Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019

Lord Leigh of Hurley Excerpts

Monday 18th February 2019 Lords Chamber

[The Earl of Kinnoull (CB)]

My Lords, I remind the House of my interests in financial services, particularly in international financial services for quite a long time.

Many of the speeches in this debate have given the Government a poor grade on things. However, it is important to remember business, which is at the centre of this. I always find that there is some confusion about what equivalence is. For financial services, there are 11 directives or regulations which give rise to powers to grant equivalences, 35 countries have taken advantage of that, and 279 equivalences have been granted—those are the figures from October on europa.eu. I gave evidence in respect of one of those 279 to try to get an equivalence for Bermuda—a successful achievement—some years ago, so I am very familiar with the process and also extremely familiar with how important it is for international business to have that equivalence.

The areas that are covered by equivalence, where obstacles and barriers are lowered or removed by granting it, include: accounting and auditing; capital requirement measurement; risk exposure measurement; and reliance on other markets’ regulators that reduces the amount of senior management time that is taken up, making sure that regulators feel comfortable with whatever the business is that you are running within their regulatory environment. It is therefore very important indeed that we have this instrument in place, if there is a disorderly Brexit, in the first instance. I agree with many of the points that have been made about how the Government’s performance has not been that good on this, or indeed on other statutory instruments. However, this is vital for business and is a key part of our economy, so I hope that the House will hurry it through.

[Lord Leigh of Hurley (Con)]

My Lords, I welcome this statutory instrument. I note that paragraph 77 of the consolidated impact assessment states:

“This does not remove the general need to review and improve legislation, which HM Treasury remains committed to doing in due course and where appropriate”.


Following the debates we had on the Financial Services (Implementation of Legislation) Bill, there are areas which might improve the financial services community and be for the benefit of the public and companies seeking to raise capital without the confines of some EU regulations; in particular, for small companies and for existing public companies that are seeking to raise capital from existing shareholders. At the moment, due to the expensive costs of a prospectus, they are prohibited from so doing. Although I have never prepared an impact assessment, I cannot imagine how one can be prepared in this sector, because there are so many potential benefits that might arise from this. I refer your Lordships’ House to my registered interests.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I too declare my interest in the register with regard to the London Stock Exchange.

I will make a couple of points on specifics, but before that I will say that I agree with noble Lords who have spoken about the manner in which things have had to be done and are done, rather than possibly what is done. By and large, the Treasury has performed well in fixing what it has to fix, but it has fallen down, possibly through lack of time, sometimes on Explanatory Memoranda and definitely on impact assessments. One of the things is that the public hardly seem to appear in the commentary. When the Minister introduced this statutory instrument, he said that equivalence was beneficial—it is in several ways—because for one thing it aided competition. He then said that that was to the benefit of consumers. That was about the only reference to consumers.

If prudential requirements are lower, does that benefit the consumer? It surely does in one sense: if the costs to businesses are less, perhaps the services to the consumer are less, but what does that do for stability? There are lots of questions about that, and the whole scene is not set. If I may say so, I may be the only person who was in the room when every one of these equivalence provisions was put in place, so I know why they are different, but it is still very difficult on some of the other SIs that we are dealing with even for me to work out exactly what is going on.