FINANCIAL SERVICES (ELECTRONIC MONEY, PAYMENT SERVICES AND MISCELLANEOUS AMENDMENTS) (EU EXIT) REGULATIONS 2019

Jonathan Reynolds Excerpts

Monday 7th October 2019 General Committees

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

It is a genuine pleasure to see you in the Chair, Ms Buck. It is good to be with the Minister for the second time today to discuss our contingency plans in the event of a no-deal Brexit. While this statutory instrument appears to address payments primarily, as the Minister said, actually it covers a wide range of financial regulation, including statutory instruments from previous months in which there have been omissions and where there have been subsequent changes to EU law since the exit date was postponed.

I know, and I hope all my colleagues acknowledge, that Treasury civil servants have worked exceptionally hard on the hugely difficult task of drafting the sheer volume of secondary legislation that has been required—often at short notice—by the Government. Given the scale of that task, it is understandable that some degree of corrections has been needed to address previous omissions. Our criticisms relate to the political decisions not taken that have required that process to come about—there were different ways this could have been done. I think it is fair to say that a lot of Government Ministers, although not this Minister, frankly under- estimated Brexit as a process. That has led, at times, to very difficult decisions, including on some of the processes that we have had to do together as statutory instruments, so I think it is reasonable to ask the Minister whether he is now confident that all drafting errors and omissions have been identified and addressed.

To give one example, in one instrument, references to the European market infrastructure regulation and the markets in financial instruments directive were mixed up. That may seem like minor semantics—fair play—and most people do not really appreciate what those regulations do, but they are huge and entirely separate pieces of legislation. We are discussing critical financial regulations, so there is no room for error. This is not legislation that can be rushed through or made without due care. Everybody was aware what using the secondary legislation process would mean if it was to be the mechanism to do this. I reiterate that this is not a criticism at all of the civil service, but rather a reflection of the gargantuan task expected of it, which was bound to bring about errors.

One principal attraction of the UK, particularly in financial services, has been its relatively stable legal and regulatory framework. The fact is that Brexit has cost us some of that reputation, which is one of the most regrettable things of all. During another recent statutory instrument Committee, a gap I identified and highlighted with the Minister was the apparent lack of permission for EEA institutions to make payments in the UK after exit. I am pleased to see that that has been clarified in this statutory instrument, and that such payments will be covered under the temporary permissions regime, given that they will be exempt from the specific Payment Systems Regulator authorisation. That will provide much-needed assurance to EEA institutions seeking to continue to operate in the UK should we crash out with a no-deal Brexit. I always say that the Opposition are always here to help.

I will ask some specific questions about some remaining items in the statutory instrument. I am curious to know why a further stipulation on the capital requirements regulation has been added to this instrument, when we addressed that regulation an hour ago in a separate piece of secondary legislation. I know it is a reference to cross-referencing, but it might have been reasonable to expect that all such references would have been included in that other piece of secondary legislation.

On the issues that the Minister raised relating to the benchmarks regulation, what exactly is causing the delay for third-country benchmark inclusion on the FCA register? Does further work need to be carried out to promote awareness and understanding of the existence of the register in third countries, or is there a resource issue on the UK side that needs addressing?

On a broader, final point, I do not believe that it is conducive to good legislative scrutiny to bundle together such different items of legislation under one SI. I appreciate the time constraints, but each of these items needs separate and thorough consideration. Equally, although some of these items pertain to changing references, due to the altered deadline, some simply relate to errors and omissions. Are we to anticipate another raft of changes in six months’ time, after these statutory instruments were all rushed through today? Given where we are with the timescale, what assurances can the Minister give us on the viability of the regulatory regime as it stands today, should a no-deal Brexit occur?