Financial Services and Markets Bill (First sitting)

Sally-Ann Hart Excerpts

Committee stage
Wednesday 19th October 2022 Public Bill Committees

[Shaun Bailey (West Bromwich West) (Con)]

I am chair of the all-party parliamentary group on financial resilience.

[Sally-Ann Hart (Hastings and Rye) (Con)]

My husband and two sons work in financial services.

[The Chair]

Anybody else? No.

We will now hear oral evidence from Sheldon Mills, interim executive director of strategy and competition at the Financial Conduct Authority; Sarah Pritchard, executive director of markets at the Financial Conduct Authority; and Victoria Saporta, executive director of prudential policy at the Prudential Regulation Authority. Before calling the first Member to ask a question, I remind all Members that questions should be limited to matters within the scope of the Bill and that we must stick to the timings in the programme order that the Committee agreed. For this panel, we have until 10.10 am. Will the witnesses please introduce themselves for the record?

Sarah Pritchard: I am Sarah Pritchard, the executive director of markets at the Financial Conduct Authority.

Sheldon Mills: I am Sheldon Mills, the executive director for consumers and competition at the Financial Conduct Authority.

Victoria Saporta: I am Vicky Saporta, the executive director of prudential policy at the Prudential Regulation Authority.

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[Peter Grant]

Q Are those comments made within the context that achieving a permanent change in net zero targets is not optional? It is absolutely necessary.

David Postings: The banking industry is 100% behind that transition, but the transition is the important point, not just greening the balance sheets of the firms.

Emma Reynolds: May I add to that? There is a huge commitment from financial services, and we also represent related professional services, in playing a part in enabling the transition to net zero. Financial services and financial regulators are an important part of a much broader picture, which is why green finance is actually led by the Department for Business, Energy and Industrial Strategy, not His Majesty’s Treasury. It is about not just the supply of green finance, but the demand for such products. If we have a transition to net zero, it has to be about every sector pursuing a transition. Financial services has a critical role to play, but that has to be done in tandem with the transition in other sectors too.

[Sally-Ann Hart]

Q Good morning. Looking at the culture in the regulatory system and the culture of the regulators, do you think our regulators need a culture change? For example, do they need more commercial experience? We are looking at rules. There is a need for speed. Speed is of the essence when trying to make decisions or make things happen. Is that something we need to focus on?

Emma Reynolds: I certainly think there is room for a more commercial mindset in the regulators. This is not just about regulation by the way; it is about operational efficiency. One of the things we have been working on is delays in authorisations for senior managers, which can slow things down. There are other authorisations as well. We are encouraging the regulators to have a more commercial mindset and to be aware of the businesses’ priorities. It is not just about regulation; it is about how efficient they are. If, for example, you want to bring in a senior manager to a bank or other institution in the UK and it takes you 18 months to 2 years, you could be doing that elsewhere, and that puts us at a competitive disadvantage. So, absolutely, we think that there is room for improvement in having a commercial mindset in the regulator.

[Sally-Ann Hart]

Q And more speed and less regulation.

Emma Reynolds: Proportionate regulation and—we have not got into the cost-benefit analysis panels—careful consideration of the benefits of regulation to make sure that the costs and burdens of regulation do not outweigh the benefit.

David Postings: I agree with Emma. To give a couple of examples, the cost-benefit analysis of the consumer duty had costs but no benefits—no financial benefits. The intent in the Bill to ensure that the FCA and FOS are aligned is really important as well, because it is very difficult for a financial services firm to operate in an environment where we are not clear what the rules are when it comes to interpretation down the line. That makes people cautious, which can add to financial exclusion. The point that Emma made about authorisations is also really valid: there are still significant businesses awaiting authorisation post Brexit from large foreign institutions.

[Sally-Ann Hart]

Q That causes serious hold-up and affects our economic growth.

Emma Reynolds: And our competitiveness. If that can be done more quickly in another jurisdiction, business might well go there to set up or expand.

David Postings: Fundamentally, what we want is a competitive UK. We are only a small island off the mainland of Europe, but we want to generate big tax revenues to support growth in the economy. Anything we can do to help that is vital. Good, strong regulation is a key aspect of that. A nimble, commercially minded set of regulators to set that stronger regulation is vital.

[Andrew Griffith]

Q We have a few minutes left. One perception is that this is about the City of London. Your members, I assume, hail from all parts of the UK, creating employment and wealth in Edinburgh, Glasgow and some of our other great cities. Will you expand on that a little for the Committee?

Emma Reynolds: Sure. We represent the financial and related professional services industry, which employs 2.2 million people, and two thirds are outside London, contrary the characterisation that financial services are mainly in the City of London. We are the biggest net exporting industry, and more than 40% of our exports come from outside London.

David Postings: Yes, we produce higher-paid jobs, and there are big concentrations in Glasgow, Belfast, the north-east, the north-west and down on the south coast. It is a thriving industry and one that we need to support and nurture.

[The Chair]

We have two minutes left. Any quick questions for a quick response?

[Sally-Ann Hart]

Q Very quickly, the hon. Member for Mitcham and Morden raised the issue of access to cash and the reduction in banking services. The Bill contains substantial provisions to safeguard access to cash and halt the decline in banking closures and free-to-use ATMs. Do they go far enough? Will the Bill work?

David Postings: Absolutely it will work. This is something that we have been working on. We kicked this off as an industry 18 months ago. I have worked with the Treasury, the FCA and the consumer groups for the past 18 months on this. The aim is to make sure that cash provision for the most vulnerable—indeed, for all of society—is protected. The Bill will absolutely do that—through cashback without purchase, ATMs that are free for consumers to use, post office counters and shared banking hubs. Twenty-five shared banking hubs have been announced so far, and that number will increase. All that will provide the right level of cash access going forward. The banks will be subject to LINK as a body to decide what goes where, based on detailed local analysis, and then there is an operating company that banks own, which will implement the solution.

[Sally-Ann Hart]

Q Is there anything you want to add, Ms Reynolds?

Emma Reynolds: No. I defer to David. UK Finance provided leadership in this area—that is where the expertise sits.

[The Chair]

Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions. I thank the witnesses on behalf of the Committee.

Examination of Witness

Chris Hemsley gave evidence.

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[Emma Hardy]

Q Do you support data-sharing agreements and things like that?

Chris Hemsley: Indeed. We have work under way to encourage and support that.

[Sally-Ann Hart]

Q PayPal Europe decided to exit accounts, including those of the Free Speech Union and the Daily Sceptic, and although PayPal reinstated the affected accounts, what happened raised concerns about the protection of freedom of speech in the UK. Are the regulators—you and the FCA—able to address the apparently unchecked ability of financial service operators, such as PayPal, to effect private economic sanctions and censorship in the UK through denial of service actions? Are legislative safeguards needed in the Bill, or in other relevant legislation?

Chris Hemsley: This is principally a matter for the FCA, so it might be best for me to follow up on it in writing, and potentially with the FCA.

[Sally-Ann Hart]

That would be good.

Chris Hemsley: The PSR’s powers allow us to make sure that people have fair access to payment systems. The access to a particular payment firm’s services would be something for the FCA. I am happy to take that away and make sure that the Committee has a reply.

[Sally-Ann Hart]

Q That would be helpful. Even though they are part of the temporary permissions regime, should operators such as PayPal be subject to the UK’s Financial Ombudsman Service, so that dissatisfied customers can seek redress?

Chris Hemsley: Again, that is more for the FCA, but I can offer you a general view. It is in everyone’s interests that the same risks and regulations apply to people carrying out payments business, including payment systems and payment firms. That is my general answer, but perhaps I could pick that up in correspondence, given that it falls principally to the FCA.

[Sally-Ann Hart]

That would be great; thank you. Maybe we can take that up with the FCA.

[The Chair]

Order. I am afraid that that brings us to the end of the allotted time for this panel. On behalf of the Committee, I thank our witness.

Examination of Witnesses

Charlotte Clark and Karen Northey gave evidence.