UK-EU Relationship in Financial Services (European Affairs Committee Report)

Lord Holmes of Richmond Excerpts

Wednesday 17th May 2023 Grand Committee

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to take part in this debate. I start by declaring my financial services interests as set out in the register. I congratulate the noble Earl, Lord Kinnoull, all the members of the committee and, indeed, all the staff of the House who worked on producing such an interesting and thought-provoking report. It is a pity that it has been some nine months since the report was published; it certainly deserved debate before this point. However, taking opportunities where they lie, this gives us an opportunity to act as an excellent curtain-raiser to the Report stage of the Financial Services and Markets Bill, coming up on our return on 6 June.

I will focus on four key areas: fintech, talent, the regulators and crypto assets. We have rightly heard from other noble Lords about the UK-wide nature of our financial services. Similarly, this goes for our excellent fintech businesses right across the United Kingdom. Does my noble friend the Minister agree with me that it is a matter of pride that, although last year was a difficult year for fintech, where global funding fell 30%, in the UK it was only 8%? It is no reason at all for complacency but there are a number of factors about which we should feel great pride and focus: we have the blessing and great good fortune of geography, time zone, language and—perhaps the greatest good fortune of all—English law to underpin all our financial services, not least our thriving fintech services.

Does the Minister also agree that, taking ourselves back to the Financial Services Act 2021, it is excellent that we have recently seen the establishment of the Centre for Finance, Innovation and Technology? It is likely to play a positive role in future; it was raised by the Economic Secretary to the Treasury during Fintech Week and is clearly an important part of the journey going forward.

Does the Minister agree that, if we will this, we can make success happen? There can be no greater example of this than the FinTech Sandbox, made in the UK. What measure of success shall we take? It has been replicated in well over 50 jurisdictions around the world. Does she also agree that we should have high hopes for the FMI sandbox, which will come about once the current FSMB becomes an Act later this summer?

Moving on, talent has rightly been raised—first of all, homegrown talent. Does my noble friend the Minister agree that, for all our young people, developing an understanding of real financial literacy is the greatest way to build a workforce across the piece, particularly—for the purposes of this debate—in our financial services sector? We need far more across our education system, right from the outset, and we need to build upon that with financial inclusion woven through every beat point that we consider. I very much agree with my noble friend Lord Bilimoria’s comments: international talent urgently needs to be addressed. Does the Minister agree that we have to grip this visa question?

Similarly, moving on to one element of the regulators’ work, visas aside, it cannot take nine months for a senior manager from overseas to gain authorisation. What do we need to do to ensure greater efficiency in that part of our regulators’ work? As has already been mentioned, does my noble friend the Minister agree that Report would be the ideal moment for her to accept amendments that would enable Parliament to have the right scrutiny and regulators to have the right level of accountability so that we truly have regulators and a regulatory framework that benefit the entire economy and the entire country? Consumer protection should not be seen at one end with competitiveness at the other; they are not mutually exclusive. If they are rightly structured and considered, with the right accountability mechanisms, both should thrive in our regulatory framework.

Does the Minister see that my noble friend Lord Bridges’ amendment on an office for financial regulatory accountability offers much to address this issue and benefit our regulators? In the discussions a number of years ago, nobody on either side of the debate said that this was about repatriating powers to our regulators. Parliament must have the right level of scrutiny and the right role in this, rightly structured and stood up.

Finally, would the Minister care to comment on the recent Treasury Select Committee report on crypto assets, on how one should consider unregulated crypto assets and on the committee’s assertion on gambling? It is clear that the crypto market moves at pace and that, putting it mildly, not all within it is necessarily where one would choose to put one’s cash, but we need to take the right approach.

I wonder whether the Minister has had time to consider the House of Representatives’ financial services inquiry last month. It called the chairman of the SEC before it to consider the whole question of the regulatory approach to crypto assets. There is much for the UK to consider within that.

Similar to consumer protection and competitiveness considerations, we should not need either to consider completely shutting down crypto assets or to believe that they are the latest, greatest thing. We should be able to approach them with rational optimism, with the right regulatory framework in place. I am sure that my noble friend agrees that what the Bill currently proposes on the digital assets space is positive. We should commend the work of the Law Commission on digital assets and decentralised autonomous organisations.

Finally, can my noble friend the Minister comment on what consideration has been given to the regulatory approach of the Monetary Authority of Singapore, and the Hong Kong and Swiss regulators? What are the key learnings and how have they influenced the Government’s approach to our regulators, as set out in the FSMB as currently drafted?

And finally finally, I echo the comments of many noble Lords in very much supporting the approach that we are trying to have with Switzerland. Can my noble friend comment on what stage that is at and give her full-throated support? It offers an excellent example of what can be done and, when it comes to fruition, both nations and far beyond will completely and certainly benefit.