Financial Markets and Insolvency (Transitional Provision) (EU Exit) (Amendment) Regulations 2021

Baroness Bowles of Berkhamsted Excerpts

Thursday 10th June 2021 Grand Committee

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, first, I declare my interests in financial services as in the register, in particular as a director of London Stock Exchange plc. I thank the noble Baroness for the introduction to this instrument. I do not have any objections, as it is pragmatic.

I guess we always knew as we waded through the sea of Brexit SIs—I think it was said there were 65 —that updates and possible extensions would be needed. Although, I am not sure that it was understood, or at least clear to us at the time, how often such changes and extensions would come along and why, but this is one of them. For settlement finality, originally there was to be a separation between those intending to be part of a continuing UK settlement finality system—which had to give notice by the end of this month, with the Bank of England having until 2023 to deal with their applications—and those which did not give such notice and would cease to be part of the system.

That always was a cliff edge in the absence of other measures to ensure migration for those that were going to remain in the system and would therefore have the transitional provisions in place. There did not seem to be any system to manage that migration and make sure that it happened. Now we have until 2023. Both the systems that will join the UK procedures under the Bank of England and those that will be leaving still have until 2023 to enjoy those protections in the event of insolvency.

My concern is whether this will be the end of the story. I accept that migration from one system to another takes time, and I know only too well that industry was slow to make a start, expecting that there would be some kind of ongoing relationship with the EU that would make things all right on the night. Can the Minister now say with any degree of certainty that there will not be a repeating pressure for the 2023 end date to be extended yet again for the systems that are not transitioning into the UK regime? In connection with that, how will businesses using those systems know when it is safe to jump? Will lists of those that have and have not applied to the UKSFR be made public so that there is knowledge about where to move to if you are going to change from system to another? If that does not happen then surely some businesses will come back crying in 2023, saying that they have not done it yet. What will be the response and what monitoring of progress will take place to make sure that does not happen?

As part of that, when will the Bank of England have approved the applications? Will it not be necessary for businesses to know that they have approved systems to transfer to, rather than ones simply awaiting approval? If not, they may fear that they will go to one that is not going to get approval and they will have to change yet again. Until there are approvals, will there not always be reluctance to move and further cliff edges? What incentive is there to move from this run-off system into an as yet unauthorised system that is waiting among the applicants?

I do not really see that this is the end of the legislative story. I do not disagree with what is being done here, but I still do not see that it solves the problem of what the future picture will be for ensuring that everybody has their businesses in the right place. I do not know whether the Treasury has an overview of this now that there has been more time to work out how things are measuring up post Brexit, to make sure that we end in the right place by 2023—or, if needs be, by 2025 or some other date. But it cannot just be “never, never”, where we never manage to get businesses onboarded to the right system and we are therefore always up against a deadline and another extension always come along. I approve of and agree with the pragmatism of our regulators but if it is used to the extreme then, in the end, one undermines the credibility of having separately running UK systems. I wonder whether anything can be said to reassure us that we are not just part of a continuing cycle that will repeat until some far time in the future.