Financial Services Bill

Lord Blackwell Excerpts

Committee stage
Monday 8th March 2021 Grand Committee

Moved by

[Lord Blackwell]

86: After Clause 40, insert the following new Clause—
“PRA and FCA joint coordination committee
(1) The Financial Services and Markets Act 2000 is amended as follows.(2) After section 3F (with-profits insurance policies) insert—3FA PRA and FCA joint coordination committee(1) In exercising their general duties and their duty to exercise coordinated exercise of functions, the PRA and FCA must establish and maintain a joint regulatory coordination committee to ensure their activities are consistent and proportionate in meeting their respective general duties and objectives.(2) The committee membership shall be—(a) the Governor of the Bank of England as Chair,(b) the Chief Executives of the PRA and FCA, and(c) two independent non-executive directors of each of the PRA and FCA.(3) The committee must review—(a) how their combined exercise of functions accords with each organisation’s individual duties and objectives, and with the memorandum of understanding between the FCA and the Bank of England; (b) their combined supervisory agenda for each of the five largest banks and five largest insurance companies they regulate; and(c) their combined supervisory agenda for any other dual-regulated entities they identify as systemically important;in order to ensure consistent priorities and proportionate impact.(4) Where the committee concludes that the combined exercise of functions by the PRA and FCA is not consistent and proportionate it must report that to the PRA and FCA boards, which must consider what changes might be made to address the concern.(5) The committee shall meet at least once every year.””

[Lord Blackwell (Con) [V]]

My Lords, once again I draw the Committee’s attention to my current and recent interests as set out in the register.

The purpose of this amendment is to place an obligation on the two regulators—the PRA and the FCA —to co-ordinate their agendas and priorities to ensure that their combined activities are consistent and proportionate in meeting their respective duties and objectives in terms of the burden of regulation on the industry in general and, in particular, the regulatory burden that they place on major financial institutions.

--- Later in debate ---

[Earl Howe (Con)]

My Lords, this debate has taken us back to a number of the issues that were brought sharply into focus during the passage of the Financial Services Act 2012. It has been useful. I therefore begin by assuring the Committee that the Government agree that we now have an important opportunity, not least in the wake of our exit from the EU, to review our regulatory framework and ensure that it is high-quality, agile and fit for the future. I assure my noble friend Lord Trenchard in particular that we will progress the future regulatory framework review as a priority and take specific action in high-priority areas, as I have set out in previous debates. I hope noble Lords will forgive me if I do not rehearse the remarks that I made in our earlier debate on competitiveness—a subject to which we will return, I am sure.

Amendment 86 seeks to establish a new joint co-ordination committee for the PRA and FCA to ensure that their activities are consistent and proportionate. Of course, the Government agree that it is important that the PRA and FCA work closely together and take a co-ordinated approach to the regulation and supervision of firms. However, I respectfully submit that this amendment is not necessary to ensure that that is the case. As my noble friend Lord Blackwell noted, the PRA and the FCA have different statutory objectives, which will naturally—and, on occasion, rightly—lead to differing priorities as these objectives are pursued.

I note the reservations expressed by my noble friends Lady Noakes and Lord Trenchard. However, this model was agreed by Parliament in the Financial Services Act 2012 as part of the post-crisis reforms, and the Government and regulators have taken a number of actions to support and improve co-ordination between the institutions while they carry out their different objectives. I believe that this addresses in a very real way the issue that my noble friend Lord Blackwell seeks to highlight through his amendment.

As mentioned in the amendment itself, there is already a memorandum of understanding between the FCA and the PRA, as set out in the Financial Services and Markets Act as amended. The MoU sets the framework for co-operation on a number of issues, particularly dual-regulated entities. In April 2020, the regulators introduced the new Regulatory Initiatives Grid, supported by a senior co-ordinating forum. The grid’s purpose is to increase co-ordination across the regulatory landscape. It provides a user-friendly overview of upcoming changes to allow the sector to plan for the future more effectively.

The senior co-ordinating forum is chaired jointly by the chief executive of the FCA and the chief executive of the PRA. It discusses the combined impact of regulatory initiatives across the financial services sector, and seeks to allow the Government and regulators to identify and address any peaks in regulatory demands on firms. The forum also provides a clearer picture of upcoming initiatives so that firms are better placed to plan for them, supporting the regulatory principles of proportionality and transparency.

I hope that those remarks are helpful in providing the background to the co-ordination that we have seen put in place and that, therefore, my noble friend Lord Blackwell will feel sufficiently reassured to be able to withdraw his amendment.

[Lord Blackwell (Con) [V]]

My Lords, I thank all noble Lords who have contributed to what has been a very helpful discussion. In moving this amendment, I was not advocating recreating the FSA; there may be a debate about that at some point in time. My point was that, having split out these separate objectives, there are points at which there are conflicts and that does not remove the need to resolve those conflicts or to have a mechanism to do that.

I listened with great interest to the noble Baroness, Lady Bowles. Her experience with the EU is clearly very relevant. I have, of course, studied the memorandum of understanding between the two regulators, but my reading is that it is much more about setting out the clarity of their individual roles and their rules of engagement, including such things as exchange of information. It does not require them to resolve issues of conflict or set priorities. It is a much lower-level setting out of the boundaries and how they should operate across them. The simple fact is that I think practitioners would say that it has not led to those issues being dealt with.

My noble friend Lady Noakes and the noble Lord, Lord Eatwell, talked about reporting to Parliament. Clearly, that is a major area, which we have discussed and will discuss further, and it may be helpful here. However, I find it difficult to believe that a parliamentary committee—particularly the Treasury Select Committee but maybe we can move to some other form of committee —would get into the level of detail of the regulatory load on institutions and those priorities. It may be able to check whether meetings are happening and the agenda is being followed, but I do not think that it can resolve the issues.

As the noble Lord, Lord Eatwell, says, if there is such a committee, there has to be a purpose. One of my reasons for specifying looking at the load on the major institutions is that it is only when you get down to the granularity of how the different agendas are loading up on specific institutions that you can have a meaningful discussion about where the conflicts arise. I am not wedded to this particular mechanism or this particular committee. I am not even sure that legislation is needed. As the Minister said, it is an issue I have raised with the chief executives of the PRA and the FCA. There is nothing to stop them doing this of their own volition. I would perhaps encourage the Minister to sound out with those chief executives how they view this and what they might consider doing to help ensure that the priorities are properly addressed. There is a consultation he has under way. He may take a view on whether this kind of legislation or some amendment along these lines would be helpful. In the meantime, I beg leave to withdraw my amendment.

Amendment 86 withdrawn.