Draft Uncertificated Securities (Amendment and EU Exit) Regulations 2019

Jonathan Reynolds Excerpts

Tuesday 12th March 2019 General Committees

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

As ever, it is a pleasure to serve with you in the Chair, Mr Sharma. Once again, the Minister and I are here to discuss a statutory instrument that would make provision for the regulatory framework after Brexit in the event that we crash out without a deal. On each of those occasions, the Minister has heard the objections that my Front-Bench colleagues and I have spelled out about the Government’s approach to transposing this amount of legislation through the secondary legislative process.

I thank the Minister for his explanation of the regulations. The Opposition are satisfied that parts 1 to 4 are essentially straightforward transpositions of the EU regulations into UK law. Central securities depositories form an important part of our financial market infrastructure, and it is important that their regulation continues to be robust and consistent. Post-trade market systems have been subject to significant reform after the financial crisis and it is important that those changes are not mitigated or unpicked in any way.

I would, however, like the Minister to provide additional clarity on part 5, which begins on page 7. As the explanatory memorandum stipulates—this was the subject of the exchange between the Minister and the hon. Member for North East Hampshire—the instrument allows the Bank of England to charge fees to some central securities depositories located in third countries. I ask the Minister for a little more explanation about whether that is a typical function of the Bank’s activities.

The explanatory memorandum also states that the Bank can charge fees to cover expenses that it or the FCA incur. Can the Minister clarify why the Bank would pick up fees on behalf of the FCA and the nature of that arrangement? Why would the FCA not collect its own fees? Once again, the concern is that this appears to be a material change to the relationship between significant institutions and we should be clear if that is what we are doing during the transposition.

Furthermore, as was announced on 1 March, the European Securities and Markets Authority will recognise the UK CSD in the event of a no-deal Brexit, but can the Minister say if there has been any clarity on whether the fee arrangement would be reciprocal? Would central banks in the EEA reserve the right to change the UK CSD fees and, if so, what assessment of the potential impact of that has been carried out? Those two points of clarity are all I want to raise with the Minister.