Financial Services (Banking Reform) Bill

Lord McFall of Alcluith Excerpts

Wednesday 23rd October 2013 Lords Chamber

Moved by

[Lord McFall of Alcluith]

98: Before Clause 16, insert the following new Clause—
“Whistleblowers’ compensation
(1) After section 206A of FSMA 2000 (suspending permission to carry on regulated activities) insert—
“206B Whistleblowers’ compensation
(1) If as a result of an investigation carried out in accordance with this Act the appropriate regulator is satisfied that an authorised person has mistreated a whistleblower, the appropriate regulator may require the authorised person to pay to the whistleblower compensation of an amount determined by the appropriate regulator to be appropriate having regard to the financial implications of the mistreatment for the whistleblower.
(2) In this section “whistleblower” means an individual who works or worked for the authorised person (whether or not as an employee) and who—
(a) gave information to the appropriate regulator for the purpose of initiating or facilitating the carrying out of an investigation in accordance with this Act, or(b) gave to a colleague information relating to any matter which might be relevant if the appropriate regulator were deciding whether to initiate the carrying out of such an investigation or were carrying out such an investigation.(3) In this section a reference to mistreatment includes a reference to any form of discriminatory or unfavourable treatment.
(4) A payment under subsection (1) is to be made only if the whistleblower chooses to accept it; and a whistleblower who accepts compensation under this section may not bring civil proceedings (including, but not limited to, proceedings before an employment tribunal) in respect of, or in reliance on, the mistreatment in respect of which the compensation is offered.
(5) The procedural provisions of this Act in relation to the imposition of a penalty under section 206 apply to an award of compensation under this section.””

[Lord McFall of Alcluith (Lab)]

My Lords, it is my pleasure to move Amendment 98 on behalf of my parliamentary banking standards colleagues, the noble Lords, Lord Lawson and Lord Turnbull. Essentially, the Parliamentary Commission on Banking Standards is saying that banks must put in place mechanisms for employees to raise concerns when they feel discomfort about products or practices, even where they are not making a specific allegation of wrongdoing. It is instructive to note that during the whole financial crisis, not one whistle was blown. Why was that? The issue of fear of damage to one’s career is central. Therefore, we must ensure that we have a system that rectifies those deficiencies.

One recommendation from the parliamentary commission is that a non-executive board member, preferably the chairman, should be given specific responsibility under the senior persons regime for the effective operation of the firm’s whistleblowing regime. We would like the Government to consider that. I am sure that the noble Lord, Lord Lawson, and I feel that that recommendation does not go far enough, particularly when one considers the situation in America. My noble friend Lord Brennan informed me earlier that under the Dodd-Frank Act, the SEC has an Office of the Whistleblower within individual companies. The United States is far ahead of us on that, and, if we do not allow the chairman to undertake this, we are ducking one of the main responsibilities that we want to give to the chairman, which is to accept individual accountability.

We were littered with examples of chairmen putting their hands up and saying, “Nothing to do with us. We didn’t know about the mis-selling scandals. We didn't know about the LIBOR scandal. We didn't know about the interest-rate scandals”, et cetera. If the system is to work properly, the chairman must be responsible. We consider that it is important that the chairman should be held personally accountable for protecting whistleblowers against detrimental treatment if we are to have a system that is worthy of the name in this area.

We recognise that whistleblowing reports should be subjected to an internal filter by the bank to identify those that should be treated as grievances. Banks should be given the opportunity to conduct and resolve their own investigations of substantial whistleblowing allegations.

The regulator should also have a part to play here. It should periodically examine a firm’s whistleblowing records in order both to inform itself about possible matters of concern and to ensure that firms are treating whistleblowers’ concerns appropriately.

The FSA’s evidence to the committee appeared to show little appreciation of the personal dilemma that whistleblowers face. It should regard it as its responsibility to support whistleblowers.

We also noted the regulator’s disquiet about the prospect of financially incentivising whistleblowing. As a commission, we call on the regulator to undertake research into the impact in the US of financial incentives in encouraging whistleblowing, exposing wrongdoing and promoting integrity and transparency. Two representatives of the SEC gave evidence at one of our hearings on how incentivising whistleblowing was going in the United States.

It is the financial sector that must undergo a significant shift in cultural attitudes towards whistleblowing, and change its view from one of distrust and hostility to a recognition that whistleblowing is an essential element of an effective compliance and audit regime.

We note that the Government did not reject our proposals, but do not propose to address them in the current legislation, instead placing the issue of whistleblowers in the context of a wider piece of work led by the Department for Business, Innovation and Skills. We feel that the FSA should be right at the centre of the issue. As a commission, we concluded that not only did internal compliance and formal control structures fail to uphold proper banking standards, but a culture of fear prevented employees from speaking out about serious wrongdoing.

There are a number of examples to which we could refer, but the FSA did its own investigation into Barclays at the time of LIBOR. In June 2012, it came out with its final notice in which it imposed a financial penalty of £59.5 million on that bank. Because,

“Barclays agreed to settle at an early stage … [it] … qualified for a 30% … discount under the FSA’s executive settlement procedures. Were it not for this discount, the FSA would have imposed a financial penalty of £85 million on Barclays”.

When we looked at the evidence that was presented to us on Barclays, we found that there were dozens of people in open trading desks for several years while this practice was going on. At UBS we found that there were up to 100 people who were there for a decade and that there was a clear e-mail trail on the issue. We could only conclude that if one is asked to do something wrong, there has to be whistleblowing so that the company can develop a better culture and better process to enable it to deal with it. We do not wish people to feel that their career will be threatened if they do whistleblow or, indeed, if they do not.

When we looked at the LIBOR situation at Barclays, we asked witnesses what this behaviour meant about the culture of Barclays and of the banking industry. As I mentioned, the final notice from the FSA painted a picture of a close-knit group of people who were colluding to try to manipulate LIBOR. For example, the following conversations were noted:

“Trader C requested low one month and three month US dollar LIBOR submissions”.

That was on 7 April 2006. Trader C was quoted as saying to his colleague:

“If it’s not too late, low 1m and 3m would be nice, but please feel free to say ‘no’ … Coffees will be coming your way either way, just to say thank you for your help in the past few weeks”.

Then the submitter replied:

“Done … for you big boy”.

In October 2006, an external trader stated in an e-mail to Trader G:

“If it comes in unchanged I’m a dead man”.

Trader G responded he would “have a chat”. Barclays’ submission on that day for three-month US dollar LIBOR was half a basis point lower than the day before, just as requested. The external trader thanked Trader G for Barclays’ LIBOR submission by saying:

“Dude. I owe you big time! Come over one day after work and I’m opening a bottle of Bollinger”.

Those are clear, open e-mails and no one can tell any of us, particularly the banking commission, that others in Barclays did not know what was going on with that situation. The noble Lord, Lord Turner, in one of the most understated comments, said that the actions over this period indicated a cultural weakness with Barclays. One might say: “You can say that again”. We read many submissions covering the direct exchanges. I will repeat just one more. Trader C said:

“The big day [has] arrived…My [New York desk] are screaming at me about an unchanged 3m libor. As always, any help wd be greatly appreciated. What do you think you’ll go for 3m?”.

The submitter said:

“I am going 90 altho 91 is what I should be posting”.

Trader C came back and said,

“when I retire and write a book about this business your name will be written in golden letters”.

The submitter, maybe with a little bit of common sense, replied:

“I would prefer this not be in any book!”.

Those comments are in e-mails—that is the trail. That is why we need whistleblowing. People were scared to give their point of view to those further up the management trail. Barclays is just a case study of all that has gone wrong with the culture. We on the commission are asking for disclosure of significant supervisory correspondence and matters considered. It would be helpful to know how many of these went to enforcement.

When I was investigating this in the last Parliament, I spoke to senior individuals in the FSA. They were very clear with me. They said that Barclays’ legal and compliance team were intimidated by Bob Diamond and others. They said that the senior legal and compliance team should be sacked because they knew about LIBOR and the capital raising for a long time. Not one legal or compliance officer at Barclays ever graced the door of the FSA to complain about that situation.

It happened down the line as well, particularly at the front-line, retail-desk level with PPI, with individuals being pressured in that regard. At a breakfast conference this morning, Martin Wheatley was very clear. He said that these individuals at the front-line level were trying to eke out a salary of £16,000 to £18,000 a year. They had been asked to sell PPI alongside loans and other products and would receive an extra couple of thousand pounds a year for doing so. At the top level, however, huge sums were involved. Distorted incentives led to a situation where, as a result of PPI mis-selling—deliberate mis-selling by companies—the banking industry could face a bill of £30 billion. Financial stability could be threatened as a result of these perverse incentives. The PPI scheme went on for 18 years. I suggest that if a rigorous, appropriate whistleblowing regime had been in place whereby individuals did not feel that whistleblowing would end their career, the PPI scandal could have been stopped well before that length of time had passed. As has been mentioned, a culture shift at the top in terms of accountability would help to increase confidence in this regard down the line. The chairman must be accountable and take responsibility in this area and must ensure that the whistleblowing regime works well.

Martin Wheatley said this morning that the Financial Services Authority had lost its focus on the moral compass and on being honest. Perhaps if we have an appropriate whistleblowing scheme we will start to reinject honesty into the system, to ensure a better culture and better ethics whereby individuals in a company feel free to serve the interests of the company and the customer and thereby help society.

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[Lord McFall of Alcluith]

My Lords, the Government’s response to every amendment is, “Manana, manana”. There is nothing in the response but, “Tomorrow, tomorrow”. There is, for example, a public consultation that we know nothing about. As noble Lords have said tonight, this is a very modest proposal. The Minister really has the wrong end of the stick here when he asks why we should protect whistleblowers in the financial services industry and what is different here from in the oil and gas industry. The Government themselves think that it is different. Why? Because they appointed the noble Lords, Lord Lawson and Lord Turnbull, and me to a Parliamentary Commission on Banking Standards, along with Members of the House of Commons. We spent a year of our lives—10,000 questions and 180 hours in committee—before presenting a report to the Government. That is why the financial services industry is different from others.

[Lord Newby]

My Lords, is the noble Lord seriously suggesting that whistleblowing in the financial services sector—we are talking about whistleblowing here—is of a different order of public interest from whistleblowing in, say, the pharmaceutical or oil industry?

[Lord McFall of Alcluith]

We have had the biggest financial crisis ever but not one whistleblower. That is the magnitude of the problem which the Minister does not grasp and that is why we looked at this issue. Goodness gracious, look at the fines: £85 million for Barclays and £13 billion for JP Morgan today. There is a litany we could go through, so what is the problem?

The Government set up a commission to look at culture and standards. What did the Parliamentary Commission on Banking Standards find? It found that the culture was rotten and the standards were abysmally low. This whistleblowing amendment—a modest amendment—is being put forward to ensure that we have a better culture, and that we have legal and compliance teams in companies that might have the nerve and confidence to go the FCA and say, “Look, there is wrongdoing in this company and we do not feel that we can assuage our conscience on this. We need to report it to the FCA to ensure that we have a better organisation here”. This has failed totally. That is the magnitude of the problem facing us and that is why we have this modest amendment.

The USA was mentioned. We had two witnesses before us from the USA who were very clear that we did not scrape the ground with the FSA. My noble friend Lord Brennan has given his wisdom on the situation in the USA tonight. We are asking the Government and the FCA to look at the experience in the USA to see if that aspect can be adapted. As the noble Lord, Lord Phillips, said, his charity did not have one person from the City. That backs up the evidence that we heard and gives the initiative to the FCA. That is the purpose of this amendment.

We received representations from trade unions in a sub-committee evidence session. The trade unions were very clear to us that their members at the grass-roots level felt pressurised but were scared stiff to do anything about it. I have a number of examples but will give the Minister one in particular. An individual I have known in my own town of Dumbarton for years, who worked in one of the banks for 25 years, left to become a care worker at less than half the salary. I asked her why she left. She said, “John, I was being forced every week to sell products that were not only unsuitable for people but were making their lives miserable. I could not partake in that, so I left”. There was someone who had been committed for 25 years being pressured on issues like that. Surely we should have a system to say “That person has given loyal service. That’s a person who wants to serve their bank and their community. Let’s establish an appropriate structure so that we protect that person, and also make the company better”.

I suggest to the Minister that there is a link between the almost £30 billion that we will be paying out in fines for PPI and the conduct of a company. If the proper procedure was in place and that information came up from the bottom, we probably would not have the abysmal situation we have with the £30 billion.

This amendment is about not just changing the culture and standards but helping the safety and soundness of companies. It was a responsibility given to us, the Parliamentary Commission on Banking Standards, by the Government to give recommendations to change the culture. This is a sound way of doing that and I would have expected a more sympathetic and engaging response from the Minister than we received tonight.

[Lord Phillips of Sudbury]

My Lords, I should quickly make clear that the whistleblowing charity, Public Concern at Work, is not mine; I was merely the lawyer who set it up. However, it does wonderful work. I am delighted to hear that there is a public consultation. I am very anxious indeed that it may not have reached the parts that it should have reached. I ask the Minister if it possible for him to look into that and, if necessary, extend the consultation period for, say, a month.

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[Lord Phillips of Sudbury]

I thank the noble Lord.

[Lord McFall of Alcluith]

My Lords, I will briefly speak in support of this amendment. My noble friend Lord Eatwell spoke of treating customers fairly. I remember, going back to 2002, when the FSA, bless its heart, introduced this to the industry. The FSA told me that it was a hugely uphill struggle. I well remember having a conversation with the chairman of one of the banks, who said to me, “Treating customers fairly? I don’t know what that FSA is up to, because I’ve always treated my customers fairly”. The gap between what the FSA was trying to do and the mentality of some people in the industry was huge. I remember being at a seminar with John Kay, who has written a great article in today’s Financial Times that I have already referred to. He said that a duty of care, if it was imposed on the banks, would be “transformational”. I think he said that for the following reason. There is today an imbalance between the customer and the bank—the term for that is symmetry of knowledge—which has led to many of the scandals.

Time after time on the parliamentary banking standards commission, when we ask chairmen and chief executives exactly why mis-selling occurred or why the grievous omissions took place in their organisation, they say that they did not know anything about it. There is, therefore, a hiatus between the top and below. One of the amusing aspects of my time as chair of the Treasury Committee was speaking informally to senior executives in the banks who came along to the Treasury Committee and said, “What you did to the chairman today was good because it allows us to educate him”—or her, although it is largely him—“about what is happening in the organisation”. A lot of them do not know what is happening. If we had this duty of care, that responsibility would lie at the very top.

During the deliberations of the parliamentary banking standards commission, I suggested that there should be an annual meeting between the chairmen and chief executives of these institutions, and the regulatory authorities, so that there was a sign-off on how they do their duty and how they serve the interests of their institution and their employees in the wider society. That information is not made public, but at least there is that accountability at the top between the regulator and the chief executive. At present, we do not have that. Having the duty of care would make those at the top much more alive to what is going on in their organisation. I have received evidence in the banking commission, particularly from the lawyers who were advising us, that the term “duty of care” has a specific legal meaning in the law of torts, and tests to establish whether a duty of care exists and whether it has been breached are a fundamental tenet of common law. In the context of banks and their customers, it is not clear what a duty of care would look like in practice. I know that there are huge legal hurdles to overcoming that, but there is a basic, common-sense and moral purpose to the concept of duty of care, and I think it is one that we will refer to again on Report.

I would like the Minister seriously to consider this amendment and ensure in some way or other that, as the Parliamentary Commission on Banking Standards stated in paragraph 416:

“Banks need to demonstrate that they are fulfilling a duty of care to their customers, embedded in their approach to designing products, providing understandable information to consumers and dealing with complaints”.

[Lord Brennan]

My Lords, perhaps I may take up the points raised by the noble Baroness, Lady Noakes. Paragraph (a) of the proposed new clause refers to a “fiduciary duty” by the ring-fenced body. In practical terms that means a duty exercised by, ultimately, the board of directors. The body acts through it. The practical consequences of such a duty, which does not involve enforceability by the regulators, are twofold. First, if the board of a bank breaches its fiduciary duty to customers in this way, it is perfectly reasonable for the shareholders to refuse to indemnify it in respect of any claims made by customers on the basis that it has breached a statutory duty, which could not conceivably be said to have been acting in the shareholders’ interests. That is the first practical consequence. It is a deterrent. Secondly, although I have not checked this yet, I suspect that in the field of commercial insurance you would not be able to get D&O insurance for protection in respect of a fiduciary duty until you have satisfied the insurability test of having acted reasonably and in accordance with commonly accepted standards of probity and good behaviour in the commercial sector. Therefore, the point is answered, I suspect, by practical consequences.

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[Lord Deighton]

It is clear that the essential contractual relationship still exists, regardless of the fine print. It is not clear what a duty of care would add to the existing contractual obligations or regulatory requirements to which the ring-fenced body is subject. The primary duty of a ring-fenced bank is to repay its borrowings, such as deposits, when they fall due, in accordance with the terms of its contracts. If a ring-fenced bank does that and complies with its regulatory obligations, such as those relating to ring-fencing or leverage, it is hard to see what a duty of care would do to make it care more for its customers, inside or outside the financial services industry.

Therefore, the Government firmly believe that it would be better to impose specific and focused requirements, and standards of business, on banks, than to rely on high-level, generic concepts such as a duty of care. Banks can comply more easily with specific requirements. Customers and regulators can more effectively hold to account the banks, and, if appropriate, their senior managers, when they do not comply. Moreover, if our ultimate objective is to improve the deal that customers get from their banks, one of the most effective and direct ways to achieve this is surely by enhancing competition. Banks must be spurred to treat their customers better by the threat of the customers voting with their feet. Through the introduction of the measures in this Bill, including the changes to the regulator’s objectives and powers, and the new payments regulator, we believe that a better deal can be achieved.

Imposing a duty of care or a fiduciary duty would not give banks or their senior managers a clear understanding of what conduct is expected of them. It would not provide a viable and effective means of holding banks to account, and it would not benefit consumers. Therefore, I hope that the noble Lord will agree to withdraw the amendment.

[Lord McFall of Alcluith]

On the duty of care, at the present moment if an individual opens a bank account, they get 170 pages of dense text to look through. No one is going to look through that. If a duty of care were imposed, does the Minister not think that banks would look at that again and perhaps fillet a lot of the information, so that the information that went to the customer would be readily understood?

[Lord Deighton]

I certainly agree with the noble Lord’s observation that sometimes the way in which business is done clearly is not in the interests of the customer. However, the Government do not believe that the duty of care is the right way to address those kinds of problems.

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[Lord Newby]

My Lords, it goes without saying that the Government are fully behind the objective of increasing competition in banking and making sure that customers who wish to switch banks can do so without impediment. The notion of portable account numbers was considered by the Independent Commission on Banking and in its final report the ICB chose to recommend a new account switching service over portable account numbers. It considered that such a service, if designed correctly, would provide the majority of the same benefits as portability, but with significantly reduced risk and cost.

The Government acted quickly on this recommendation to secure a commitment from the banking industry to deliver current account switching in two years. This was an ambitious timetable for such a big project, but the banks have met the challenge. The new current account switching service was launched on schedule in September and covers almost 100% of the current account market. It has been designed to meet all the ICB’s criteria for tackling customer concerns over switching and to give customers the confidence they need to make the banks improve their services by ensuring that their customers can vote with their feet.

However, it is important that the new system delivers on its promises. That is why the Government continue to engage closely with the Payments Council, which has delivered the service on behalf of the industry, on the progress of switching.

[Lord McFall of Alcluith]

The noble Lord mentioned the Parliamentary Commission on Banking Standards and talked about account portability. But that was not as firm a recommendation as he has suggested, because one of the questions we asked was: why can the banks not allocate an account number that works in the way that mobile telephone numbers do, so that people can swap them around in the same way? The banks replied that the IT costs would be too high, but a cursory examination—that is all we did—of the IT aspect indicated that there were legacy problems with the IT. As we have seen with the horrendous examples involving RBS and others, the IT system is in a very poor state. So now is the ideal time to raise our ambitions and ensure that we get for bank customers the portability that telephone customers have.

[Lord Newby]

My Lords, I did not mention the parliamentary commission; I was referring to the Independent Commission on Banking. None the less, I shall come to the substantive point that the noble Lord has just made.

As I was saying, to aid transparency we have asked the Payments Council to publish statistics regularly, including switching volumes on a monthly basis and more detailed statistics every quarter, which include data on awareness and confidence in the new service. The Government consider that making this information public is the best way to hold the current account switching service to account. As has been mentioned, the Payments Council has just published the first set of data, covering the four-week period following the switching service becoming fully operational. The numbers show that 89,000 switches were completed—an 11% increase on the 80,000 completed during the same period last year. I am a great fan of the Financial Times, but to describe a scheme that has been running for a month as a failure, when it has already got 9,000 extra people to switch, is clearly complete rubbish.

Account portability is a more complicated issue. I am not necessarily disagreeing with the noble Lord, Lord McFall, but the only way to make a properly informed assessment as to whether, or how, steps towards portable account numbers should be taken is to conduct a comprehensive analysis. I must say, almost in parenthesis, that I do not believe that the analogy with telephone numbers takes us as far as might appear at first sight. For a start, as an individual I am quite happy if lots of people know my telephone number —but I am very unhappy if anybody knows my bank account details. This means that I have a completely different view about how I want to deal with that account. That is one of a number of different reasons why this is a complicated issue. It is not, however, an issue that the Government have just pushed to one side. We have made a commitment to ask the new payment systems regulator to undertake the comprehensive analysis that is required.

There has not yet been a proper study of account portability in the UK, but it is clear that operating the payments systems alongside account portability would be one of the significant challenges. That is why we think that the payment systems regulator is the right body to carry out this work. It will have the appropriate expertise and will be able to give an independent view. To be clear, the payment systems regulator will have the powers described in subsection (2) of the proposed new clause. There would be no need to confer new powers on the regulator in order to implement the recommendations of a review. In order to get a complete picture of what benefits account portability could bring, the experience of the current account switching service will need to be fully considered. Therefore, the Government expect the success of the switching service to be firmly within the scope of the payment systems regulator’s view of portability. The switching service is new and the regulator is not yet established. In our view, the logical step is to let them both become properly established and bedded in and then have a proper and comprehensive analysis. On the basis of that, a decision can be taken.

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Moved by

[Lord McFall of Alcluith]

104B: Before Clause 16, insert the following new Clause—
“Restriction on disclosure of confidential information by FCA, PRA etc
In section 348 of FSMA 2000 (restriction on disclosure of confidential information by (FCA, PRA) etc), after subsection (4)(b) insert—“(c) it is made available, without imposing any requirement of confidentiality, to a consumer (as defined in section 425A), or to a person imitating a consumer, or to persons who include consumers;”.”

[Lord McFall of Alcluith]

My Lords, while many aspects of competition, culture and behaviour in the industry are addressed by the Financial Services (Banking Reform) Bill, these amendments focus on the lack of transparency and public disclosure of poor products, practices, individuals and institutions, which remains unaddressed. The focus of these amendments is to open up this aspect of transparency. The amendments would enable the FCA to publish the instructions it gives to firms when it finds that consumers have been unfairly treated. It would improve the accountability of the regulator and of the regulated firms.

Most people are agreed that the FSA was not a transparent regulator. Indeed, in 2009, when the Treasury Select Committee investigated the treatment of customers in mortgage arrears, it concluded that,

“the balance between disclosure to the public and the need to protect firms before they have been found guilty of wrongdoing may have tilted too far towards the interests of the industry”.

More importantly, Section 348 of FiSMA placed a blanket prohibition on the FSA publishing information received from firms without the firms’ permission. The question has to be asked: are any banks going to voluntarily agree to the publication of their poor practice? I would suggest that is highly unlikely.

I will give one example. In the case of PPI, HFC Bank was fined by the FSA in 2007 for mis-selling of PPI. It issued instructions about the steps the bank needed to take to contact customers and review its previous conduct. However, when consumer groups asked for full details of the instructions, the answer given was that the instructions issued by the FSA contained information from HFC and the FSA was therefore prohibited from disclosing them by Section 348 of FiSMA.

This amendment empowers the FCA to release the instructions given to firms. Genuinely confidential information still will be protected, but the regulator will no longer be able to use Section 348 as an excuse for not disclosing the instructions it gives to firms. There are safeguards for firms, requiring the regulator to consult firms on the notice it will issue and to take account of their representations. Indeed, when the managing director of supervision at that time, Jon Pain of the FSA, appeared before the Commons Treasury Committee in March 2010, he was asked if he would like to have the ability to publish names of firms to which the FSA has sent a warning notice on disciplinary process. He said that that process struck the right balance between transparency and process.

The FSA itself would like that facility to be looked at. Indeed, when the Parliamentary Commission on Banking Standards looked into it, we stated that:

“Amendment of Section 348 … is likely to be required to facilitate the publication of appropriate information about the quality of service and price transparency.”

The amendment argues that the definition of “confidential information” should be modified to exclude firm-specific results of mystery-shopping exercises and thematic work. That would prevent consumers being kept in the dark and ensure that firms are not able to get away with not treating their customers fairly without suffering any practical penalty.

The definition should also be modified to exclude price data for certain markets, such as annuities—a very hot topic at the moment—which would make it easier for consumers to shop around to get the best rate and spot when they are getting a bad deal. It would also assist consumer organisations in warning consumers about products to avoid.

Complaints data for individual firms should also be excluded, which would allow the FCA to react swiftly to emerging problems by disclosing specific information about individual product areas to consumers. The legacy of mis-selling which exists happened because of a lack of speed in telling consumers and ensuring that individual companies undertook the remedies which the then FSA asked them to undertake.

If the definition also excluded enforcement activity against firms, that would allow for greater regulatory transparency. That must include the FCA publishing information on the number of cases referred to enforcement, broken down by subject—including product and practice involved—and industry sector; the outcome of cases, including how many resulted in a fine, public censure or were dealt with informally; and the names of firms and individuals involved in cases.

As I said on an earlier amendment, the balance is tilted too much towards the industry. The asymmetry of knowledge is in the industry’s favour. This amendment would help redress that by improving transparency. I ask the Minister to consider the long-standing commitment that I have had to that.

[Lord Eatwell]

My Lords, my noble friend has made a very strong case. He needed to add one other element to persuade the Government, which is that this would enhance competition. If one improved information in this way, then, given the enhancement of consumer choice, the competitive objective of the Government would be better served. This would be a diminution of some of the severe problems of asymmetric information that distort competition in financial services, especially retail financial services. If it was developed with care it would be a considerable boost to the overall efficiency of retail financial services in this country.

It is very easy to say, “The time is not ripe; it is not really quite the time; there are unintended consequences”. All that is required is a consistent bias towards transparency. The Government should approach this issue by saying, “In principle, we are in favour of transparency”. The argument should be made for not being transparent. In other words, the strong case has to be made for not revealing something. The fundamental prejudice should be that this information should be transparent. Effective transmission of information is a key element in creating an efficient market and enhancing the competitive goal that the Government claim to be their own.

[Lord Newby]

My Lords, as the noble Lord, Lord McFall, pointed out, we debated this issue at great length during proceedings on the previous Financial Services Bill. Sections 348 and 349 of FiSMA govern the treatment of confidential information obtained by the regulators and the ability of the regulators to disclose such confidential information. The noble Lord argued at the time, and repeated today, that there was inadequate transparency and insufficient disclosure of information in the financial services regulatory regime. This led to the argument that Section 348 should be amended to make it as unrestricted as possible.

In response, the Treasury undertook a careful review of Section 348 and its associated provisions. The review concluded, first, that it would be difficult to amend Section 348 without negative consequences. Scaling back Section 348 would increase the risk that firms would become less willing to share information with the regulators, undermining those important relationships and the regulators’ ability to protect consumers. Secondly, even with Section 348 in place, the FCA could and should do more to increase transparency.

With that in mind, the Government decided at the time not to amend or delete Section 348 but agreed with the FSA, as it then was, for it to carry out a fundamental review of how transparency would be embedded in the new FCA regime. This was published as a consultation in April of this year and received positive feedback from consumer groups—that is, the very people the new or changed approach was intended to benefit. The review covered use of disclosure as a regulatory tool by the regulator, disclosure of information by firms, both voluntarily and as a result of FCA rules, and transparency on the part of the regulator.

In terms of publishing details of enforcement action, the FCA is already required to publish details and information about decisions and final notices that it considers appropriate. It can also publish the fact that a warning notice has been issued in respect of disciplinary action. In response to the recent PCBS recommendation that it should require firms to publish more information, the FCA has outlined its plans to issue a call for evidence next year on data that it should require firms to publish to help consumers better understand the firm and product quality.

I hope the noble Lord will agree that this is exactly what the PCBS was seeking to achieve and that it can be done without further amendment to Section 348.

[Lord McFall of Alcluith]

My Lords, again the Government’s response is a little timid. However, the hour is late. It is an appropriate time to say, “Mañana” and we will fight it another day.

Amendment 104B withdrawn.

--- Later in debate ---

[Lord Newby]

The noble Lord may or may not remember that at the start of today’s discussions the noble Lord, Lord Lawson, pointed out that the size of the Bill had expanded multiple times. I admit that part of this relates to the Government’s amendments on bail-in. However, every other amendment is in order to implement a recommendation of the PCBS. That is what we spent nearly all of last week discussing.

[Lord McFall of Alcluith]

There is a real communication problem here. I was at a meeting with the noble Lords, Lord Turnbull and Lord Lawson, and with Andrew Tyrie, and they all complained about the expansion of the Bill from 35 pages to 199. If the Minister, incredibly, is saying that this is to help the Parliamentary Commission on Banking Standards, perhaps the Government should start communicating with us on this, because we are dismayed by the number of pages in the Bill, not accepting of it.

[Lord Newby]

My Lords, I am sorry; with the exception of the bail-in provisions, the expansion of the size of the Bill is specifically in order to implement recommendations of the parliamentary commission, such as the senior managers regime, the criminal sanctions and the enhanced electrification power. The reason that the Government have not today accepted everything that the PCBS has recommended is that we have already accepted the majority of the commission’s recommendations and put them in the Bill. It is simply not the case that we have accepted no recommendations of the parliamentary commission—quite the opposite.

The final issue is specifically about the powers in this amendment. The powers can only be used to make consequential amendments—that is, those which are needed to deal with the provisions passed in the Bill. The example I gave was in relation to the senior persons regime, and I can reassure the noble Lord, Lord Brennan, that there is nothing sinister or unusual in what is being proposed. These powers are commonly taken in Bills which make significant changes to existing law. I am very happy for Treasury lawyers to set out in a letter the precedents that these powers exactly replicate. The hour is late, but I can assure the House that we are not doing anything here that is in the slightest way unusual.