Draft Financial Services and Markets act 2000 (regulated activities) (amendment) (No. 3) order 2015 draft financial services and markets act 2000 (relevant authorised persons) Order 2015 draft financial services and markets act 2000 (Misconduct and appropriate regulator) order 2015

Richard Burgon Excerpts

Thursday 22nd October 2015 General Committees

[Richard Burgon (Leeds East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Nuttall, not least because this is my first appearance as a member of the shadow Treasury team in a Delegated Legislation Committee. I welcome this as my first opportunity to respond to the Economic Secretary, whom I thank for her detailed opening remarks.

My remarks will be brief on this occasion because we do not seek to divide the Committee today. The Economic Secretary and I will, in the time ahead, be debating the Bank of England and Financial Services Bill. Both sides of the House wish to see a dynamic and thriving financial services sector that supports our economy and the people of this country as whole, but we are concerned to see that the necessary regulation is in place to deliver a resilient sector on which the electorate can rely to deliver for all of us. These three orders amend the Financial Services and Markets Act 2000, which created the Financial Services Authority as a new single statutory regulator for the financial services sector.

Since the financial crisis of 2008, of course, numerous legislation on financial services regulation was initiated by the Labour Government but happily continued under the coalition and today’s Government, with the Bank of England and Financial Services Bill currently in the House of Lords. We have the Independent Commission on Banking and the Parliamentary Commission on Banking Standards to thank for much of the progress since 2008.

We are not opposing the orders, so I will not detain Members long, but I have a couple of brief questions for clarification on one order and a question about another order to make a broader point. First, on the draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 3) Order 2015—this is a simple question for clarification and to bring me up to speed—will the Minister confirm why pre-2004 mortgages are being regulated differently from post-2004 mortgages? Secondly, will she explain why bridging loans are being exempted from credit agreement regulations? I suspect that is because such loans are not held for very long, but I would appreciate her clarification. I am happy if she wishes to send that clarification to me in writing.

On a wider point, the Financial Services and Markets Act 2000 (Misconduct and Appropriate Regulator) Order 2015 extends the PRA’s oversight and approval of senior managers to UK branches of foreign banks and investment firms, as the Minister has explained. Essentially, that means that the PRA has to approve senior managers as fit and proper people to carry out their functions. Those senior managers will become subject to UK rules and regulations on conduct. The claim is that that helps to strengthen individual accountability in banks. The change was first proposed in the Chancellor’s 2014 Mansion House speech in the wake of the LIBOR scandal:

“Let us not wait for the next wave of scandals in financial markets to hit us before we respond…I am also extending the senior managers regime to cover all banks that operate in this country, including the branches of foreign banks.”

That move, set out more than a year ago, is undoubtedly welcome, but I suggest that the measure is a survivor of an approach in the post-crash period that was dominated by public concern about the risks in the financial sector and the lack of viable legal trial for individuals who may have caused the crash. The approach during that period, as demanded by public opinion, was to appear tough on the banks. The Bank of England and Financial Services Bill directly weakens the wider package for strengthening individual accountability in banks, of which this order forms a part.

I also note the points raised this week by the Bank’s Governor, Mr Mark Carney, at the Treasury Committee. He said that

“there may need to be some adjustments”

to existing regulation. We will keep an eye on any proposals that Mr Carney might advocate.

I reiterate that we fully welcome the proposals in the draft orders to extend the PRA’s oversight and approval of senior managers to those representing interests outside the UK. On the more general issue, I want reassurance from the Minister that the Government will not row back from necessary regulation of the financial sector, because appropriate regulation is absolutely essential to safeguard our economic future, and to help deliver the dynamic and thriving financial services sector that we wish to see to support our economy and the people of this country.