Draft Credit Transfers and Direct Debits in Euro (Amendment) (EU Exit) Regulations 2018 Draft Electronic Money, Payment Services and Payment Systems (Amendment and Transitional Provisions) (EU Exit) Regulations 2018

Jonathan Reynolds Excerpts

Tuesday 13th November 2018 General Committees

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

It is a pleasure to see you in the Chair this morning, Mr Hanson.

As we are all aware, the draft regulations are part of a large number of statutory instruments related to preparations for a potential no-deal Brexit, of which about 70 are expected between now and February. The Minister and I have broached the first few of them already, as have some of my Front-Bench colleagues. We have covered matters relating to the temporary permissions regime, building societies and counterparty clearing. We shall return to such Committees frequently over the coming months.

The Opposition have voiced our concerns about the adequacy of the process, and I will state them again for the record: the number of Treasury SIs and the speed at which they are set to unfold are deeply concerning with regard to ensuring that the Government are held fully accountable. As the Opposition, we commit to make every effort to do that, but this is a constitutionally unprecedented and enormously resource-intensive task that leaves room for error, as much as we appreciate the time that the Minister, his staff and the civil service have taken to brief us.

We continue to be alarmed that we have reached a stage whereby such contingency measures for a no-deal scenario, which occupy significant time and resource of both the Government and the Opposition, must be laid before a Committee. Financial services firms need to be able to plan with certainty about the shape of things to come. In the absence of such clarity, they have ended up enacting their own contingency measures, such as moving staff and resources to the continent in preparation.

Everyone hopes that we will never have to use the provisions before the Committee today, but the day of reckoning gets ever closer. We still await details following the news reports last week that a potential Brexit deal has been struck for financial services, but nothing has yet been communicated formally to the House. Chief negotiator Michel Barnier has contradicted those reports publicly. Will the Minister begin by kindly providing some further details about that settlement, as it relates to the draft regulations, and saying whether there is any substance to those reports? At face value, it appears that we are looking for enhanced equivalence, which the industry has articulated will fall short of what we need to prevent our industry becoming a rule taker.

The draft regulations bring us specifically to the issue of payments. Much collaborative work was undertaken to bring about the implementation of the single euro payments area in January 2014, to the benefit of consumers and businesses alike. It is vital, therefore, that any detriment to consumers must be mitigated as far as possible and that we do not lose the efficiencies that have made cross-border payments easier for individuals and companies. The European Payments Council, in its report on possible outcomes published in May 2018, optimistically posited that we might be able to remain a member of SEPA after exit through functional equivalence—that is significant.

The explanatory notes on the draft regulations refer to the fact that no formal consultation has been undertaken, but that some stakeholders have been consulted. Will the Minister please elaborate on which stakeholders have been engaged on the issue and how any relevant concerns have been integrated into the statutory instruments?

The notes also acknowledge the benefits of SEPA, as did the Minister in his speech. It sounded as if the Minister was confirming that the Government see maintaining access to SEPA as a priority. Will the Minister confirm beyond question whether that is the case? If we crash out without a deal, what mitigation of detriment is being planned? The Minister explained that the draft regulations will set up the temporary legal regime, but will consumers see any difference in how they go about their business?

Finally, I note that the draft regulations will extend safeguarding of assets to an approved foreign credit institution anywhere in the world. Will the Minister please explain the driver behind that policy decision to expand beyond EU institutions, and what the criteria would be for foreign institutions to be assessed for their suitability? Those are the only questions that I have this morning.