Financial Services and Markets Bill (Fifth sitting)

Debate between Stephen Hammond and Craig Tracey

Committee stage
Thursday 27th October 2022 Public Bill Committees

[Stephen Hammond]

It is a pleasure to see you in the Chair, Dame Maria, and to serve under your chairmanship. I would again guide the Committee to my entry in the Register of Members’ Financial Interests.

For many of us, chapter 3 of the Bill is hugely important because it looks at the accountability of regulators. As the Bill could hugely increase their powers, the themes that many of us explored during the evidence session—of transparency, accountability and proportionality—are fundamental. Clause 24 deals with the secondary objective. Regulation and regulatory culture are some of the biggest factors affecting the competitiveness and attractiveness of a jurisdiction.

This is not about a race to the bottom. Any jurisdiction that is not well respected and well regulated, with tough regulation and an independent regulator, will fail on the international stage. It is about ensuring the regulator’s accountability, particularly for the objective. We heard evidence from major City trade organisations last week, and Emma Reynolds from TheCityUK said to us:

“it is important that the regulators are not marking their own homework”––[Official Report, Financial Services and Markets Public Bill Committee, 19 October 2022; c. 18, Q28.]

Charlotte Clark from the Association of British Insurers made a similar point.

It is clear that there is a track record, but we must make sure that the regulators stay on track and are held to their duty regarding the new secondary objective. Amendments 46 and 47, which are fairly simple, would change “facilitating” to “promoting”. Facilitating almost implies letting something happen, perhaps through disregard. There should be active promotion of the secondary objective to remain internationally competitive. Internationally, we would not be alone in taking such action. The Swiss Financial Market Supervisory Authority is required to take particular account of the effect that regulation has on competition, innovation and the international competitiveness of Switzerland. There is a very similar objective for the Monetary Authority of Singapore, and no one anywhere will suggest that those are not well regulated, competitive international markets.

London trade bodies, such as the London Market Group, suggest that in the UK, some regulatory costs are up to 14 times what they are in other places around the world. When we look at the one-size-fits-all approach sometimes taken by the Financial Conduct Authority, it is clear that a distinction needs to be drawn. If we are not careful, the objective could be subsumed in others and forgotten. If we want London to be the global financial centre, we should have regard to the secondary objective. I want the Bill to set out more clearly regulators’ accountability for this objective, the intention, and regulators’ role regarding the objective.

[Craig Tracey (North Warwickshire) (Con)]

As ever, it is a pleasure to serve under your chairmanship, Dame Maria. I refer to my interest, which I declared at the start of Committee proceedings. I welcome the Bill, and particularly clause 24 because of its competitiveness duty, for which I have campaigned for quite some time. I would prefer it to be a primary objective, and perhaps the Minister will look into that, but if we keep it in its current form, then we have to go further for it to be meaningful. There must be proper metrics to ensure that the regulator follows up on it. For that reason, I support the amendments put forward by my hon. Friend the Member for Wimbledon.

In the evidence sessions, I was surprised to hear that the FCA was not aware of any other regulator that had a competitiveness duty. That is quite worrying. It seemed slightly detached from what our competitors are doing. We need to ensure that the FCA is pressed hard on this issue, and that there is a clear, stated objective for them to promote competitiveness in the industry. To be clear, this is not at all about lowering standards. The FCA said in its evidence that it considers jurisdictions such as Hong Kong, Japan, Singapore and Australia to be robust financial centres. They all have a competitiveness duty, so a duty of that kind can be beneficial.

Let me put this into context by giving the example of insurance-linked securities. The FCA created regulations regarding them, which Singapore then lifted—took and used. Because of Singapore’s competitiveness duty, we lost one firm midway through the process. In the same timeframe, 15 firms have been regulated there, against five in this country. The estimated loss is around $700 million. That is money out of our economy that could come our way with just this simple change.

There is a similar story on captives. We do not have any set up here. The reason cited is over-burdensome regulation. The industry agrees that there needs to be regulation, but it needs to be proportionate, and we need to ensure that it does not block investment in this country. I hope the Minister will consider the amendments and see what can be done to strengthen the measures.

Financial Services and Markets Bill (First sitting)

Debate between Stephen Hammond and Craig Tracey

Committee stage
Wednesday 19th October 2022 Public Bill Committees

[Stephen Hammond (Wimbledon) (Con)]

I guide the Committee and witnesses to my entry in the Register of Members’ Financial Interests.

[Craig Tracey (North Warwickshire) (Con)]

I chair the insurance and financial services all-party parliamentary group and am a former insurance broker.