Financial Services and Markets Bill

Lord Vaux of Harrowden Excerpts

2nd reading
Tuesday 10th January 2023 Lords Chamber

[Lord Vaux of Harrowden (CB)]

My Lords, I first draw attention to my interest in the register as a shareholder of Fidelity National Information Services, which owns Worldpay. Like others, I generally support what this Bill is trying to achieve. There is much that is good here, but there are areas for improvement. It is a pleasure to follow the noble Lord, Lord Sharkey, who chaired the EU Financial Affairs Sub-committee of this House, which I sat on. In its last publication before it was wound up following Brexit, that sub-committee stated that

“Delegating more powers to the financial regulators will require increased parliamentary oversight of their activities”.


It suggested that

“This might require a change in the way that parliamentary committees are structured and an increase in resources to enable effective scrutiny”.


While the Bill gives strong rights of oversight and direction to the Treasury, it does very little to provide increased parliamentary oversight. Frankly, informing the Treasury Select Committee of consultations does not really cut the mustard, nor are the performance reporting requirements strong enough. Treasury oversight and parliamentary scrutiny are not the same thing. Our financial services industry is so important and its regulation so complex that I continue to believe that this House—possibly jointly—should create a committee specifically for this purpose and to provide the systematic scrutiny of the decisions, actions, policy-framing and impact of the financial services regulators and of HM Treasury. Financial services regulation is too big a topic to be a part of a wider committee such as our existing Industry and Regulators Committee; it needs dedicated coverage.

Importantly, the systematic scrutiny should be forward-looking. Historically, the regulators have tended to be too reactive after the event and have not done enough to identify future risks. Most of the financial scandals of recent years were foreseeable—indeed they were foreseen by some. I do not see anything in this Bill that will improve that.

I welcome the secondary objective to support growth and international competitiveness. Our financial services industry is such an important part of our economy that it must not be held back by overzealous regulation. It is not possible or even desirable to eliminate all risk. I do not understand, though, why the net-zero objective should not be given equal importance. It is welcome that the regulators should “have regard” to net zero, but I would be keen to hear from the Minister what the practical difference is between a secondary objective and a “have regard” requirement, and why net zero should not have equal billing to growth, given that the Government agree about its fundamental importance to our future. I do not believe that the two are incompatible.

I welcome the introduction of the sandbox rules, which should enable innovation. I have one question: when rules are disapplied for this purpose, who will be liable for any losses suffered if things go wrong? Consumers should not bear that risk.

I am pleased that crypto assets are at last being brought into the regulatory environment, although in a small way—only stablecoin when used as a means of payment. The Bill allows for further regulation in the future, which is welcome. But crypto has become the wild west, increasingly used by fraudsters both as a scam in itself and as a means of extracting value from other scams.

The Government’s stated objective is that activities having the same risk should have the same regulatory outcomes. Crypto is clearly of the highest risk, but it is almost entirely unregulated. That feels like a missed opportunity. When will we see crypto assets being properly regulated?

The Bill requires the PSR to consult and to regulate for the mandatory reimbursement of victims of APP scams which used faster payments. That is very welcome, but it is only a very minor step in addressing the huge and growing fraud epidemic to which the noble Lord, Lord Hunt, referred earlier. Why does it include only faster payments and not all forms of payment? Faster payments themselves are part of the problem, so where is the ability to slow down payments in certain circumstances? What about the sharing of the liability, preferably with all those who facilitate the crime, such as social media and telecoms companies, or at least the sharing of the liability between the victim’s bank and the bank which received and processed the money for the fraudster? Has the Minister read the recent report from the Fraud Act 2006 and Digital Fraud Committee, of which I am a member? When will we see real action from the Government to address fraud, not just consultation?

The inclusion of access to cash is welcome, but access to cash is meaningless if cash is not accepted. The main reason why businesses stop accepting cash is the closure of nearby bank branches where it can be deposited. I again agree with the noble Lord, Lord Hunt, that we need to find a solution to the closure of bank branches.

Overall, this is a necessary Bill, and I generally support it. However, there are areas where it could be usefully improved, and I hope the Government will be receptive to constructive suggestions during the next stages.