Financial Services and Markets Bill [HL]

Lord Tunnicliffe Excerpts

2nd reading
Monday 8th June 2026 Lords Chamber

[Lord Tunnicliffe (Lab)]

My Lords, for 14 years, I was the most junior opposition Treasury spokesman. A slight problem with that is I was occasionally—in fact, more than occasionally—the most senior opposition Treasury spokesman, largely because there was only one of me. Settling into being a Back-Bencher, I glanced at what was coming ahead and decided I had a duty to participate in this debate and learn. I have looked at the Bill and concluded it is what I am going to call “motherhood”. That is not to belittle it, but part by part by part, it attacks individual problems and proposes solutions. We will be very good at that; we will work at it; and we will, I hope, get a good result.

The only bits that hit my eyes were Clauses 39 and 40 on ring-fencing. The global financial crisis in 2008-09 was right at the beginning of my career as an ill-informed Front-Bencher. I have been through virtually all the Bills—I think only the noble Baroness and I have been there so consistently, although there was of course also the noble Baroness, Lady Kramer. We had the global financial crisis in 2008-09, and we really must remember that. It has been mentioned that there will be another one; we do not know what it is, but we should think about how we are prepared for it. I could not agree more with that.

In the 2008-09 financial crisis, the world teetered on the edge of financial chaos. It was solved by a lot of people, but I am particularly proud of Alistair Darling and Gordon Brown for what they did in those weeks when we really did not know what would happen next. After the crisis, we created the Independent Commission on Banking, the Vickers commission, which reported in September 2011 and proposed ring-fencing. I must say that the consensus view on our side was of a good report, a good commission and great people, and the output produced general approval, including from me.

In anticipation of this debate, and looking at ring-fencing as the most significant point that it would touch on, I decided to read a few reports. I read the Ring-fencing and Proprietary Trading Independent Review by Keith Skeoch. It is a fascinating document, which was published in March 2022. The Treasury produced A Smarter Ring-fencing Regime in November 2024 and Safeguarding Stability, Enabling Growth in May 2026. I am afraid I concluded that the ring-fencing regime was doing little good and, in many parts, harm. It has been overtaken in the area of protection by The Bank of England’s Approach to Resolution, of October 2017.

I became fascinated by this resolution stuff—funny things happen to you in old age—and managed to get somebody in the Bank of England, the official who is in charge of resolution, to give me a series of seminars on the telephone. He was a bit suspicious, so he said he had to have his solicitor with him throughout the conversation. I feel I understood it, and I think the claim made in some of these reports is this: all the good that ring-fencing produces is covered by the resolution regime, but the resolution regime, at the end of the day, takes years in preparation, as various banks are persuaded to take particular actions to make them more robust in a crisis. But it actually happens in about 60 hours over a weekend. It is a very elegant process, and they have enormous powers.

I feel that there is a strong case for a relook at ring-fencing, recognising that the resolution regime gives all the protection. We must not lose sight of what we were trying to do. We were trying to avoid the “too large to fail” dilemma. The resolution regime does that. It does not do it for just ring-fenced banks; it does it for all banks. It achieves almost certainly the minimum cost to the public purse—normally, no cost to the public purse. It prevents systemic impacts.

The reason I am making this so short is because the only Bill that goes into the details last about 40 minutes and I did not think this was the time of night to start on it. I simply say that I hope I will be able to find a way, I hope even some support, to produce amendments to the Bill so that we have a proper discussion that looks at whether ring-fencing is still fit for purpose and the extent to which the resolution regime can take over much of its work. The rest of its work, if any, can be distributed within the regime. We can take away the detailed problems that are all over the place in its application, which is a negative to the system, and remove the fact that there are two regulators, which is always a bad thing, especially when one is going to take over at the last minute, as the Bank of England has the power to do in the resolution regime.

Financial Services and Markets Bill [HL]

Lord Tunnicliffe Excerpts

Committee stage
Wednesday 8th July 2026 Grand Committee

I shall say one final thing before I finish that I hope we will all agree on. The papers from this document make it sound like the finance industry and the City of London are synonymous, except for what looks like a late edit, which tells the reader that the many references to the City of London mean other places, too. Perhaps in the new spirit of devolution, all parties could note that two-thirds of employment in finance is outside London. It is in Edinburgh, Glasgow, Manchester and Leeds. It is everywhere—the cash point, the local bank manager or the call centre. When we think and publish about the purpose of the industry, we need also to think and acknowledge that it is based in the whole of the country and that it is there to serve the whole country.

[Lord Tunnicliffe (Lab)]

I rise to speak to the Motion that Clause 40 does not stand part. As I explained at Second Reading, I have no professional knowledge of the banking industry but, because of circumstances, for more than 14 years I have been in this Room talking about the finance industry and doing my best to pretend to understand at least bits of it.

The one thing that I think I bring to this Bill is my long experience of concern about problems of little likelihood, even small likelihood, but with catastrophic results if the risks mature. It is on that theme that I am concerned that we are creating risks. In 2008 we had the crisis. It is now 18 years ago, just long enough for most people to have forgotten it. We had the Vickers review, which we all felt was pretty good, and after that came ring-fencing, and we convinced ourselves that this would solve most of the problems. There were some other things as well. There was the splendid clause that vested criminal responsibility on the boss of a subordinate who committed some criminal offence. Clearly this was too uncomfortable for the City, so it was changed. I led the opposition to the change and failed with a 200-vote tie. Because we were the Opposition not the Government, we failed.

The preparation for my consideration of this ring-fencing issue caused me to read through a lot of stuff. I came to the conclusion that the ring-fencing was not nearly as effective as we had felt it would be at the time, but, in a sense, I was reluctant to be overly concerned about it because I felt that the resolution regime developed by the Bank of England, in which I had personally taken a great interest, would be good enough to pick up the holes in the Bill.

I was comfortable in this position—almost willing to ignore it—until, at Second Reading, the noble Baroness, Lady Kramer, for whom I have immense regard, rather woke me up. I quote her speech:

“Picking up on the point made by the noble Lord, Lord Tunnicliffe—I disagree with him completely—that in the case of resolution, we do not need ring-fencing because we have a resolution regime in place or we can weaken the one because the other exists. Will the Minister be able to look me in the eye and say that he would activate a bail-in bond scheme if a big bank failed? The consequence would be huge financial instability among those who held those bail-in bonds—I am talking about the insurance companies and pension funds. Many would be on the verge of collapse if we ever exercised bailing in those bonds. That is one of the reasons why, in the financial crises that have happened, no Government have ever taken that step”.—[Official Report, 8/6/26; col. 1206.]


I do not have the weight of knowledge to be able to disregard such a statement.

The Minister was kind enough to facilitate a visit to the Treasury and the Bank of England to take me through the bail-in regime. It took four people from the Treasury and four from the Bank of England to try to persuade me that it was in good hands. I came out of that uncomfortable. If one is uncomfortable about a potential catastrophe, one feels that one has to pursue it, I am afraid.

Then one comes up against the mechanisms of legislation; here, I have to give notice of my concerns. If we are going to remove or take away activity from the ring-fencing solution and replace it with the resolution regime, it is important that that is tested much more intrusively than is proposed. I hope to persuade the Minister that, between now and Report, some mechanisms that are convincing to like-minded, fair-minded people have to be put together so that that balance will be achieved.

I was responsible for all sorts of safety, but particularly in the railway industry. You would not be able to do this in the railway industry. If you make a change that is of critical importance, there is a set procedure that must be gone through, and it must be signed off at the highest level. We should recognise that Clause 40 is of that magnitude. It just so happens that, in yesterday’s Times, there was an article that said:

“The Bank of England is planning to loosen rules it brought in to make the financial system safer after the 2008 crisis despite worries about the proposed changes voiced by some of its own officials … The central bank’s financial policy committee announced on Tuesday that it intended to revamp some regulations on the loss-absorbing capital that lenders must hold because it wanted to tackle the ‘unintended consequences’ of its rules and make it easier for banks to lend to households and businesses … Andrew Bailey, the Bank’s governor, insisted the overhaul would ‘make our capital regime more effective, proportionate and better calibrated to the risks in today’s financial system without unduly compromising the safety and soundness of firms’”.


“Without unduly compromising” is not nearly a powerful enough test. The limited test is that the risk should be lowered—as low as reasonably practicable.

We have all sorts of problems in this world, and all sorts of unprecedented things are happening. We have cryptocurrency. Now, I do not understand cryptocurrency; it seems a series of charades to me, but I suppose the purist would also point out that the dollar is a series of charades, because that is the essence of paper money. Nevertheless, things that can go and down up like that are fundamentally dangerous, given how large they are becoming in the banking world.

We also have the unregulated banking area. Without knowing the detail, but from listening to people who know about it talk about it, that seems to be an increasing threat. We also have wars all over the place. If we are moving to a regime where we give up ring-fencing, depending on resolution, we will need to subject it to a stronger set of tests through the processes of this legislation.

[Lord Massey of Hampstead (Con)]

I support Amendment 160A. I want to start by briefly addressing a couple of issues raised by the noble Lord, Lord Pitt-Watson. Most importantly, I want briefly to quote the conclusions of the Skeoch report. The panel judges that the ring-fence

“is worth retaining at present”

but adds a number of considerations:

“The Panel recognises that the regime’s benefit will likely diminish with time, especially as the resolution regime—designed to ensure the continuation of all critical functions … —is embedded. This is because … UK authorities become comfortable with the viability of the large banking groups’ restructuring capabilities”.


I mention this only because the impression was given—