Financial Services Bill

Lord Flight Excerpts

Tuesday 10th July 2012 Lords Chamber

Moved by

[Lord Flight]

47A: Clause 3, page 6, line 16, at end insert—
“( ) An order under subsection (2) may only exclude or modify procedural requirements under FSMA 2000 where the Committee believe that this is necessary due to the urgency of the situation, and where this occurs the order must include an explanation of the reasons for excluding or modifying the procedural requirements of FSMA 2000.”

--- Later in debate ---

[Lord Stewartby]

My Lords, I would like to add a word to what the noble Lord, Lord Peston, has said, in particular to ask my noble friend Lord Flight about the frequency with which this situation is likely to happen. Would it be an exceptionally rare event, because that may affect the way in which one approaches it?

[Lord Flight]

My Lords, I was simply making the point that if this power is used, and as a check against its improper use, there should be the requirement to explain why.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, I will see if I can help a bit here. Amendment 47A seeks to prohibit the modification or exclusion of procedural requirements—that is, the requirement to consult—except for reasons of urgency. The reasons for the exclusion or the modification would also need to be included in the order. I should briefly explain why the Treasury has the ability to switch off or modify procedural requirements—the requirement to consult—which apply to action taken by the PRA and FCA on a tool-by-tool basis.

As the Government made clear in their February 2011 consultation document, in the case of some macroprudential tools, directions from the FPC will be very specific, requiring no discretion at all on the part of the regulator to implement them. Noble Lords asked for examples. In these cases—for instance, where the FPC is simply changing the level of a particular lever—consultation or cost-benefit analysis undertaken by the regulator would have little value and would introduce unnecessary delay into the process.

The Government believe that in these cases the FPC’s policy statement for the tool and its explanation of how the action is compatible with its objectives will provide much more valuable information about the action and its impact than any consultation by the regulators. However, I reassure the Committee that the Government do not expect to modify or exclude procedural requirements for most tools.

The Government will in due course publish a consultation document with proposals for the composition of the FPC’s initial toolkit, which will set out whether procedural requirements will be amended for any tools. In that case, there will be complete transparency regarding whether there has been any proposal by the Government to cut out the normal full consultation processes, and, if so, the reason will be clear. On the other hand, taking the question of urgent cases, if a delay in implementing an FPC direction could pose a risk to financial stability, both the PRA and the FCA already have, under their existing powers, the ability to waive consultation requirements in order to take action urgently.

Therefore, I hope I can assure my noble friend that on the one hand it will not be, in his words, at all common for consultation not to take place and it will be transparently set out; on the other hand, the power in new Section 9H(2) will not be needed in cases of urgency because that is already covered. On the basis of that explanation, I ask my noble friend to withdraw his amendment.

[Lord Flight]

My Lords, I think I am happy that the fundamental point is covered, and what the Minister has just stated effectively puts that on the record. I beg leave to withdraw the amendment.

Amendment 47A withdrawn.