Money Market Funds (Amendment) (EU Exit) Regulations 2019

Lord Adonis Excerpts

Monday 25th February 2019 Lords Chamber

[Baroness Kramer (LD)]

My Lords, like my colleagues on these Benches, I support this statutory instrument. It is necessary: to put it in technical terms, British investors in money market funds would be in a right pickle if we did not pass it, because, as the Minister has said, the domestic market is tiny.

However, I want to raise an issue which is repeated in many of the other statutory instruments before us. Paragraph 2.8 of the Explanatory Memorandum states:

“When the UK is no longer a member of the EU single market for financial services, it would not be appropriate for UK authorities to be obliged to share information or cooperate with the EU on a unilateral basis, with no guarantee of reciprocity”.


I understand the emotional tag behind all this, but there is a wise old saying which goes: “An eye for an eye and we all go blind”. The 2008 financial crash and many of the other problems that we have had have come through fragmentation of regulation and the lack of information transfer between regulators in different locations and countries. I really do not understand why we are not seeking to do everything in our power to make sure that information flows continue. A money market fund that is being regulated by the FCA under the new statute following any kind of no deal might well be in the same family as other such funds being marketed in the EU 27. Therefore, something that flags up an issue or concern with one may well reflect through to the other, because it could be core to the administration and deep within the overarching family. Will the Minister explain the consequences of putting up any kind of barrier to existing information transfer and what risks we might be taking on? I am exceedingly concerned about fragmentation.

[Lord Adonis (Lab)]

The noble Baroness had made an important point. We surely have an interest in giving unilateral assurances on transfer of information, because we have such a big interest in the health of our own financial services industry. Anything which ensures that dodgy practice is exposed and information exchanged in respect of it is in our interests, even if—by a complete failure of our negotiating capacity, which unfortunately the Government are guilty of the whole time at the moment—we do not get any reciprocal rights in respect of these transfers of information. The noble Baroness’s question is very well made.

I have a question about the impact assessment. On page 17, it says that the familiarisation costs in respect of this instrument are estimated at £340 per firm and that the total cost is £7,200. Do I deduce from that that only 21 firms are affected, or is there an error and it should really read £7.2 million or something? That seems to be a point of some importance.

[Lord Tunnicliffe (Lab)]

My Lords, I feel the need, once again, to express my repeated objection to being here. We are here to discuss no-deal statutory instruments: I believe the Government are being irresponsible in not ruling out a no-deal outcome. A no-deal outcome would be serious in every area of life, particularly in its economic impact and in its security impact. I also believe that it is possible that we may fall into a no-deal scenario by what could be described as “by accident”. Accordingly, I will continue with my duty of scrutinising the SIs. The problem with this is that, when you come in on a Monday morning and people ask if you enjoyed the weather yesterday, you have to say: “What weather?” There was no weather for me; I was busy studying these five SIs. What made that even more irritating is that I failed to find any serious problems with them.

I have to admire the noble Lord, Lord Sharkey, for delving into the instruments themselves. I always find that pretty close to impossible, because of their habit of amending previous SIs that amend previous SIs that amend previous Acts. I will listen to the Minister’s answer with interest. I also join the noble Baroness, Lady Kramer, in her concern at the tone of the Explanatory Memorandum on the matter of information. I know that the Minister will say that it is just turning it from an obligation to an option. I am sure that is what the words say, but I hope that if we get into the extraordinarily unfortunate situation of leaving with no deal, the appropriate regulatory authorities in the United Kingdom go out of their way to co-operate with regulators in the European Union. These SIs—this one and quite a number of the others—touch on the core issues which caused the 2008-09 crisis, and overall the SIs we are looking at are sensible in making these markets safer.