Financial Services (Banking Reform) Bill

Baroness Laing of Elderslie Excerpts

Wednesday 11th December 2013 Commons Chamber

[Sajid Javid]

I thank the shadow Minister, the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), for her comments and all other—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. With the leave of the House, Minister.

[Sajid Javid]

Thank you, Madam Deputy Speaker. With the leave of the House, I thank the shadow Minister for her comments and all other Members who contributed to the debate. In particular, I thank my hon. Friend the Member for Chichester (Mr Tyrie) for the work that he has done in this area, especially in chairing the Parliamentary Commission on Banking Standards. I have listened to all hon. Members with great interest over the past couple of hours, but in particular to my hon. Friend. I thank him for all his efforts and also for his supportive comments, which I take as broad support for the Government’s amendments.

In the time available, I shall deal quickly with some of the key issues that came up. The shadow Minister raised the issue of timing and her understanding that there was not enough time to scrutinise the Bill and the amendments. She will know that the Bill started with the recommendations of the Independent Commission on Banking, which were scrutinised extensively in the House and in the other place, including the recommendations of the PCBS. The Government produced their response as quickly as they reasonably could to the PCBS, which was in July, in advance of the Commons Report stage so that it could inform debate as soon as possible.

The shadow Minister also asked why the Government resisted Opposition suggestions on improving professional standards. Again, she will know that because the PCBS had been set up and had been asked specifically to look into this area, the right thing to do was to listen to the commission and take its views into account when drafting amendments, before anything was settled upon. She asked about minimum standards and competence. She is right to do so, as we all recognise the importance of those. It is worth pointing out that, because of Government amendments that were introduced, banks will be required to check all new applicants to ensure that they are fit and proper, and not just at the point that they start with the bank; annual checks will have to take place and regulators will have important powers to specify any qualifications that they believe are required for the job.

A number of hon. Members raised the issue of a code of conduct. The regulators, both the Financial Conduct Authority and the Prudential Regulation Authority, will have broad powers, including the ability to set up a code of conduct for banks in general or for a particular bank, as they see fit. These are the kind of powers that regulators can use in future. My hon. Friend the Member for Redcar (Ian Swales) asked how we could scrutinise regulators. He is not in his place, but he will know that an annual report produced by the regulators about how they discharge their functions will be provided to Parliament, where it can be given proper scrutiny.

There was a discussion about remuneration. Hon. Members will know that the PCBS made recommendations on remuneration which the Government have accepted, particularly on longer deferrals and clawbacks, including a full clawback if a bank ends up receiving state aid. I understand that the PRA will make further recommendations on that next year.

I have time only to touch on Lords amendment 41 which, as I said, the Government oppose. It is worth taking into account the comments of my hon. Friends the Members for Chichester and for Wyre Forest (Mark Garnier) that, although the amendment is well intended, it will lead us back to a box-ticking culture and confuse regulation and professional standards. Both are necessary, but it would be wrong to conflate these—

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[Sajid Javid]

I beg to move, That this House agrees with Lords amendment 63.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

With this it will be convenient to discuss the following:

Lords amendments 64 to 154.

Lords amendment 155, and amendments (a) and (b) thereto.

Lords amendments 156, 161 to 163, 169 to 172, 175 to 180 and 182 to 184.

[Sajid Javid]

The second group of amendments introduce substantial changes that will ensure that consumers get a fair deal. They will drive up competition and improve outcomes for consumers. Amendments 63 to 134 introduce a new competition-focused, utility-style regulator as a separate legal entity established under the FCA.

The Government have concerns about the payment systems market, with particular problems in three main areas: competition, innovation and responsiveness to consumer needs. Under the current arrangements, there is nothing holding big banks, payment scheme companies and infrastructure providers to account for consumers. The regulator will therefore have strong powers and objectives: to ensure that the operation of payment systems promotes fair and open competition in banking; to promote innovation in payment systems, for the benefit of consumers; and to support the interests of end users.

The regulator will have bespoke objectives and powers to address problems particular to the market for payment systems, allowing for the benefits of close co-ordination with the FCA. Once a payment system is brought into scope, the regulator will have powers over the system’s operators, infrastructure providers and providers of payment services using the system.

The payment system regulator will be equipped with a broad range of regulatory powers, enabling it to address the significant issues causing problems in the market for payment systems. To open up access and encourage greater competition, the regulator will be able to intervene and require changes to any anti-competitive fees or terms and conditions of an agreement for access to regulated systems. It will have powers to require the provision of access to payment systems. The regulator will also have competition powers exercisable concurrently with the Competition and Markets Authority.

My hon. Friend the Member for South Northamptonshire (Andrea Leadsom), who is in her place, will be pleased to know that the regulator will examine the case for full account number portability within 12 months of its establishment—although, with the successful seven-day switching service, which was launched by banks in September, hon. Members should know that they do not have to wait until then if they want to switch their account quickly.