Financial Services Bill

Lord Northbrook Excerpts

Tuesday 20th November 2012 Lords Chamber

[Lord Flight]

My Lords, Amendments 78A and 79A are supported by the Listing Authority Advisory Committee to the FSA, which is an external committee appointed by the FSA. The amendments have the objective of permitting the FCA going forward as the listing authority to have regard to the international character of capital markets and the desirability of maintaining the competitive position of the UK in international capital markets.

The advisory committee is concerned that without the amendment the FCA, when regulating, will not have the power to consider UK competitiveness in international capital markets and could in fact be challenged for doing so unless the issue is specifically covered. Under current legislation, the listing authority is separately set out in FiSMA, while most legislation under FiSMA is about the regulation of those conducting various forms of standard financial services businesses. The listing function is a very different role, though; it is about setting the rules for and regulating listed companies as the issuers of securities, both debt and equity, where issuers obviously have choices as to the markets in which they opt to access capital. Hong Kong in particular has become an even more important financial capital than London, which also faces great competition from New York.

At present, under Section 73 of FiSMA, the FSA is obliged to have regard to market competitiveness and the UK’s position in carrying out this function. These two amendments would leave the listings authority’s role and function substantially aligned with the rest of the FCA but would reflect the fact that this part of the FCA’s function is about regulating listed companies, not the financial services industry. It is different and should have competitiveness not as an objective but simply as a matter to which the FCA should have regard.

This may sound a slightly obscure point but the chairman of the Listing Authority Advisory Committee is concerned that unless this particular, slightly different responsibility of the FCA going forward is given at least the steer to have regard to international competitiveness, it will not be covered by the wider parts of the Bill requiring the FCA to have competitiveness as an objective. I hope that the Minister will be able to give comfort that the wider competitive objective covers the particular listing authority context of the FCA. If not, I hope the Government might consider this somewhat offbeat territory. I beg to move.

[Lord Northbrook]

I support my noble friend Lord Flight’s amendment. It is important that in this area the FCA should have regard to the international character of capital markets and the desirability of maintaining the competitive position of the United Kingdom.

[Lord Sassoon]

My Lords, Amendments 77A and 79A would reinstate an existing “have regard” that applies to the FSA in its capacity as UK listing authority as a “have regard” applying to the FCA’s listing work. This “have regard” is a requirement to take account of the international character of capital markets and of UK competitiveness. I can assure my noble friend that these amendments are not needed. As we discussed in Committee, the FCA and the PRA will be bound to have regard to the regulatory principle that any burden they impose should be proportionate to the benefits that flow from it. The proportionality principle will apply where a requirement would have an effect on UK competitiveness that would be a burden, and the same need to ensure that the burden was proportionate to the benefits would apply.

In addition, last week we debated and agreed to make an amendment to the Bill to add a new regulatory principle giving the regulators the duty to have regard to the desirability of sustainable UK economic growth. My noble friend was good enough to welcome that amendment, which I assure him will also encompass international competitiveness in the appropriate way in relation to listing as well as more generally. I think that that answers the direct question he posed to me. My noble friend refers to the London Stock Exchange and my understanding is that, although it was rightly concerned about the removal of the listing authority competitiveness “have regard”, it has welcomed the new regulatory principle. I hope therefore that my noble friend will agree to withdraw his amendment.