospect of a no deal Brexit due to the incompetence of the UK Government and Back Benchers who are more interested in feathering their own nests than in the interests of the country as a whole. It is utterly ridiculous for my constituents to see all these shenanigans as the clock ticks and we get ever closer to the point where the UK leaves without a deal.

We have the ridiculous prospect of the Prime Minister touring EU capitals only to find, as was totally predictable and inevitable, that people are not interested in speaking to her—the deal is already done as far as the EU is concerned. All of this is a distraction at a time when we should be focusing on the economy and on those people at the very bottom who are losing out massively as a result of UK Government policies.

We are here today to look at these statutory instruments in further detail, which is hidden away in these Committees rather than being scrutinised in a more open way. It is interesting to look at both instruments and their wider implications such as the familiarisation costs, which I mentioned at a previous SI Committee. The capital requirements regulations will have a total familiarisation cost of £1.7 million, which is absolutely huge. Businesses are being asked to bear those costs as a result of a decision that was not theirs. It will have a huge impact.

The FCA estimates that around 800 businesses will be affected. The Bank of England estimate is 209, so some 1,009 businesses will be affected. I ask the Minister, as I often do, how that is being communicated to those businesses because the clock is ticking, and they need to know and make preparations. The Fraser of Allander Institute mentioned yesterday in its report that small businesses are under-prepared for the prospect of a no-deal Brexit. For a long time, perhaps we hoped that that might not happen, but who knows whether that will remain the case? The Government have a job of work on their hands to ensure that all those businesses are aware of what might happen in the event of a no deal Brexit, and what it will mean for each and every businesses across this country.

The Financial Markets Law Committee is concerned, as I am, about the regulatory burden on the Bank of England, the Prudential Regulation Authority and the Financial Conduct Authority. How will they cope with the additional work coming to them? They are concerned about the recognition in UK law as things progress, withdrawing from the shared protections we have in the EEA and the impact on the market as a whole.

[Sir Oliver Heald]

Under the withdrawal Act, of course, EU law just comes into our law on the day we leave, but it would be ineffective in this area because there are a lot of references to institutions that we will no longer be in. Does the hon. Lady agree that the regulations are needed?

[Alison Thewliss]

I do not dispute that they are needed. I am not sure that Brexit is needed, but that is a different argument for a different day. The note mentions that the FCA and PRA will be updating the rule books in time for exit day. I want to press the Minister a wee bit more about what stage the preparations are at, and whether the expectation is that they will be ready in time. What progress has been made?

As to the capital requirements and, under the CRR, the binding regulations to co-operate and share information with EEA authorities, removing them and moving to a more discretionary system within it obviously means there is a question as to how we maintain the rigour of the system. If it is going to be sharing on a discretionary basis rather than being obliged to do so as part of the system, how will we ensure that things are going to work properly and as well as they can work at the moment? How do we prevent the slide towards another financial crash in a system that is more discretionary rather than one that obliges us to do certain things?

I want to mention research from the London School of Economics, and concerns about the impact that everything that is happening has on the UK’s voice in the shaping of the regulations:

“The weakened UK voice means that opposition to greater harmonization and EU calibration of international standards may be less strong in the Council than it was over the original CRD IV negotiations. Conversely, while the UK can be expected to support the proposal to lift certain of the contested CRD IV remuneration rules from smaller and less complex firms, other Member States may be less accommodating and more influential.”

Again, that relates to the loss of the UK voice in all such matters. We end up in the worst of all worlds as a result of the decision. We become rule takers and have less influence over the things that affect financial services, which are a huge part of the economy of the UK and my constituency. I hope the Minister addresses those concerns.

--- Later in debate ---

[John Glen]

My right hon. and learned Friend is of course correct. We are creating as smooth as possible a scenario in a no-deal situation. The costs would be much greater if we did not do so. However, I stress that we seek to maintain close relationships with all third countries.

[Alison Thewliss]

Will the Minister tell me a bit more about how the costs have been communicated to the 1,009 businesses and the 350 businesses that will be affected?

[John Glen]

As I mentioned, the regulations were laid on 21 August and 8 October. There was engagement with industry during that intervening period, and those costs will have been made clear during that time. We have tried to be as transparent as possible and to engage as closely as possible with different trade bodies and, through them, with firms, so that there is an understanding of the costs.

The Government believe that the regulations are needed to ensure that prudential and resolution regimes applying to banks, building societies and investment firms work effectively if the UK leaves the EU without a deal or an implementation period. We do not want to lose the progress in establishing these regimes that we have made over the last 10 years. I hope the Committee has found this sitting informative and will join me in supporting the regulations.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Capital Requirements (Amendment) (EU Exit) Regulations 2018.

Draft Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018

Resolved,

That the Committee has considered the draft Bank Recovery and Resolution and Miscellaneous Provisions (Amendment) (EU Exit) Regulations 2018.—(John Glen.)