Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2020

Lord Faulkner of Worcester Excerpts

Thursday 18th June 2020 Lords Chamber

[Lord German (LD) [V]]

My Lords, at one level these regulations could be seen as a technical set to see us through to the end of the year in order to be compliant during transition. However, they raise some very substantive issues which set a pathway with much greater significance.

What we are legislating for here is derived precisely from the legislation which the EU will use in dealing with the United Kingdom from 1 January next, onwards. Unless there is some major shift in governing policy, the EU form of these regulations will be the rules which govern the activities of UK entities within the 27 member states of the European Union. All of the tightened EMIR 2.2 regime rules on the over-the-counter derivatives market will be applied to us a third country. In the context of the Government’s aim not to be within the single market, a primary concern must be whether our regulatory regime will be regarded as equivalent by the 27 member states of the EU next year.

It is through this lens that we must assess the adequacy of these regulations. I am afraid that all the signs of what will happen next year to our relationship with the EU look increasingly gloomy. As written, the Explanatory Memorandum is either very misleading or incredible in its paragraph 7.1, depending on your view of its literal meaning. Its opening words state:

“The UK has left the EU with a deal”,


yet the EU, as we know, has said that we are not even negotiating effectively on the agreement—the political declaration which the UK reached at the end of last year. What was achieved was leaving with an agreed declaration on the future issues to be negotiated. I suspect that the terms of this bald statement in paragraph 7.1 of the EM refer to a much narrower arrangement than the one currently cited by all sides and the media, including our own Prime Minister, as leaving with a deal. Can the Minister tell the House what deal the Government are referring to in this statement, and which terms of that deal are relevant to these regulations?

According to the political declaration, the UK is required to conclude its equivalence assessments in 12 days’ time. These regulations are part of that exercise. How much more needs to be concluded in these coming days, or will we require an extension of some weeks or months to finish the exercise?

Turning to the regulations themselves there is a considerable increase, as noble Lords have said, in the powers and role of the Treasury and the Bank of England. What level of scrutiny do the Government envisage over the use of these powers? The only reference to Parliament is in relation to Regulation 21 of this instrument. As the Minister said, it uses the most limited form of parliamentary scrutiny, the negative procedure; additionally, this regulation is the one most likely never to be used. As we seek to provide regulatory equivalence and, I hope, avoid a cliff edge at the end of the year, I am bound to reflect that none of this can replace the market access we currently enjoy.

[The Deputy Speaker (Lord Faulkner of Worcester) (Lab)]

We can see you, Lord Mann, but we cannot hear you.