Financial Services and Markets Bill [HL]

Lord Bridges of Headley Excerpts

Committee stage
Monday 29th June 2026 Grand Committee

[Lord Bridges of Headley (Con)]

My Lords, I will speak very briefly on this. I declare my interests as employee adviser to Banco Santander in Madrid and a shareholder in Santander. I also apologise to noble Lords, as I was unable to speak at Second Reading.

I will follow on from the noble Lord, Lord Eatwell. I think he and I may disagree on certain aspects of the regulatory and supervisory approach, but I fundamentally agree with every single syllable he has just said. I am very queasy about aspects of the Bill. Many of us spent some time in this Room several years ago trying to ensure that we can hold to account in Parliament, both in this House and the other place, the regulators and supervisors, who hold immense power. That was absolutely right. We put in place a number of measures, including the establishment of the new committee, so ably chaired by my noble friend Lady Noakes, to enable us to do that—just one measure. This clause goes very much in the wrong direction.

I read the letter, for which I am very grateful, from the noble Lord, Lord Stockwood, and I have to say that I am somewhat perplexed by it. My wife says that I have a very little brain, so I very much look forward to the noble Lord telling me that I am wrong—I am very used to it. Let me try to understand what it is saying.

It starts by saying—or, rather, several paragraphs in it says:

“Considering separate rules in isolation is not effective for assessing the cumulative effect of the regulators’ actions—both the benefits in terms of advancing their objectives, and the costs to affected businesses”.


It goes on to say, as noble Lords will no doubt have read, that the publication of the overall long-term strategy will somehow address this. It also says:

“Clause 16 is intended to address this feedback”


from the sector—I am not sure from whom—

“and improve transparency around the regulators’ long-term direction and focus”.

I am very happy to have a long-term strategy but we absolutely need to be able to call to account actions that the regulators take, case by case.

I have read the Explanatory Notes, which say that the long-term strategy will be once every five years. I see that as entirely insufficient. Furthermore, in paragraph 170, the Explanatory Notes go on to say:

“The Government expects that the strategies will be high level and focus on the FCA’s and PRA’s top priorities and the outcomes they aim to achieve over that time”.


I do not see this as anything like the accountability that we were looking for when we introduced the measures in the last Bill, now an Act, and in the new committee. As far as I can see, it is not the case that the Government dispute the need for this case-by-case analysis, for they say this three paragraphs down in the same letter that I quoted earlier:

“There appears to be broad agreement that, in some areas, regulatory requirements on firms have become overly prescriptive, in some cases duplicative, and that this results in high costs for firms, and means that they spend a large proportion of their time and resources focusing on regulatory requirements”.


I agree wholeheartedly. We need, therefore, to address these points case by case.

All these points tie up. We cannot see the regulatory oversight of this House and the other House diluted in the ways that these clauses do when you put them together. I therefore agree entirely with the noble Lord and those who back these two amendments. I will later press for other measures to tighten, not weaken, regulatory accountability.

[Baroness Noakes (Con)]

My Lords, I will be brief because much of what needs to be said on this topic has already been said. I will not detain the Committee for long but, as I have added my name to the clause stand part notice, I thought that it was worth me reiterating my strong opposition to Clause 17.

Picking up on what the noble Lord, Lord Eatwell, spoke about, in our debate on the first group, the Minister reiterated that the Government think that the FSMA model is the correct model. I do not think that any of us is seriously disputing that as a broad proposition. What we are focusing on is the detail of how the FSMA model can continue to work. When we left the EU, the huge amount of EU law that became assimilated law changed the name of the game around how financial services regulation is lived out in this country.

As we have heard, the 2023 Act tried to deal with that in part by increasing parliamentary accountability through the committees of each House, including the requirement for individual rules proposed by the PRA or the FCA to be accompanied by explanations of how the regulatory principles had been applied. I do not think that any of us clearly understood the scale of the problem back in 2022, when we were considering the Bill, but we thought that these were sensible moves in the right direction. The only thing that has changed is that, now, the Government are coming along and putting even more into the FCA by way of the consumer credit legislation, which is a good idea.

But this has seriously undermined what was still work in progress on how effective parliamentary accountability could be worked. There were never any discussions with either committee of the Houses of Parliament about how the arrangements for accountability following the 2023 Act worked. We suddenly got this decision by the Government to cut away the legs of the committee through its inability to engage with the individual regulations. It is clearly the case that looking at a five-year strategy will never replace the work that needs to be done at a granular level on some of the proposed regulations that come from the regulators. That is the time for interventions—not by looking back at whether actions have complied with a strategy.

We should use this Bill to refine the FSMA model, to make it workable for the scale of the task that is being given by Parliament to the regulators and to make sure that the strength of the accountability mechanisms matches the scale of that activity. That is all that we are trying to do. The direction of this Bill is the wrong direction.

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I beg to move.

[Lord Bridges of Headley (Con)]

My Lords, I agree with all the amendments to which my noble friend Lady Noakes just spoke, but Amendment 99 merits attention. I will speak to it very briefly, as I get a sense that everyone is wanting to get out of this lovely Room to eat something.

This amendment asks an interesting question; perhaps the Minister can answer it when he winds up. I am interested in what is more important. Is it the alignment with global international standards, or is it the competitiveness and growth objective? When one is thinking about these international standards, do we think that it is more important to align with those standards than it is to improve the competitiveness and growth of the financial services sector? I ask this as a genuine question. I can see an argument for saying that alignment with international standards adds to competitiveness and growth, but, if we believe that those international standards undermine growth, what is more important?

I ask that because—once again, I draw your Lordships’ attention to my entry in the register—every day, I am seeing, as my noble friend Lady Noakes alluded to, the fragmenting of international standards. Noble Lords may take very different views on that, but it is undeniably the case that the overall approach of the large financial sectors to adhering to those standards, if they ever really existed, is now under enormous pressure. Therefore, if we want to retain the competitiveness of the City and its contribution to the growth of this country, we need to be very mindful of that. If we want to continue to attract high levels of global capital here, we cannot, to my mind, just blindly say, “We must align with international standards”, without being fully cognisant of the consequences.

The amendment moved by my noble friend asks a very big question, which I look forward to hearing the Minister address.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise briefly to speak against all of these amendments, but the noble Lord, Lord Bridges, has asked an interesting question here: are we making this legislation for the City or for the country? My question to the Minister, therefore, is: does aligning with international standards mean that we can actually set higher standards? That is certainly what I would like us to do in terms of money laundering and the other issues that I raised earlier, but I think that the assumption in this amendment is that we might set lower standards.

One of the things that aligning with international standards would do is improve our international standing in this uncertain geopolitical age. Undercutting standards would be severely damaging to our international standing in the world. That is a much broader question than just the City.

I will cover all these amendments collectively. It is no secret that throughout all the previous financial services Bills I have worked on, I have opposed competitiveness and growth objectives. I am sure the noble Lord, Lord Vaux, will be delighted to know that it was his earlier contribution to the clause stand part debate that helped me to see clearly that what we are doing here is singling out the growth and competitiveness objectives from everything else. One of the ways in which noble Lords tried to deal with that in earlier groups was by adding crucial issues such as climate. The other way of approaching the problem, which I may well be tempted to do on Report, is by proposing that Clause 20 does not stand part.

It is important to raise the issue again now, given that just this week the Bank for International Settlements has spoken about the financial risk associated with big tech’s AI spending spree—in its terminology—which could lead to a prolonged investment bust that could have significant impacts on financial markets and the global economy. It produced the figure that the five biggest hyperscalers expect to invest more than $1 trillion from 2025 to the end of 2026. We are in a position of risk, so I believe we should look at growth and competitiveness again.

Amendments 102 and 104 seek to extend further than the Government have gone on the growth and competitiveness agendas. That is an extraordinarily bad and extremely risky idea. I am happy to carry forward that idea and keep saying it on Report.

Financial Services and Markets Bill [HL]

Lord Bridges of Headley Excerpts

Committee stage
Wednesday 1st July 2026 Grand Committee

[Lord Ashcombe (Con)]

My Lords, I declare my interest as an employee of Marsh, an FCA-regulated entity. These amendments in the names of my noble friends Lady Neville-Rolfe, Lord Altrincham and Lord Holmes concern Clause 21, which I very much welcome in principle. The improvements to regulators’ approval timelines are a positive step, as are the powers within the clause that enable the Government to amend those timeframes over time. In effect, the Bill already recognises the need for a mechanism to drive improvement. However, the evidence suggests that we can and should go further. The fact that regulators have consistently met their existing targets—targets that have remained largely unchanged for some 25 years—indicates that there is clear scope for more ambitious deadlines.

These amendments are therefore designed to embed a culture of continuous improvement, as referred to by my noble friend Lord Holmes. They would ensure that any future changes to the timeframe set out in Clause 21 could move in only one direction, towards faster decision-making. Moreover, where regulators have consistently met revised targets over a period of two years, the Treasury would be required to reduce those timelines further. In doing so, we would place a statutory obligation on the system to evolve and improve. This matters greatly for the competitiveness of the United Kingdom, particularly for the insurance market in which I work. The speed at which regulators handle authorisations, variations of permission and approvals for senior managers has a direct impact on the ease of doing business. These processes define many firms’ day-to-day interactions with regulation and shape broader perceptions of our market. Firms today have choices about where to deploy capital, where to grow and where to locate talent. A regulatory system that is clear, predictable and timely is a key part of that decision-making calculus.

The UK must offer a compelling proposition. There are many other places to go. Evidence from the London Market Group reinforces this point. A recent survey of firms regulated by the FCA and the PRA shows that both institutions are respected with strong overall scores, yet concerns remain. More than half of firms believe that aspects of the FCA’s approach negatively affect the attractiveness of the London market, and nearly nine in 10 highlight slow approvals for senior managers as having a strong detrimental impact on their operations. Improving timelines is not about reducing standards; it is about ensuring that our system supports growth, innovation and competitiveness. These amendments help to achieve just that.

[Lord Bridges of Headley (Con)]

My Lords, I should like to speak briefly and, in so doing, declare my interest as an adviser to and shareholder in Banco Santander. I very much support these amendments. I think that we would all agree that we want our regulations and the entire process to be simple and robust, as that is the bedrock of a competitive global financial centre. I do not think that anyone here is arguing for a weakening to the extent that it would undermine confidence in the market, which is absolutely critical.

To support what has just been said, I draw your Lordships’ attention to a study that TheCityUK brought out a few years ago—I think in 2023. It highlighted in its survey concerns among those in the City about the speed of regulatory requirements. If I am reading it right, of those who responded to the survey and were undergoing FCA regulatory approvals, 92% were experiencing delay. If you look at the views on the opaqueness of the systems, which indeed adds to uncertainty and undermines investor confidence, an enormous percentage—almost 100%—saw the system as opaque or somewhat opaque. If one then looks further on in this study at the perceived overall impact that the efficiency of the regulators’ authorisation processes had on the attractiveness of the UK as a place to establish and do business, in terms of the FCA, if my maths serves me right, almost 90% saw it as detrimental or somewhat detrimental to the UK’s attractiveness.

I am sure that the FCA and others are doing their best to solve this issue, but these amendments would do a lot to add pressure to that process and would strengthen the resolve within the system to address what is a clear need if we are to build on the competitiveness of London as a financial centre.

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I am always impressed that a crisis that began in America and was driven by a series of American commercial and investment banks ended up costing the British economy and the British financial sector far more than it did that of the United States. In the United States, a relatively small part of its GDP was impacted, but in our country, it was a very significant part. I think we should be exceedingly careful when we see the phrase “considering financial stability”. Obviously, it is no longer a primary objective.

[Lord Bridges of Headley (Con)]

My Lords, I shall briefly speak in response to the noble Baroness, and I once again draw attention to my interest as an adviser to the chairman of Santander. I want to make three quick points.

First, I overwhelmingly agree with the thrust of the amendment. I think analysis of this critical issue is important for the reasons that the noble Lord, Lord Pitt-Watson, said. He will know much better than I do how notoriously difficult it is to compare the regimes of the United States, the UK and the EU. If noble Lords are interested in this and cannot sleep, I advise them to look online at recent reports that have come out. The Financial Times reports a law firm called Alvarez & Marsal pointing to the impact of the US’s current moves in prudential regulation and how that has unleashed a considerable amount of bank capital. Meanwhile, the ECB has pushed back with its own analysis showing that the US and the EU are broadly on par, so we cannot compare the others. The European Banking Federation has recently come out with its analysis of this issue.

As far as I can see—I stand to be corrected by others—a lot of this depends on how we measure not just the regulatory and prudential aspects but the supervisory actions, and how supervisors can put buffer upon buffer, depending on the banks, the GSIPPS and who you are looking at within the perimeter. This analysis will be very important, and it could be very worthwhile, but it has to try to overcome the enormous problem that exists, now matter we how bridge it. That is the first point.

The second point, flowing from that, is that the more I look at this, the more I think that the objectives—and, underlying those, the culture—of the regulators and supervisors seem to be almost more important here. When you look at the difference in regulatory approach, be it by the Singaporeans or the US, you find that it is largely a matter of the culture within those bodies, where they are coming from and the messages that the politicians are sending them.

I will cite just one example. Picking up on what the noble Baroness, Lady Kramer, said—we disagree on this violently, I know—I am very interested in the US approach. Secretary Bessent in the US Treasury gave a speech about eight months ago where he told the Financial Stability Oversight Council, which is a key body that brings together regulators and supervisors, that low growth was in itself a financial stability risk—let me repeat that: low growth was a financial stability risk—and that they needed to act accordingly. That sent a signal, as far as I can tell, throughout the entire regulatory and supervisory environment in Washington and the States, and they have acted accordingly. That has had more of an impact than necessarily what the capital requirements are for various bodies.

The final point is on SMEs. We will not have a long debate about this, but I would make one point here about the demand from SMEs for lending. We can debate the role of capital requirements—I think there is more of a role for and more impact from capital requirements on bank lending than perhaps the noble Baroness does—but where we would probably agree is that it is the overall general environment in which SMEs are operating that will stimulate demand for lending. If you have a Government who are piling pressure after pressure on SMEs—to be taxed more on employment, to have more regulation, et cetera—that will dent their demand for lending and for more investment. That is what will happen. Therefore, it is very important that we look at that issue per se in the round. With that, I will sit down.

[Baroness Kramer (LD)]

I probably have a right to reply, because it is Committee and we can speak more than once. The noble Lord, Lord Bridges, and I often find a whole lot of common ground, and I agree completely that the environment in which SMEs are operating is extremely difficult. However, if he goes back and looks at the numbers produced by the Federation of Small Businesses, he will find that there is significant demand for borrowing, which is continuously turned down and rejected. I just want to make sure that the noble Lord understands that side of the picture.

I have no problem with people going away, as I said, and doing proper analysis and trying to understand exactly what the picture is, but there is another side to that, and it is not included in this amendment. If I was amending it, I would add a line, because we need an analysis of the cumulative risk that has been reintroduced into the financial sector by everything from Solvency UK to the whole range of changes—I think I listed them once in a Second Reading speech, and it went on for nearly a page and a half—that have been made. Measuring that cumulative risk would be extremely instructive to us when we start to look at issues such as financial stability. But for goodness’ sake, if we are reducing financial stability to no more than a “have regard”, which is exactly what this amendment would do, we are stepping into really dangerous territory.

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[Baroness Bowles of Berkhamsted (LD)]

Shortly after my proposal first surfaced, I was contacted by people involved in the Australian royal commission on financial services, because they had noted that I had reached the same conclusion as them: that it was too big a job for Parliament to do by itself, given everything else that national Parliaments have to do.

Australia introduced two-yearly reviews, and it is not the only country to have an independent review. A similar arrangement now exists in New Zealand, and in the US all regulators come under powerful scrutiny by the Government Accountability Office. One advantage of my proposal is that it follows a path we understand from Section 1S reviews, and it could be done quickly—maybe as an interim solution, for example, until an office such as that proposed by the noble Lord, Lord Bridges, could be formed. By having regular reviews, oversight of progress would also be possible. After her review, Dame Elizabeth Gloster told the Treasury Committee that we are left to “hope” that the regulator “implements” regulations. Hope is not a system.

Why did I propose this? It was the point at which the Government were looking at the post-Brexit future financial framework. As has already been rehearsed in this Committee, this Parliament does not have the structure and focus that was available in the EU Parliament. Having been chair of the ECON committee dealing with all the post-financial crisis legislation, I can safely say that I know what it takes and that it is not easy. That is another reason why I do not recommend a continuous process.

There will be more to it in the UK, because many issues arise from the execution of supervision post rule-making. Brexit created the first need, which we eventually tried to patch with a new committee. Your Lordships heard from members of that committee and in the report of the Industry and Regulators Committee, Who Regulates the Regulator?, that now the overwhelming conclusion is that significant independent review is needed.

Now we have a new, second need due to the changes in this Bill, which remove the “have regards” away from operational effectiveness and into a five-year strategy. How is that to be monitored? Is there any intention at all for follow-through? The changes make the already difficult acquisition of information even harder. Several things that the Minister has said in his replies ring alarm bells and show the absolute need for scrutiny. We need it because financial services regulation and supervision is too important to allow issues to creep up—all the more so in a higher-risk environment. LCF-type regulator risk needs even more guarding against.

The Minister has said that proportionality will now be tested only at the strategic level. Let us be clear: testing proportionality at only the strategic level is barely a nudge. Rule-level and supervisory-level proportionality is the real test, but that has been put out of reach of accountability, as there is nothing to measure against. Indeed, they are not even looking at it apart from every five years. From that, it is pretty clear that substantial follow-ups on the five-year strategy are necessary. The Minister says that annual reports and remit letters provide accountability. Some substantial upgrading and interrogation of those is needed. What actionable event flows from an annual report? It is judge, jury and public relations all in one place. Does the Minister genuinely believe that an example here and there constitutes accountability?

The Minister argues that principles remain central, yet they are being moved into a document that cannot be enforced by the courts and cannot be used to test a specific rule or supervisory action. They are applied every five years, when the future cannot really be seen. This is not lip service; it is just print service, and as my noble friend Lady Kramer has shown us from the current version of the five-year report, there is little substance. Will we get something detailed for every category and size of financial market business?

The Government’s rhetoric suggests that reducing the burden of accountability will unleash a more dynamic and agile regulator, but that does not demonstrate the stability that is a prerequisite for competitiveness. Stability is the best friend of a competitive financial sector. Whether you cite centuries of institutional experience or the second law of thermodynamics, left to their own devices, systems corrupt or tend to disorder. Someone has to be on their case. But the Government are making the regulators far more insulated from the procedures that keep them on their toes. Avoiding the burden of accountability today is like banking a much larger, more expensive crisis for tomorrow. Additional periodic or permanent oversight has become even more necessary. I beg to move.

[Lord Bridges of Headley (Con)]

My Lords, I will speak to Amendments 133 to 135 and 136 to 139 in my name, but not Amendment 135A, which is in the name of my noble friend Lady Lawlor. I thank my noble friends Lady Noakes and Lady Lawlor and the noble Baroness, Lady Bowles, for putting their names to my amendment. This little clutch of amendments is turning into déjà vu, because the noble Baroness, Lady Bowles, has just spoken about issues that she raised some years ago. My amendment is one that I raised in this very Room, sitting on the other side, exactly three years ago—so it is déjà vu all over again.

I start from a basic point, which picks up exactly where the noble Baroness left off. I believe that we here in Parliament need more powers and, critically, more independent analysis to hold financial regulators and supervisors to account. In fact, I just mention here that we need to do far more to hold the Bank of England to account, but that was declared out of scope. I had wanted to table an amendment calling for a regular, probably five- or six-yearly, review led by Parliament into the remit and performance of the Bank of England as an entity and as an institution. I believe that that is an enormous democratic deficit that we need to address. I was told that it was out of scope for this piece of legislation, but I very much intend to return to that at a future date. It is much to the Minister’s relief, I am sure, that we are not going to do that now.

We spent Monday debating clauses in the Bill that I see as weakening parliamentary accountability. My amendments and those of the noble Baroness will take us in the opposite direction, towards more accountability. A number of us, on all sides of the Committee, have been asking a very simple question: do we, in this House and in the other place, have sufficient means to hold our financial regulators and supervisors to account without compromising that operational independence? The answer keeps coming back, resoundingly: no, we do not.

It is not as though this is the first time we have said this. As the noble Baroness mentioned, in its excellent 2024 report, Who Watches the Watchdogs?, your Lordships’ Industry and Regulators Committee found that parliamentary scrutiny of regulators remains too fragmented, too reactive and—I stress this—too limited by the resources available to Parliament. It concluded that the balance between regulatory independence and democratic accountability needs to be strengthened. As I said, that report came after all the debates we had in this Room on the previous Financial Services and Markets Bill, now an Act. We warned then that the transfer of extensive rule-making powers from Parliament to the regulators had created an accountability gap. That is why I addressed this very same proposal then. My concerns about accountability have not diminished; if anything, they have grown in the years since I was standing over there, so I am trying again.

Noble Lords will be grateful to hear that I will not go line by line through what each of these amendments would do. I simply say that Amendment 133 would establish an office for financial regulatory accountability, OFRA, as an independent body to support Parliament in scrutinising the work of financial regulators. It is crucial to stress that I do not see this as second-guessing regulatory judgments or interfering with regulatory operational independence. Rather, as set out in Amendment 135, which is pretty key in this clutch of amendments, it would provide Parliament and the outside world with impartial analysis of regulation, the actions of regulators in the round and, crucially, their performance at meeting their objectives, as set by Parliament.

Why do we need this? For a very simple reason—my noble friend Lady Noakes will pay testament to this. The volume and technical complexity of financial regulations are now making this absolutely necessary. If Parliament is to fully and effectively scrutinise the hundreds of pages of regulation that our regulators keep churning out, we need to do more. My concern—I would be grateful if the Minster could put my mind at rest—is that the Government seem to be suggesting that we do not need to have a case-by-case analysis of regulations. That is wrong: it is absolutely critical to have that analysis. We cannot rely on a five-yearly strategic report, or overall impressions and analysis, from regulators. We need to be able to analyse regulation point by point.

If the Minister responds by saying, “Don’t worry. The regulators will reflect their objectives in their actions and decisions, so we have nothing to worry about here”, I will say, “Let’s prove it”. Let us have the independent analysis to make sure that it is indeed the case that our regulators are reflecting the objectives that Parliament has set them in what they do. Greater scrutiny and, with it, greater accountability, will surely strengthen trust, which is critical.

The Minister might go on to argue that my proposal is not needed for two other reasons, the first being the cost-benefit analysis panels that my noble friend Lady Neville-Rolfe and others talked about when discussing previous amendments. I completely accept that they perform a very important function, but I see their role as being very different. Their role is to improve the quality of individual cost-benefit analyses prepared by the regulators. They are advisory bodies to the regulators themselves. They are not designed to provide Parliament and others with an independent assessment of the overall effectiveness and proportionality of regulation, bit by bit. This amendment would therefore complement rather than replace those panels: the cost-benefit analysis panels improve regulatory decision-making from within; OFRA would strengthen parliamentary accountability from without.

The second reason the Minister might use to oppose my proposal is that the FCA introduced its rule review framework in 2024, with the stated aim of undertaking increasingly rigorous post-implementation analysis of what it does. I stand to be corrected, but my delving into this suggests that the results so far of this new framework are modest. As far as I can see, since its introduction, only one full impact evaluation has been published, and one other has appeared in the past five years—I think that is overall, pre the framework being introduced. I would like to know whether that is the case and how effective the rule review framework has been.

Either way, that underlines the point that Parliament needs access to independent analysis, especially as the Government want to give regulators more discretion. This seems to be the entire drift of the Bill: more discretion for the regulators. If that is the case, surely the quid pro quo for more discretion must be having more mechanisms for accountability. If we are being asked to entrust the regulators with more, we need greater ability to have independent scrutiny of what they are doing.

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[Lord Stockwood (Lab)]

My Lords, we turn to the important topic of the accountability of the financial services regulators. I am grateful to the noble Baroness, Lady Bowles of Berkhamsted, and the noble Lord, Lord Bridges of Headley, for tabling these amendments and for the thoughtful contributions made by noble Lords during this debate. I hear what the Committee has said on regulatory accountability and am glad to be meeting the Lords Financial Services Regulation Committee, chaired by the noble Baroness, Lady Noakes, next week. I have also written to noble Lords, as has been mentioned, about the existing framework that governs the accountability of regulators and a copy of the letter is available in the Library.

Amendment 121 proposes establishing an independent panel for periodic independent review of the FCA, the PRA and the Bank of England. The Government agree that it is important that regulators are held to account for their performance. This is why they have formalised biannual performance reviews, which the Economic Secretary to the Treasury holds with the CEOs of the FCA and PRA. The minutes of these are published on GOV.UK to support transparency.

A prescriptive, legislative requirement would duplicate this and would not be a good use of taxpayers’ money, as the purpose of such a review could be only to understand the regulators’ performance. But through FSMA, Parliament and the Government already have a large number of levers to understand and assess the performance of the regulators. There is of course nothing to stop the Financial Services Regulation Committee from calling up the CEOs of the FCA and the PRA, or the Governor of the Bank, to discuss their performance as frequently as that committee desires. It is also difficult to see where the panel would get its legitimacy from, when the Government and Parliament are responsible for democratic oversight and accountability for the regulators—the regulators that Parliament has vested with the responsibility for regulation of our financial services sector.

It is the Government’s view that the existing avenues for accountability are appropriate and sufficient, and that Parliament has the authority to do this in a way that no other body could. If Parliament wants to enhance the scrutiny of the regulators, it must consider how best to do that.

Amendments 133 to 139—including Amendment 135A —would, taken together, create a new statutory body, the office for financial regulatory accountability, charged with examining and reporting on the performance of the FCA and the PRA, supported by a charter setting out the Treasury’s regulatory objectives, with full information access rights and funding drawn from the regulators themselves. Such a body would complicate the accountability framework in a way that could dilute individual responsibility and accountability, and create significant additional costs. As such, the Government cannot support the amendments.

Since this proposal was last made, during the debates on the Financial Services and Markets Bill in 2023, the landscape has changed materially. The Financial Services Regulation Committee of this House was established precisely to provide sustained, expert parliamentary scrutiny of the regulators, and it has done so with considerable rigour. In the other place, the Treasury Select Committee continues to hold the FCA and the PRA to regular account. These are active, resourced bodies with the standing and powers to interrogate regulatory performance in depth. More importantly, as parliamentary committees, they have the constitutional authority to scrutinise and opine on the effectiveness of our independent regulators.

Creating a new statutory office alongside these structures would fragment accountability, rather than strengthen it. There is a risk that the existence of a parallel body would blur the lines of responsibility and create confusion about where the authoritative scrutiny sits.

[Lord Bridges of Headley (Con)]

I just do not understand this argument at all. The committees in this House and in the other place, as my noble friend Lady Noakes said, have the power to summon but, as far I know, they have one policy adviser and one expert adviser—and that is it—to analyse regulations and the actions of regulators and supervisors. As the Minister knows full well, that is nowhere near enough to fulfil what would be the purpose of OFRA.

As I said, OFRA would establish a means by which there is independent analysis of regulations—on the specifics and in the round—and of the performance of the regulators and supervisors. They are very different things. One is a means to hold regulators to account; the other gives parliamentarians the means, analysis and insights to do that. I do not understand how the Minister can say that that would dilute accountability.

[Lord Stockwood (Lab)]

The point I was making is that the structure that exists today gives the effective governance that we believe is required. We are open to a conversation about the noble Baroness’s options to improve accountability, but the noble Lord rightly raises a separate conversation about the requirements to make sure that those committees are sufficiently resourced. That is a separate conversation but, in our current position, we are trying to balance the accountability that already exists with the ability for the regulators to be flexible. As I have stated previously, we are open to that discussion, because we want to make sure that this process does not dilute that.

[Lord Bridges of Headley (Con)]

I completely agree, but this is not about making them inflexible; it is about giving Parliament the ability to hold them effectively to account. I do not hear anyone saying that there is that means at the moment, and I cannot think that there would ever be a committee, of either this or the other place, enabled to do that. It would require an enormous resource for a committee, which would be completely impossible, as far as I can see. That is why we need a separate body.

[Lord Stockwood (Lab)]

We are happy to have that conversation. We believe that the framework we have set out is the right one: it balances that ability to have oversight with the flexibility that we have empowered through FSMA. However, I agree that this debate has clearly illuminated that there is work to do, and I look forward to having that conversation with the Committee next week. I am sure that there are more conversations to be had on this issue between Committee and Report.

Amendment 139 would require the FCA and the PRA to fund this new body from their own resources, which are ultimately drawn from industry levies. The regulators would presumably need to increase their fees on authorised firms to cover this. Establishing a body of this kind, with its own membership, staff, legal powers of information access and publication obligations, would involve significant and recurring costs. We would be making industry pay twice to fund functions that have significant overlap.