Financial Conduct Authority Redress Scheme

Debate between Mark Garnier and Bob Stewart

Thursday 4th December 2014 Commons Chamber

[Mark Garnier (Wyre Forest) (Con)]

It is a great pleasure to follow my hon. Friend the Member for Beckenham (Bob Stewart). I should like to add my congratulations to my hon. Friend the Member for Aberconwy (Guto Bebb) on securing the third of these debates. This is turning into a running series, although I hope that we shall not need a further debate on this matter in the next Parliament because we will have resolved the issue by that time.

Great progress has been made as a result of the huge amount of work that my hon. Friend has done, and it should be recognised that, in many cases, the banks have stepped up to the plate to handle the problems that they have created. However, we have been left with a cohort of claimants who feel that they are not getting the redress they deserve, and I want to concentrate on them today.

When I consider the plight of those businesses that have been mis-sold interest rate hedging products, I have yet to find a victim for whom I do not have enormous sympathy. This appalling scandal has destroyed many people’s lives, including those of people who have not been directly affected. For example, people have found themselves out of a job when their employer went bust as a result of the scandal. Other people have been creditors who could not suffer the cash flow shortfall resulting from banks taking too long to make redress payments, especially consequential loss payments, to the businesses that owed them money.

The scandal’s implications go far beyond the victims who were mis-sold swaps, and it is therefore right that we should consider the regulator’s response. The response of the Financial Conduct Authority is incredibly important, not least because this is one of the first full-blown scandals to which it has had to respond. How the new regulator behaves over this scandal will set a precedent for how it behaves in the future and tell us whether it is fit for purpose.

I want to raise a couple of issues, given that the regulator has opted for a voluntary redress scheme. That in itself is probably not unreasonable, and it gives the banks an opportunity to show how they have changed their culture and responded to the chaos they have caused. However, this is a brand new way of responding to such a crisis, and it must be looked at very carefully. The briefing note that the FCA prepared for this debate states, in the frequently asked questions section, that the voluntary approach is different from previous redress schemes, citing speed in compensation. Speedy outcomes have not been achieved in all cases, however.

It is noteworthy that the regulator cites part of the Financial Services and Markets Act 2000 as a reason for not having to make public the arrangements between itself and the banks. Any new process needs to be fully transparent if there is to be confidence in that process. There is no confidence in this process, and the situation is fundamentally flawed.

[Bob Stewart]

How can anyone possibly think that there should not be full transparency in this sort of activity? I do not understand how the FCA can justify not being transparent about all its dealings.

[Mark Garnier]

I am not sure that the FCA can justify it. The FCA is answerable to Parliament and to the Treasury Committee, and until such time as we can conduct a proper investigation into what it has been up to, how can anyone believe that this is a good system?

Financial Services Bill

Debate between Mark Garnier and Bob Stewart

Monday 23rd April 2012 Commons Chamber

[Bob Stewart (Beckenham) (Con)]

What happens when the FPC gets things wrong? How will it be held responsible for the decisions it makes?

[Mark Garnier]

I am grateful for my hon. Friend’s intervention, because that is exactly the point I am coming to. What is the accountability of the FPC? Ultimately, it has to come down, in some way, to the court of the Bank of England making an intervention to assess what is going on.

As we have discussed, the FPC will have far-reaching powers to intervene, some of which we may never know about. Some might be restricted to a 30-year rule, so we might hear about them in the future, although an awful lot may well be published. However, it is incredibly important that we look at what the Bank of England does to supervise. Currently, the court of the Bank of England is responsible for administrative matters, as we have heard—it is responsible for pay and rations. What we on the Treasury Committee want is the Bank to have a proper board—probably with a new name that reflects its updated role, although I do not think that will happen. We recommended that it should have a majority of external members who must have the relevant skills and experience, and the Treasury Committee wants the court of the Bank to be able to conduct—this is an important point—retrospective internal reviews of policy decisions of the Bank. The Bank’s response envisages limiting that to commissioning external reviews or conducting internal reviews only of the decision-making process of the Bank.

The creation of the FPC—on which my hon. Friend the Member for Beckenham (Bob Stewart) intervened on me—makes this governance issue incredibly important. As we have heard, the Monetary Policy Committee has just two tools: quantitative easing and interest rates, which it uses openly and publicly. We see detailed minutes of the meetings, followed up by evidence sessions by the Treasury Committee, which is also part of an incredibly important scrutiny process, which is fully transparent and very simple. However, as we have heard, the FPC has a large range of tools at its disposal, which means that it might not be able to give a full and open account to the Treasury Committee or publish entirely transparent minutes. Moreover, as I have said, it might be years before we know what intervention has been made. That is why we need an organisation that can intervene to look at what the FPC is doing and take on a strong governance responsibility.

That is why the court of the Bank of England needs to be able to look at the merits of the FPC’s policies and not just the method. The Bank’s board must not be restricted to finding out whether the wrong decisions were made but in the right way. That is why I would be incredibly grateful if the Minister gave serious consideration to new clause 1.