Financial Services and Markets Bill [Lords]

Nusrat Ghani Excerpts

Tuesday 10th November 2026 Commons Chamber

[John Healey]

I think I can do better than answer about my instinct on the scope for that. I would point the right hon. Gentleman to the measures in the Bill. I would also point him to my exchange of letters with the Governor of the Bank of England about capital requirements and the expectation to see material change, bearing in mind the importance of the internationally competitive position of UK banks. He will know that the Bank is undertaking its own review of this area at the moment, and I hope we will get the results and any consequent changes before too long.

Finally, I have spoken about the importance of maintaining the UK’s pre-eminent position as a global financial centre. That requires maintaining the very highest standards in tackling illicit finance. We have in the UK a strong set of anti-money laundering rules, but the supervision of compliance with those rules is currently fragmented and inconsistent. Last year, the Government announced that the Financial Conduct Authority will take on responsibility for the anti-money laundering supervision of legal and accounting service providers, as well as trust and company service providers.

The Bill enables the FCA to take on those new responsibilities, meaning that we can reduce the number of bodies that have a role in anti-money laundering supervision from 25 to three. Additionally, as financial crime increasingly involves cryptoassets held outside the UK, the Bill will enable the Government to update existing cryptoasset recovery powers through secondary legislation. [Interruption.] Madam Deputy Speaker, you are encouraging me to conclude, so I will, but I hope you appreciate that I have taken a large number of interventions.

I believe there is a shared determination in this House to ensure that the UK remains the global location of choice for financial services firms to invest, innovate and grow. This Bill is a necessary step to strengthen that leading UK position on financial services: streamlining regulation and reducing the burden on businesses, supporting financial resilience through our credit unions, reforming consumer protection so that it is fit for this digital age, and raising levels of investment in our high-growth firms, all while maintaining our high standards of regulation and oversight. It is a Bill to generate good growth in every postcode and provide fresh hope for the future. I commend this Bill to the House.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the shadow Minister.

--- Later in debate ---

[Mark Garnier]

The hon. Gentleman raises a number of points. We are getting deep into the debate, but the very quick answer to his question is no, I cannot rule out getting rid of the ringfencing regime. It has already been made public that the policy of a future Conservative Government will be to do so. That is the debate we will be having in Committee, and I am sure the hon. Gentleman will be delighted to join us in Committee, where we can get into the debate in depth. It is great to see so many Members across the House putting themselves forward with their enthusiasm to get involved in the debate—my right hon. Friend the Member for Beverley and Holderness (Graham Stuart) will have found a friend.

My second point—of a number of points, although I am conscious that I am taking up a lot of time—is that we would like the Government to go further on bank capital requirements. UK banks, building societies and PRA-designated investment firms are required to maintain minimum levels of capital in proportion to their risk-weighted assets. That is to help ensure that firms remain resilient and to reduce the impact of failure. Clearly, no responsible Government would abolish capital requirements, but we need to question whether banks should be required to hold capital beyond what is genuinely needed for resilience. This is an important point.

We should acknowledge that the Bank of England has eased bank capital requirements in recent years, specifically at the end of 2025, when it revised down the benchmark for tier 1 capital from 14% of risk-weighted assets to 13%. However, it is worth remembering that the Parliamentary Commission on Banking Standards recommended 11%, so that benchmark is higher than we originally asked for. We believe that the current level is still too high. The most recent stress test carried out by the Bank of England found that

“all banks remained above their set capital minima at the low-point of the scenario. No individual bank was required to strengthen its capital position as a result of the test.”

From memory, it was a one-in-250-year event that the banks were being stress tested on. The system has to allow an element of risk—when I was on the banking commission, we made it very clear how important that was. We made it clear that it was okay for a bank to fail, but it was not okay for banks to bring down the entire system.

The important point is that there has to be an element of risk in the system, but that is not what has been delivered, meaning that the potential lending and financing capacity of our banking sector is significantly reduced—to the tune of about £450 billion each year, we reckon. That is an awful lot of money that is not going into the economy. UK Finance has advised me that each percentage point of the tier 1 capital stack potentially represents about £600 billion in liquidity, so 2% above the recommendation of the Parliamentary Commission on Banking Standards represents about £1.2 trillion. Leverage that up under the banks and we are potentially talking about £12 trillion that is not in circulation because of over-interpretation of the rules. But we do not want to get ahead of ourselves; we reckon that £450 billion is not in circulation because of that over-enthusiasm on the tier 1 stack. That is money that could be used more productively. It could be invested in our communities or in businesses, but it remains stuck on banks’ balance sheets.

While the Bill does not contain any specific measures dealing with bank capital requirements, we believe that it is a perfect opportunity to make the necessary changes—specifically, to reform the parameters within which the Financial Policy Committee and the PRA operate. As such, we will be putting forward changes in areas where we believe the Government may be encouraged to take some advice from the Opposition.

As we have heard, the Financial Ombudsman Service plays an incredibly important role in the UK financial services sector. It provides redress for consumers and small and medium-sized enterprises against FCA and PRA-regulated firms outside of the court system, and crucially, it provides a service that is low-cost and accessible for consumers. However, over the years, the FOS has gone beyond being a dispute resolution mechanism and has become a quasi-regulator. This is creating significant costs for firms, with research from TheCityUK suggesting that the cost of regulatory compliance across the financial sector now exceeds £34 billion. Importantly, firms are also being retrospectively penalised, despite having followed the law on the day of an occurrence that was subsequently deemed to be problematic.

The Bill makes some positive changes in this area, which we welcome. It narrows the fair and reasonable test so that there is no longer a presumption of guilt, and creates a 10-year complaint deadline. Those positive changes will help prevent the FOS from acting beyond its remit. However, again, we do not believe that they go far enough, and there are a number of issues that we will raise during our debates in Committee.

Madam Deputy Speaker, you will be pleased that this brings me to my final point.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Ah!

[Mark Garnier]

We are getting there. As I said at the beginning of my speech, the UK is a major financial centre with a rich history of innovation. We cannot afford to lose that reputation, so we must also be looking to the future. Digital assets will be a key part of that, as will the technologies that underpin them. We have been told time and again that the UK has no clear direction on digital assets, meaning that companies in the UK are being restricted from innovating, so we need to create a strategy that sends a clear signal to that industry. That is why the digital assets strategy in clause 50, which was introduced in the other place, is so important.

We tabled that amendment in the Lords for a few reasons. First, we want to send a clear message about where the UK is going; it is incredibly important that we define what the UK’s ambition is. Secondly, going back to the competitiveness point, other jurisdictions have these strategies. Thirdly, the significance of digital assets has not been identified in any recent Government strategy. Finally, the digital assets sector is incredibly diverse, beyond where the Government are currently looking—it is very innovative. For all of those reasons, we believe that the digital assets strategy and clause 50 are necessary, and that removing that clause from the Bill—if that is the Government intend to do—would send the wrong message to the sector.

Do not take our word for it; take the word of the organisations that support clause 50: the UK Cryptoasset Business Council, TheCityUK, Innovate Finance, the Payments Association, techUK, Global Digital Finance, the Crypto Council for Innovation, the International Digital Assets Counsel Association, CryptoUK and the Digital Money Association. All of those organisations know that

“Other jurisdictions are moving rapidly to attract digital-asset businesses, investment and talent.”

A clear strategy will help the UK to keep up with those other jurisdictions and demonstrate that we are embracing these new technologies. I know that the Economic Secretary to the Treasury feels passionately about this area of her brief, so I hope she will use her closing remarks—we will all be waiting in the Chamber until 10 o’clock to hear them—to reassure the industry and commit to retaining the digital assets strategy in the Bill.

To conclude, financial services and the related professional services are incredibly important to the UK. When they succeed, they help to empower our communities and unlock growth. The Economic Secretary to the Treasury understands that. She has a very good reputation in the City of London as being somebody who gets it, so I look forward to working with her over the next few weeks and months. I am sure we will have our disagreements, but where we do, it will be about the detail, not the overall direction of this Bill. I know we can remain focused on empowering the sector.

The financial services sector is also important to me personally. I spent the bulk of my working life—27 years—working in the City, and I know the amazing things it can do. Being the shadow Economic Secretary to the Treasury, I have seen at first hand that we still have so much potential across this great country of ours. If we get this Bill right, we can unlock even more. While the financial services sector may be at a crossroads, it is now time for us to get behind the sector, to shift into gear, to accelerate our efforts and to focus on the exciting journey ahead.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the Chair of the Treasury Committee.

--- Later in debate ---

[Several hon. Members rose—]

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. I call Gareth Thomas, after whom the speaking limit will drop down to six minutes.

--- Later in debate ---

[Dr Sam Rushworth (Bishop Auckland) (Lab)]

The Bill contains many good things that other Members have spoken to. The Chancellor pitched it as a Bill that will unlock investment for growth. If we want people to invest, we need them to have confidence. My right hon. Friend the Member for Hayes and Harlington (John McDonnell) and I did not collaborate on our speeches, but, as he pointed out, 36% of people surveyed by the FCA believe that financial firms are not honest. When the Bank of England asked people to sum up the finance industry in a word, the word that the British people picked was “corrupt”. The Financial Services Ombudsman is receiving 216,000 complaints a year, and it is easy to see why: £1 billion is now being lost every year in investment scams. The most notable example is London Capital & Finance, but there are others, including Blackmore Bond, Basset & Gold, Astute Capital and Godwin Capital.

The Bill addresses complex issues in which I claim no expertise, but I take a strong interest in them because they are of interest to the people I represent. I want to share the experience of ordinary people who have lost their savings to unregulated investment products. I myself lost a few thousand pounds to a scam. I set up a Facebook group years ago, and the first person who contacted me was a man from Manchester. He had worked as a binman throughout his career, getting up early in the morning, working in all weathers and saving for his pension. He took the lump sum of his pension and invested it in Astute Capital. He lost all of it.

I want to talk about what that looks like as a process. It begins with an ordinary person searching to compare high-interest savings accounts with banks. They put their contact details on the internet, and then they get unsolicited calls from people with posh accents offering them investment advice and suggesting that they put their money in an ISA. They have probably heard of ISAs, and they know it is a Government-approved and tax-incentivised way to save. The person will admit to them that they are not FCA-regulated, but they probably have not heard of the FCA and may not know what that means. They may also be told that their capital is at risk, but then that nice person with a posh voice explains to them, “I have to tell you that—it’s the legal bit—but let me explain to you why you’re actually okay. Everything you’re investing is fully asset-backed up to several times its value, and we spread the risk across multiple portfolios.”

The individual trusts, they invest and they wait three years. They look forward to getting their money back with the interest they were promised, but when that time comes—this happened to customers of Astute Capital—they get told, “We’re sorry; we can’t pay you. But if you just stick with us for another six months, it’s better than causing someone to whom we’ve lent your money to default.” So they wait another six months. Six months later, their bonds are forcibly converted into shares and they are told, “Don’t worry; soon enough you’ll be able to sell those shares, and your shares are worth more than what you invested”—except they are not, and eventually the company goes into administration.

And then what happens? The person loses everything. When they investigate it, they find that a director of Astute Capital was simultaneously a director of the firm to which their money was lent. As a director of both firms, he took away the security on the debt. An ordinary person would expect that, in such a situation, there is some sort of recompense. They would think it is illegal, but it is not. People are told that they are at fault because they should have known that they were investing in an unregulated company. I had a man say to me on the phone, “I can’t look my wife in the eye. I’ve lost everything that we’ve saved over all these years.”

What happens to the directors? What happened to Timothy John Smith, who was the director of two companies? According to Companies House, he is now at Axecap Ltd, another unregulated offshore broker with many warnings against its name not to invest. For me, the most troubling part of this is that these unregulated investment schemes are entirely legal or, if there has been illegal activity, there has been no investigation and nobody has ever been held accountable. That is why the public are in disbelief, because they expect the Government and laws to protect them. They do not think this unregulated space should be allowed.

When I was elected, I raised this issue with the Financial Conduct Authority. It told me that it needs a bigger mandate to regulate this space, which it has not been given. In my last 30 seconds, I ask that the Bill be amended to give a mandate to the FCA to have oversight of unregulated activity, to make directors personally liable, to require directors of unregulated investment companies to demonstrate that they have acted responsibly, to automatically bring unregulated mini-bonds within FCA supervision, and to create a general compensation scheme for the victims of unregulated investments.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call Noah Law to make the final Back-Bench contribution. Those who contributed earlier should make their way back to the Chamber.

[Noah Law (St Austell and Newquay) (Lab)]

I warmly welcome the Bill and its goal of creating a more transparent financial services sector that can continue to play a key role in creating growth and prosperity for the whole of the UK. I refer the House to my entry in the Register of Members’ Financial Interests.

Having spent a decade in investment banking and financial advisory work, I have some understanding of both the potential of our financial services and the reforms that they need. The proposed reforms to credit unions are extremely positive. By virtue of being owned by their members, credit unions are uniquely incentivised to put surplus profits into providing better services, rates and returns for their members—something that, as a Co-operative Member, I am delighted to support. I am delighted to support the efforts of my hon. Friend the Member for Peterborough (Andrew Pakes) in this space too.

The Bill will make it easier for credit unions to accept new members. It removes unnecessary administrative blocks and provides greater support, allowing more people to join credit unions, which are rooted in their communities and committed to delivering for them. Expanding access to credit unions also means access to more affordable lending, which gives those in the most dire financial circumstances access to credit at reasonable rates, instead of leaving them at the mercy of predatory lenders. Credit unions encourage saving, responsible borrowing, and investment in our communities and local economies. The reforms in this Bill will make accessing them easier than ever. As my hon. Friend the Member for Harrow West (Gareth Thomas) pointed out, we eagerly await the response to the review of fair access to banking and capital markets.

More widely, I am glad to see the industry support the aims of this Bill and the support for the better regulatory strategy, accountability, deadlines and the proposed improvements to the senior managers and certification regime. By requiring the FCA and the PRA to report annually on their efforts towards competitiveness and growth, we ensure that the Government, regulators and the industry pull together in one direction for the financial sustainability of our country.

Additionally, by improving the way in which regulators make decisions, we can improve the confidence of investors in our financial services. The reduction in the statutory period of authorisations and variations of permission from six to four months, and the period for incomplete applications being reduced from 12 to 10 months, ensures a smoother system for firms and leaves a lot less up in the air. Delays in regulatory decisions can be hugely costly for firms, and can even mean postponing fund launches and major investment decisions, and affect firms’ ability to grow, innovate and compete internationally. A simple regulatory system provides greater clarity for firms, better transparency for the public and the Treasury, and benefits us all. I welcome the Bill’s allowing the Treasury to introduce secondary legislation to amend specified determination periods, once again demonstrating the Government’s willingness to work closely with Britain’s most valuable and prosperous of industries.

I am very grateful to the Chancellor for his acknowledgment that we have asked the sector to do its bit to contribute to sound and prudent public finances— I would argue that that prudence, to quote the right hon. Member for Beverley and Holderness (Graham Stuart), who is no longer in this place, “dwarfs” short-term fiscal interventions—and it directly contributes to sound and prudent finances in an otherwise globally turbulent macroeconomic environment, after the public did their bit to safeguard the sector through its most challenging of times. Consequently, we in this House must also give due care and attention to this incredibly valuable sector. I do believe that the Chancellor has shown that, even when those difficult decisions have to be made, this need not be a zero-sum game.

I would like to think this Bill can be just one of many stepping stones as part of an ongoing effort throughout this Parliament to ensure a healthy level of risk taking in this most expert of financial markets that we have in the UK. In that regard, I welcome the targeted reviews of ringfencing requirements alongside the Bank of England’s own review of capital requirements to promote thriving banking and capital markets—public, private and, of course, mutual.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the shadow Minister.