Financial Services Bill

Lord Teverson Excerpts

Wednesday 25th July 2012 Lords Chamber

The Treasury Select Committee recognised that the Government have shifted their position considerably during the development of the Bill, but it remained concerned that there would not be significant improvement over what it describes as “current inadequate practice” in the regulator. If the current regulator is inadequate in relation to the current regulatory structure, it would be doubly so in the context of the new powers and the new focus under the Bill. There are lots of ways of dealing with this problem, and the approach of my amendments is a very minimalist one of simply including costs and benefits in the annual report. The amendments are no more prescriptive than that. I am sure that my noble friend will say in a moment that there is no need for a statutory requirement because the new bodies will be encouraged to be mindful of regulatory burdens, but what is not stated in statute is often forgotten. That is why we need some more recognition of the issue in this Bill—probably going beyond my modest amendments.

[Lord Teverson]

My Lords, I shall speak to the amendments in my name and that of my noble friend Lady—

[Baroness Kramer]

Kramer.

[Lord Teverson]

My apologies to my noble friend Lady Kramer. I am thinking ahead and getting too far ahead in my own mind.

Amendments 144C, 144D, 144E, 147D and 147E refer to Schedule 3 and are very much in the area of the annual duties of the FCA and the PRA to make public their actions over the previous year. Apart from producing annual accounts, three methods of accountability are mentioned in Schedule 3. There is the annual report, which is the responsibility of both the FCA and the PRA; there is a public annual meeting for the conduct authority, but not for the PRA; and there is a consultation process for the PRA on the annual report that is followed by a further report by the PRA on that consultation. It seems to me that all three processes are not only admirable but essential for the full accountability of these important and key organisations both to the industry and the public.

My amendments would put the same responsibilities on both those organisations so that the FCA will also have a consultation process on its report, and a report on that, and the PRA would also have an annual public meeting. I note with interest the Minister’s remarks about one size not necessarily fitting both these organisations because they are very different. Clearly their responsibilities, actions and how they work are different but, in terms of their responsibilities to the broader industry and to the public, their responsibilities are very similar. That is why I think it is important that, as in my amendment, the Prudential Regulation Authority should have an annual public meeting. Again, the reasons seem to me to be pretty straightforward. Although the PRA has a relatively limited clientele compared with the FCA, its work, as we have seen through the financial crises of the past few years, is very relevant to the remainder of the financial services industry, customers of those institutions and to all taxpayers, who at the end of the day, if the regulators of those major institutions have been ineffective, carry the can for the cost of that regulation not working. For those reasons the very admirable process of annual accountability should be reflected in both organisations. On that basis I hope that the Minister will look favourably on these amendments.

[Lord Davies of Oldham]

My Lords, I have little to add to this debate. I will keep my remarks very brief, but they are remarks of some cheer. I never thought that I would from this Dispatch Box congratulate the noble Lord, Lord Flight, on an amendment, but I very much approve of his Amendment 130B, and the precision with which he spoke, as well as the noble Baroness, Lady Noakes, who has made such a contribution to our proceedings today.

--- Later in debate ---

[Lord Teverson]

My Lords, I understand that argument about the PRA and a public meeting, but it seems to me that all of us that are in public bodies, in politics or whatever, know that there is nothing that makes you feel more accountable than knowing that you have to face an audience face to face once a year and people can turn up and ask you live questions. That is why corporate annual general meetings are not perfect, but at least they can be effective in that way and be quite focusing for the board of that company, or, in this case the members of the prudential regulation authority. It seems to me that since prudential regulation is so important to the financial health of the country, it would be a good thing for that reason.

[Lord Sassoon]

I well understand my noble friend’s argument. It is, of course, far from the case that the PRA and the Bank of England will be able to hide from direct questioning of what they do because I am sure that they will be in front of the Treasury Committee much more frequently than annually, under the full spotlight of television cameras and so on. It is not like a normal corporate situation in which the board may be able to hide away from that sort of scrutiny except annually. There will be very regular public challenge, principally through the Treasury Committee, and I can only repeat that it would have been the simple, easy answer to just put both requirements on both the successor bodies, but I come back to the underlying point: we must remember that we are creating two bodies that have to be, in very many respects, different from what we have with the FSA at the moment. If it is merely shifting the chairs around, we need not be spending the many hours that we are spending over the Bill.