Financial Services and Markets Bill [HL]

Lord Hunt of Wirral Excerpts

Committee stage
Monday 29th June 2026 Grand Committee

[Baroness Noakes (Con)]

I thank the noble Lord for telling me about my noble friend’s disqualification from speaking; I will now speak to his Amendment 101. I find that it would be a useful addition to Clause 20, by imposing some modest requirements such as making the reports comparable with previous reports and covering things such as the cumulative cost of regulation and an explanation of how proportionality has been applied, including for SMEs. I do not think that any part of this amendment should be controversial, and I hope that the Minister will be able to accept it.

[Lord Hunt of Wirral (Con)]

I thank my noble friend.

[Baroness Noakes (Con)]

My last amendment in this group, Amendment 102, is also about the secondary competitiveness and growth objective, but, this time, for the Financial Market Infrastructure Committee of the Bank of England. The FMIC was set up with a secondary innovation objective, and there is clearly a link between innovation and growth and competitiveness—but they are not synonymous. I am not sure why the FMIC was set up with innovation objectives rather than full competitiveness and growth objectives, and I do not recall a substantive debate on that during the passage of the 2023 Act.

Financial Services and Markets Bill [HL]

Lord Hunt of Wirral Excerpts

Committee stage
Monday 6th July 2026 Grand Committee

Moved by

[Lord Hunt of Wirral]

142A: After Clause 22, insert the following new Clause—
“FCA: wholesale markets and firms division(1) The FCA must, within 12 months of the day on which this Act is passed—(a) establish and maintain a dedicated unit (a “Wholesale Markets and Firms Division”) within its organisation, and(b) appoint a Deputy Chief Executive to lead this division.(2) The FCA must ensure that its relevant functions in relation to wholesale markets and firms are exercised and discharged through a Wholesale Markets and Firms Division.(3) The FCA, in discharging its functions through a Wholesale Markets and Firms Division, must—(a) act in a way which advances the regulator’s operational objectives,(b) act, so far as reasonably possible, in a way which advances the regulator’s duties under section 1EB (competitiveness and growth objective) and section 3B (regulatory principles to be applied by both regulators) of the Financial Services and Markets Act 2000, and(c) have regard, in particular, to the desirability of—(i) reducing regulatory burdens on participants in wholesale markets,(ii) facilitating innovation in wholesale financial services, and(iii) promoting sustainable growth and international competitiveness of UK wholesale markets.(4) A Wholesale Markets and Firms Division must be responsible for—(a) the development, implementation and supervision of rules and policies relating to wholesale markets;(b) authorisation and supervision of wholesale markets and firms; (c) engagement with market participants active in wholesale markets, including international firms;(d) advising the regulator on the impact of its policies and rules on wholesale market activity, investment and competitiveness.(5) The FCA must, at least once in each calendar year, prepare and publish a report on the activities of its Wholesale Markets and Firms Division.(6) A report under subsection (5) must—(a) be provided to the Treasury, and(b) include an assessment of—(i) steps taken to reduce regulatory burdens in wholesale markets,(ii) progress in supporting innovation,(iii) the contribution of wholesale markets to investment and growth in the United Kingdom, and(iv) the extent to which the regulator has advanced its secondary competitiveness and growth objective in relation to wholesale markets.(7) In this section—“wholesale firms” means regulated firms whose customers, clients or counterparties are pre-dominantly not covered by the UK consumer duty;“wholesale markets” means such markets, activities or classes of regulated activity as may be specified for the purposes of this section by the Treasury by regulations, having regard to—(a) the nature of transactions undertaken primarily between market counterparties acting in a professional capacity;(b) existing distinctions within the FCA Handbook (including, but not limited to, provisions relating to wholesale market conduct, eligible counterparties, and professional clients);(c) the role of such markets in facilitating capital allocation, risk transfer and investment at scale.(8) A statutory instrument containing regulations under subsection (7) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”Member’s explanatory statement
This amendment seeks to require the FCA to develop a dedicated division to undertake their regulatory activities in regard to wholesale market participants.

[Lord Hunt of Wirral (Con)]

My Lords, in moving Amendment 142A and speaking to the other amendments in this group, which I also support, I am asking for the FCA to be able to develop a dedicated division to undertake its regulatory activities regarding wholesale market participants.

This amendment is all about ensuring that in what is a highly competitive global marketplace the FCA can balance its priorities and resources effectively to benefit the consumer or clients who use them in those markets that the FCA regulates. The FCA’s protection of the individual consumer is rightly prominent, but businesses that are customers of wholesale markets, such as our world-leading London insurance market, require a very different level of protection. Currently, the definition used by the FCA is very unclear and does not distinguish between these two very different sets of needs.

I declare my long-standing interest in financial services Bills over the last 50 years, particularly as a practising solicitor in the City of London and a partner in the firm DAC Beachcroft LLP. I have slowly but surely seen the evolution of regulation, but I am concerned that it is now inhibiting the growth of what is for us one of the great global centres, particularly for insurance. However, the definition of wholesale does not just apply to insurance; it applies to other aspects of financial services as well. The FCA is well aware of the issue. Indeed, it has been raised actively with the FCA over the last few years and there have been commitments to action. However, sad to say, progress is not being made. The FCA appears to be struggling with the definition of a retail consumer and has not found the best way forward.

Once again, we rely on our Select Committee to highlight the issue. The cross-party Financial Services Regulation Committee identified this as an issue, finding in its report last year:

“The FCA does not do enough to distinguish between firms that cater to wholesale and retail markets in its regulation and supervision which … imposes unnecessary burdens and frictions on firms … These issues have fuelled an increase in bureaucracy and imposed significant monetary and resource demands on firms”.


Witnesses to that Select Committee gave key examples. They show that wholesale and retail markets serve fundamentally different customers. Retail regulation is designed to protect individual consumers, whereas wholesale markets are primarily used by professional investors, insurance firms, banks, pension funds and corporate entities. The London insurance market deals almost exclusively with corporate clients, but the regulations take a one-size-fits-all approach, applying consumer-focused rules to firms and activities for which they were never really intended.

We have a situation where pet insurance is essentially regulated in the same manner as marine or aviation insurance. Policies and services delivered in the London market are bespoke to the individual client or individually negotiated and tended, where there is no evidence of this type of market failure. They are not unit-based commoditised products that are offered within the retail market. The FCA’s implementation of what is described as the consumer duty has introduced considerable uncertainty for domestic and international firms operating in the London market. This uncertainty is driven by a lack of clarity on the FCA’s expectations as to how firms should comply with the consumer duty, including which markets and consumers it applies to.

I believe, therefore, that a dedicated wholesale division would help to ensure that regulation is proportionate to the sophistication of market participants. That is why I feel so strongly that this amendment and my noble friend Lord Ashcombe’s amendment should be contained in the Bill. I hope that the Minister will be able to address this issue for the first time as a Minister on a financial services Bill, recognising that, at the moment, we are dealing with two separate markets that are merged under the consumer duty, which is wholly inappropriate. I beg to move.

[Lord Ashcombe (Con)]

My Lords, I declare my interest as an employee of Marsh, which is an FCA-regulated firm. I shall speak to Amendment 142C in my name, which seeks, in essence, to achieve something modest but necessary: equipping the regulator with a clearer and more effective framework within which to operate.

I am—as, I suspect, other noble Lords are—unequivocal in my support for well-judged regulation. It is the foundation of consumer protection, market integrity and London’s standing as an international global financial centre, particularly in insurance, as my noble friend Lord Hunt mentioned. However, the position in which we find ourselves today is one not of insufficient regulation but of fragmentation, with a system that in parts lacks clarity and coherence.

At present, the FCA operates without a clear statutory distinction between retail and wholesale clients. The distinction between wholesale and retail markets is not academic; it is fundamental, particularly in insurance. Retail regulation exists to protect individuals and small businesses. Wholesale markets are, by contrast, the domain of larger and corporate entities. These participants are not passive consumers. They are typically active, informed buyers engaging in complex and often bespoke transactions, as I said on Monday last week. This is very much in line with my noble friend Lord Hunt’s Amendment 142A, to which I have added my name.

This situation leads to a consequence: a degree of inconsistency that is, frankly, difficult to justify. Businesses of broadly similar scale and sophistication can find themselves subject to different regulatory treatments depending on the regime applied or the particular lens through which they are viewed. That uncertainty serves no one well. It imposes a cost on, first, firms, which must devote increasing resource to navigating overlapping and at times contradictory interpretations, and, ultimately, on consumers and smaller businesses, which bear that burden through higher costs and reduced access to services.

There is, however, a straightforward solution. Where my amendment takes that further than my noble friend’s is as follows. A turnover threshold of £6.5 million already exists in statute and is used by the Financial Ombudsman Service to reflect the size of companies. It reflects a determination made by Parliament of the point at which a business can reasonably be expected to possess a degree of financial sophistication and resource, and it could easily be adopted by the FCA.

My amendment does not seek to innovate for innovation’s sake; rather, it seeks to bring coherence by anchoring the distinction between retail and wholesale clients to that already established threshold. In doing so, it would provide the regulator with a clear statutory direction. It would also introduce a necessary discipline: that retail-style protections should not be applied to wholesale clients unless there is a demonstrable and proportionate case for doing so.

This is not about weakening regulation; it is about smart regulation. It is a call for regulation that is properly targeted and grounded in the realities of the market. This matters because we must allow the FCA to focus its efforts where they are most needed, which is on genuine customer protection for individuals—you and me when we are purchasing insurance, for example—rather than dispersing them across forms of compliance that add bureaucracy cost without delivering commensurate benefit.

There is a genuine competitive point here too. Post Brexit, we have the chance to move faster than Europe, but we can do that only if the industry has certainty. Businesses need to know where they stand. They cannot plan investment or hire teams based on regulatory guidance that shifts depending on whom you talk to and when. They need law. My amendment offers a measure of that certainty. It would reduce unnecessary friction and support the FCA in meeting its secondary objectives of growth and competitiveness, and it would do so without in any way diminishing the protection afforded to those who genuinely require it. This is a measured and pragmatic proposal that respects the importance of regulation while seeking to improve its application. I support the other amendments in this group.

--- Later in debate ---

[Lord Hunt of Wirral (Con)]

My Lords, what an important debate this has been. It has highlighted some of the difficulties facing the FCA in its wide remit, covering both wholesale and retail markets. I am grateful to my noble friend Lord Ashcombe; as he pointed out, industry needs certainty. I warmly welcome the contribution of the noble Baroness, Lady Bowles, with all her knowledge of this area. She readily reminded us that the FCA acknowledges overreach. So the problem is there, but what is happening about it?

I am delighted to hear from the Minister that all these workstreams are progressing. But from talking to those outside—the London Market Group, for instance—they point out that the UK has to compete with New York, Singapore, Bermuda, Hong Kong and the EU financial centres, and it just cannot do that with the system of regulation that we have at the moment governing the wholesale markets.

I agree with the noble Lord, Lord Vaux of Harrowden: it is all about proportionality. If I can pick up one point that the Minister made, it is to stress the need for proportionality or, as my noble friend Lord Holmes of Richmond called it, applicability. I just think that there is a way through here. My noble friend Lady Neville-Rolfe talked about the overlap between wholesale and retail. There must be a solution if we are to continue to be the global centre that we always have been.

At the moment, bearing in mind the growth and competitiveness objectives, and regarding a move by the FCA suddenly to take out wholesale, I would site it in Canary Wharf. That would send a message across the world that the UK really means to grow and be internationally competitive in this vital marketplace. We are bound to return to this on Report but, in the meantime, I beg leave to withdraw the amendment.

Amendment 142A withdrawn.