Financial Services and Markets Bill (Seventh sitting)

Tulip Siddiq Excerpts

Committee stage
Tuesday 1st November 2022 Public Bill Committees

[The Economic Secretary to the Treasury (Andrew Griffith)]

Good morning, Mr Sharma. It is a pleasure to serve under your chairmanship.

If it pleases the Committee, I would like to draw the Committee’s attention to a letter that I have written to you, Mr Sharma, and to the interim Chair of the Treasury Committee. I had previously undertaken that it was my intention to table for the consideration of the Committee some draft wording on a public interest intervention power. As a result of the new Prime Minister wishing to understand what is an important matter in more detail, such that consideration can be given to points that have been made and to whether the proposed wording is the right wording, I regret that it will not be possible for us to table a proposal at this stage. There will be further consideration of the matter on Report and at other stages, and my commitment to write to the Treasury Committee, as well as to members of this Committee, as soon as we have draft wording for Members’ consideration, stands. I give that commitment to the hon. Member for Hampstead and Kilburn as well.

The clause introduces schedule 7, which sets out corresponding or similar provisions to those introduced for the Financial Conduct Authority and the Prudential Regulation Authority in chapter 3 of the Bill, relating to the accountability of the payment systems regulator. As the Committee is aware, the Bill repeals retained EU law pertaining to financial services. That means that the regulators, including the Payment Systems Regulator, will generally be responsible for setting the direct regulatory requirements for supervised entities where those were previously contained in retained EU law.

As the Committee has already discussed in some detail, it is important that that increase in responsibility for the regulators is balanced with clear accountability, appropriate democratic input and transparent oversight. It is also important that the accountability measures are applied consistently across the regulators. Schedule 7 therefore makes provisions corresponding or similar to those in chapter 3 in a way that is relevant to and appropriate for the PSR.

The accountability provisions are applied to the PSR by amending the Financial Services (Banking Reform) Act 2013, which is the domestic legislation governing the PSR. The key distinction is that because the PSR makes rules via powers of direction, as opposed to having the rulebook like the FCA, the accountability requirements on rule making apply where the PSR imposes a generally applicable requirement. Those are the PSR’s equivalent for rule making. Overall, the provisions in the schedule apply the accountability measures in a relevant and appropriate way to the PSR’s legislative framework and regulatory remit. This will ensure consistency in the application of the accountability provisions across the financial services regulators.

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I have just one question for the Minister. How does he foresee the Payment Systems Regulator’s new sustainable growth principles taking account of the UK’s net zero emissions target? How will that balance work in practice? Will the regulator be required to report against its performance?

[Andrew Griffith]

In substance, the Payment Systems Regulator, in the same way as the FCA, the Bank and the PRA, will have the target as one of its principles. It will be for the PSR to decide how it reports against that. These are ultimately decisions for the regulators themselves to put into practice. To the extent that I have more information at this stage, I will write to the hon. Lady with any clarity I can provide.

Question put and agreed to.

Clause 46 accordingly ordered to stand part of the Bill.

Schedule 7 agreed to.

Clause 47

Cash access services

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[Tulip Siddiq]

I will speak to clause 47 and the various amendments tabled to it by my hon. Friend the Member for Mitcham and Morden and the hon. Member for Glenrothes, who cannot be here because of a personal commitment. I pay tribute to him and all the work he has done so far. While we sympathise with the principle behind amendments 41 and 42, we believe that the amendments tabled by my hon. Friend the Member for Mitcham and Morden would better achieve free cash access. Before I continue, I pay tribute to her for all her work on financial inclusion. She is not stopping her fight for justice, and she talked about this being a societal duty. She also has a ten-minute rule Bill that seeks to persuade the Government to give free internet access to children on free school meals. I pay tribute to her work.

We are delighted that after years of delay, the Government have brought forward some legislation to protect access to cash. The industry, particularly the major banks, should be applauded for coming together to help protect cash services at the end of last year, which put this legislation on a statutory footing. However, the delay in bringing forward the Bill has cut off whole sections of society from our economy, including millions of the most vulnerable, the poorest and older people, as my hon. Friend the Member for Mitcham and Morden pointed out. It has also damaged smaller businesses that rely on cash.

On top of this, almost 6,000 bank branches have closed since 2015 on this Government’s watch, and the Bill does nothing to protect essential face-to-face banking services, which the most vulnerable in our society depend on for financial advice and support. I know we are discussing new clauses 4 and 5 later, which will protect access to essential in-person banking services, so I will stay focused on cash for now, but I do not feel that we can have this debate without talking about face-to-face banking services, or the lack thereof.

It is inevitable that payment systems will continue to innovate, but a recent report from the RSA that I am sure the Minister is aware of found that 10 million people still depend on cash and that the pandemic, which saw an acceleration in the digitisation of payment systems, has made it increasingly difficult for many of us to pay for the goods and services we need—especially people from a lower socioeconomic background.

The Bill is a welcome step in guaranteeing access to cash, but clause 47 goes nowhere near far enough in ensuring that cash is available for those who depend on it. My hon. Friend the Member for Mitcham and Morden pointed out how so many people in her constituency—where I was born, I am proud to say—still rely on cash, especially free cash. The Bill makes no commitment to protect free access to cash. That is what we are worried about. That is why we support amendments 16, 17 and 18, as well as new clause 10, which were all tabled by my hon. Friend the Member for Mitcham and Morden. They would provide a guaranteed minimum provision of access to free cash.

Protecting free cash access has never been more important, as I am sure the Minister will agree. Data collected by the Post Office has shown that the use of cash in recent months has increased. As the cost of living crisis deepens, the poorest in society are increasingly turning to cash to manage their budgets on a week-by-week, often day-by-day basis. Data collected by the consumer group Which? found a notable decline in the provision of free-to-use ATMs in recent years.

In July 2022, there were around 12,000 fewer free-to-use ATMs in the UK than there were in August 2018. That is a decrease of nearly 24%. Does the Minister agree that forcing the poorest in society, who are increasingly reliant on cash, to pay for access to cash in the middle of the worst cost of living crisis on record risks further deepening financial exclusion in our country? Is this the kind of society we want to live in?

I am sure the Minister knows of Natalie Ceeney, chair of UK Finance’s Cash Action Group. During the Committee’s evidence session, she made it absolutely clear that the Government have a societal duty to ensure that the most vulnerable people in the UK have free access to cash.

Which? warned that if these clauses do not make it clear that they will protect free cash withdrawals and deposits, the entire objective of this part of the Bill will be undermined. Which? is right to stress the importance of free cash withdrawals and deposits. That is crucial to securing cash acceptance. There is little point in the most vulnerable having access to cash if they have nowhere to spend it. That is why Labour will support new clause 11, which would place a duty on the FCA to collect data on cash acceptance.

During her oral evidence, Natalie Ceeney also warned that we have to ensure that the Bill

“covers small businesses as well as consumers. Small businesses, typically…pay for their cash access.”––[Official Report, Financial Services and Markets Public Bill Committee, 19 October 2022; c. 51-52, Q101.]

Increasingly, small business owners also have to travel long distances to deposit. That is a dangerous disincentive for them to accept cash. Natalie Ceeney also pointed to Sweden, where shops have largely stopped taking cash. If the UK wants to avoid a similar outcome, we must ensure that small businesses can deposit cash easily. That is why we will push new clause 12 to a vote. It would guarantee minimum provision of free cash access services for small businesses.

The Minister is likely to respond that we must wait for the Government’s access to cash policy statement. If he does, will he confirm when that statement will be published? Does he not agree that, if the Government are truly committed to protecting free access to cash services, there is no reason not to make protections for free access explicit in the Bill?

[Andrew Griffith]

I will speak first to clause 47, before turning to the many amendments and new clauses proposed by hon. Members.

Although the transition towards digital payments brings many opportunities, the Government’s view is that cash remains an essential payment mechanism for many, particularly those in vulnerable groups. I am particularly familiar with the work of Age UK in this respect. Protecting access to cash for those who rely on it is a priority for the Government, and clause 47 delivers on that.

The hon. Member for Mitcham and Morden highlighted not just her own concerns about the issue but, rather thoughtfully, those of all hon. Members, to which I should add mine as well.

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[Tulip Siddiq]

Will the Minister give way?

[Andrew Griffith]

The hon. Lady is very good at anticipating what I would not say. Perhaps she is going to finish my sentence for me.

[Tulip Siddiq]

Well, we have certainly spent enough time together. “In due course” is very vague, as I am sure the Minister will agree. Can he not give us any sort of timeline? I have not had a straight answer to this question for a few months now—to be fair, I recognise that it was not him in that chair, but his predecessor.

[Andrew Griffith]

I am a big fan of taking one step at a time, and the step in front of us today is to pass clause 47 and put it on the statute book—to make that very significant advance in the statutory protection of access to cash. I look forward to continuing my tenure and engaging with the hon. Lady, and it seems appropriate for us to bring forward the policy statement very rapidly once Royal Assent has been achieved, taking this important topic step by step.

The hon. Member for Kingston upon Hull West and Hessle nodded vigorously at the obligations on the FCA to collect more data. I think that that is absolutely right. One challenge, as cash potentially diminishes over time, is to ensure that we nevertheless have the right and detailed datasets in order to continue to protect our constituents.

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[Siobhain McDonagh]

I rise to support my amendments 19, 20 and 21, which are grounded in transparency and evidence, requiring the Financial Conduct Authority to collect and publish relevant data related to access to cash. Examples include enabling public bodies to request a review of the local community’s access to cash needs or to publish how they intend to define and assess the reasonable nature and extent of provision when meeting a determination of access to cash; making provision for the publication of that assessment; and outlining steps to be taken by relevant parties to address such a deficiency.

Currently, under the voluntary agreements put in place by the Cash Action Group to preserve access to cash, individuals or community groups can request a review of their access to cash where they consider it to be inadequate. Where unmet needs are identified, LINK can recommend the installation of a new cash access point. I must say that it is doing precisely that in my constituency, in Pollards Hill, so I am grateful to LINK and the Cash Action Group for their progress.

The amendments call for a similar ability for individuals or communities to request a review of local cash provision, irrespective of whether baseline geographic distances set in the Treasury’s policy statement are met. I argue that that should be enshrined in the Bill to give consumers confidence that their concerns in their local areas will be considered by the regulator. Whether for transparency, fairness or consumer confidence, it is vital that the legislation compels the FCA to publish both the criteria that will apply when determining whether a cash access point is required in a community and the assessment of a local community’s access to cash.

I hope that chimes with commitments made by the hon. Member for Vale of Clwyd on Second Reading, when he argued that assessments of the needs of communities should be transparently published and that there should be a formal process of appeal. Surely such an appeal is impossible unless the data is collected, understood and available. I hope that this uncontroversial call will have the support of hon. Members as we seek to strengthen access to cash for communities and individuals up and down the country.

[Tulip Siddiq]

I shall speak to schedule 8 and amendments 19, 20 and 21 together. We recognise that the Bill sets out an important, overarching framework to protect access to cash. However, many critical elements, such as the baseline geographic distances that will apply to withdrawal and deposit facilities and which are factors that the FCA will take into account when assessing a local area’s needs with regard to access to cash, will be set out in a policy statement to be published by the Treasury. That makes it impossible for members of this Committee, more widely, Members of Parliament to judge whether the Government’s proposals will deliver an adequate level of free access to cash services. That is why the organisation Which? and others have called on the Government to assess the significant gap by setting out, in Committee, the details of the draft policy statement, which will determine the proposed baseline distances between cash facilities.

As my hon. Friend the Member for Mitcham and Morden has said, we also want the Government to set out how local deficiency of free cash access will be assessed by the regulator and how local people can request an FCA review of their communities’ access to cash needs. That is why we will be supporting amendments 19, 20 and 21 today. If the Conservative party does not lend its support to the amendments, will the Minister set out how he will ensure that Parliament has adequate opportunity to scrutinise the Government’s draft policy statement before the Bill leaves the House of Commons?

[Andrew Griffith]

I shall speak first to amendments 19, 20 and 21, before turning to schedule 8. Amendments 19 and 20 seek to introduce requirements on the FCA in relation to how it will determine reasonable provision of cash access services and how it will assess and address local deficiencies in provision. I am grateful to the hon. Member for Mitcham and Morden for raising that important issue, and I recognise the strength of feeling expressed by many in the debate on Second Reading and here this morning. I reassure the hon. Member that the Treasury has considered the matter carefully, and will continue to consider it through its approach to a policy statement.

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[Andrew Griffith]

In addition to ensuring reasonable provision of cash access services in the UK, it is vital that we have an effective, resilient and sustainable wholesale cash system to support continued access to cash.

The UK’s wholesale cash infrastructure is a system of cash centres that sort, store and distribute banknotes and coins. A decline in the transactional use of cash has put pressure on the business models of the existing wholesale cash networks. Over time, the industry is expected to transition to a smaller overall network.

Clause 48 and schedule 9 contain provisions to give new powers to the Bank of England to oversee the wholesale cash distribution industry by creating a two-level regime. First, it gives the Bank oversight over, and the ability to regulate, the market activities of the wholesale cash industry. That will ensure the effectiveness, sustainability, and resilience of the system. Secondly, it gives the Bank the ability to prudentially regulate a systemic entity in the market, should one form in the future, to manage risks to financial stability.

Schedule 9 enables the Treasury to make a wholesale cash oversight order, which specifies an entity as a recognised entity. That will set out whether an entity is recognised as having market significance only, or systemic significance. If a firm has market significance, it will be subject to the market oversight regime. If it is systemically significant, it will be subject to both the market oversight regime and the prudential regime.

The Treasury does not currently consider any entity to be systemic, but the provisions will ensure that the Treasury and the Bank can respond effectively to future changes in the market to manage risks to financial stability. It is expected that the industry will transition to a smaller overall network, potentially with fewer operators, in the coming years.

The powers given to the Bank under both parts include the ability to publish principles and codes of practice, gather information, give directions as required, make inspections and enforce the regime. Under the regime, the Bank can also collect fees, which must relate to a scale of fees approved by the Treasury. The Bank will seek to exercise its powers proportionately.

Schedule 9 also requires the Bank of England to prepare and publish a policy statement on its regulatory approach before exercising its powers under the legislation. The Bank will launch a consultation on that policy statement shortly. Once the regime is operational, the Bank is required to provide an annual report on the regime to the Treasury, which must be laid before Parliament.

In summary, clause 48 and schedule 9 are necessary to ensure that the wholesale cash industry remains effective, resilient and sustainable. The measures form part of the Government’s action to support the continued access to cash. I therefore recommend that clause 48 and schedule 9 stand part of the Bill.

[Tulip Siddiq]

We welcome clause 48, but I have two questions for the Minister. First, how will Parliament and industry be consulted on the scale of the fees placed on businesses by the Bank to cover the operation of the scheme, and on the penalties for non-compliance? Clause 48, as drafted, allows the Treasury to designate an entity as being subject to the Bank’s new prudential regimes for the wholesale cash industry, but how will the Government ensure that the Bank is adequately consulted on additions to the regime?

[Andrew Griffith]

The answer is that, in the normal way, the measures will be laid before Parliament. If there is any extra detail with which I can furnish the hon. Lady, I will write to her.

Question put and agreed to. 

Clause 48 accordingly ordered to stand part of the Bill. 

Schedule 9 agreed to.

Clause 49

Recognised bodies: senior managers and certification

Question proposed, That the clause stand part of the Bill.

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[Andrew Griffith]

The clause introduces schedule 11, which expands the existing resolution regime for central counterparties, or CCPs. CCPs provide clearing services for large volumes of financial trading activity and are systemically important pieces of market infrastructure.

Resolution is the framework for managing the failure of systemic financial institutions. It provides the Bank of England, the UK’s resolution authority, with the tools required to manage the failure of a financial firm safely. If a CCP got into difficulty and could not continue to provide its clearing services, there could be serious consequences for financial markets, affecting financial stability and potential risks to public funds

Although the UK has an existing resolution regime for CCPs, introduced in 2014, a fuller and stronger set of powers will enable the Bank to take faster and more extensive action than it can now. Schedule 11 will therefore expand the existing CCP resolution regime, providing the Bank with a comprehensive set of tools and powers to protect financial stability and limit contagion within the financial sector. That includes powers to remove impediments to resolvability in a CCP before it gets into any difficulties, and the ability for the Bank to put a CCP into resolution before the CCP’s own recovery measures have been exhausted, if continued recovery actions would be likely to compromise financial stability.

The schedule gives the Bank the powers needed to impose losses on the CCP and its clearing members in the first instance of the very unlikely event of failure, thereby protecting public funds. It also enables the Bank to take control of a failing CCP to stabilise the CCP and ensure the continuity of critical clearing functions while it is in resolution.

By expanding the existing regime we are also ensuring that our regime reflects international standards, as set out by the Financial Stability Board. That will cement the UK’s reputation as a global leader in providing clearing services and further enhance confidence in the UK’s financial system. The provisions therefore demonstrate the Government’s ongoing commitment to high standards and effective stewardship of the UK’s financial services sector, so I recommend that clause 50 and schedule 11 stand part of the Bill.

I also commend amendments 9 to 15 and 24 to 31. They are technical amendments that will ensure that schedule 11 functions as intended, reflecting the original policy intent by rectifying drafting errors and ensuring the legislation is applied consistently across the UK.

[Tulip Siddiq]

Because of the volume of trades cleared through CCPs, the failure of one could pose risks to the stability of the financial system. We therefore welcome clause 50 and the Government’s various technical amendments. Does the Minister agree that, because of the high risk to the financial system that a failed CCP could pose, the expanded regime must be brought in as a priority? How long after the Bill has passed will the provision become law and the regime be implemented?

[Andrew Griffith]

I agree with the hon. Lady that, given the systemic importance, it is important to bring the regime into place as quickly as possible. It will be for the Bank to consult on that. I expect the Bank to do that shortly after Royal Assent and then bring forward the necessary measures to put it in place. I hope that is enough for the hon. Lady at this time. We want to see the implementation proceed as quickly as possible.

Question put and agreed to.

Clause 50 accordingly ordered to stand part of the Bill.

Schedule 11

Central counterparties

Amendments made: 9, in schedule 11, page 205, line 21, leave out “9A” and insert “9B”.

This amendment corrects a cross-reference so that the provision refers to paragraph 9B of Schedule 17A to the Financial Services and Markets Act 2000, which is inserted by clause 10 of the Bill.

Amendment 24, in schedule 11, page 228, line 22, leave out sub-paragraph (1) and insert—

“(1) This paragraph applies where the Bank uses one or more of the stabilisation options mentioned in paragraph 1(3) in respect of a CCP unless the CCP has ceased to be subject to the exercise of any stabilisation power mentioned in paragraph 1(4).”

This amendment widens the scope of paragraph 39 of Schedule 11, on shadow directors etc, by ensuring that it applies following the exercise of any of the Bank’s stabilisation options under Schedule 11, not just the powers in paragraph 38.

Amendment 25, in schedule 11, page 228, line 28, leave out

“, or as a temporary manager under paragraph 6,”.

This amendment is consequential on Amendment 27 and omits the reference to temporary managers as they will be included in the list of relevant persons in paragraph 39(3) under Amendment 27.

Amendment 26, in schedule 11, page 228, line 38, at end insert—

“(e) the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19));

(b) the Company Directors Disqualification (Northern Ireland) Order 2002 (S.I. 2002/3150 (N.I. 4));”.

This amendment ensures that the list of relevant enactments in paragraph 39(3) of Schedule 11 includes the relevant Northern Ireland legislation so that the position regarding shadow directors is consistent across the UK.

Amendment 27, in schedule 11, page 228, line 41, at end insert “, and

(c) a temporary manager appointed under paragraph 6 of this Schedule.”

This amendment ensures that the list of relevant persons in paragraph 39(3) of Schedule 11 includes temporary managers, for consistency with the bank resolution regime.

Amendment 28, in schedule 11, page 255, line 43, after “EMIR” insert

“where they have a contractual relationship as principal with the CCP”.

This amendment operates on paragraph (d) of the definition of “relevant person”, to limit that group of persons entitled to compensation to those who are direct creditors of the CCP.

Amendment 10, in schedule 11, page 256, line 16, leave out “or 29(3)” and insert “, 29(3), 66(2) or 73(2)”.

This amendment provides that the definition of “residual CCP” applies to properties transferred under paragraphs 66(2) and 73(2) of Schedule 11 (transfers subsequent to resolution instrument and transfers subsequent to share transfer to bridge CCP).

Amendment 29, in schedule 11, page 257, line 43, at end insert—

“(5) An obligation imposed on the residual CCP or a group company under sub-paragraph (2)(d) or (e) continues to apply despite the residual CCP or group company entering insolvency, and may not be disclaimed by a liquidator under section 178(2) of the Insolvency Act 1986 or Article 152(1) of the Insolvency (Northern Ireland) Order 1989.”

This amendment provides an equivalent provision to section 64(6) of the Banking Act 2009 (continuity obligations relating to property transfers), to ensure that certain obligations continue to apply despite the residual CCP or group company entering insolvency.

Amendment 11, in schedule 11, page 259, line 25, leave out

“CCP whose business has been transferred”

and insert “transferred CCP”.

This amendment provides the correct terminology in relation to share transfers, to which this provision relates.

Amendment 12, in schedule 11, page 259, line 26, leave out “property” and insert “share”.

This amendment provides the correct terminology in relation to share transfers, to which this provision relates.

Amendment 30, in schedule 11, page 260, line 19, at end insert—

“(5) An obligation imposed on the transferred CCP or a former group company under sub-paragraph (2)(b) or (c) continues to apply despite the transferred CCP or former group company entering insolvency, and may not be disclaimed by a liquidator under section 178(2) of the Insolvency Act 1986 or Article 152(1) of the Insolvency (Northern Ireland) Order 1989.”

This amendment provides an equivalent provision to section 67(6) of the Banking Act 2009 (continuity obligations relating to share transfers), to ensure that certain obligations continue to apply despite the residual CCP or former group company entering insolvency.

Amendment 13, in schedule 11, page 267, line 2, leave out “or onward” and insert “, onward, bridge or subsequent”.

This amendment is consequential on Amendment 14.

Amendment 14, in schedule 11, page 267, line 3, after “50,” insert “52, 66,”.

This amendment adds to the list of instruments in paragraph 105(6) to include instruments made under paragraphs 52 (bridge CCP: share transfers) and 66 (property transfer subsequent to resolution instrument).

Amendment 15, in schedule 11, page 267, line 5, leave out “or onward” and insert “, onward, bridge or subsequent”.

This amendment is consequential on Amendment 14.

Amendment 31, in schedule 11, page 299, line 30, at end insert—

“(g) the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19));

(b) the Company Directors Disqualification (Northern Ireland) Order 2002 (S.I. 2002/3150 (N.I. 4)).”—(Andrew Griffith.)

This amendment ensures that the list of relevant enactments in paragraph 165(2) of Schedule 11 includes the relevant Northern Ireland legislation so that the relevant law can be applied consistently across the UK in the event of a resolution of a CCP.

Schedule 11, as amended, agreed to.

Clause 51

Insurers in financial difficulties

Question proposed, That the clause stand part of the Bill.

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[Andrew Griffith]

The clauses contain a mix of substantive and technical amendments to FSMA, which lists the functions and responsibilities of the FCA and the PRA and requires them to perform them in line with their statutory objectives and principles. Clause 52 adds to that list the responsibilities conferred on the PRA and FCA by the Bill and any functions conferred on them by future regulations made under the Bill.

On clause 53, currently, except in a few specific circumstances, the FCA and the PRA cannot use their disciplinary powers against firms that committed misconduct when they were authorised if they cease to be authorised. That means that if a firm has committed misconduct while authorised, and that comes to light only once the firm has ceased to be authorised, the regulators cannot take disciplinary action. It also means that when an authorised firm is under investigation for misconduct, the regulators must sometimes choose to maintain the firm’s authorisation to preserve the ability to sanction it following the conclusion of the investigation. To address that, the clause will enable the FCA and the PRA to take action against unauthorised firms in relation to misconduct that occurred while they were authorised.

Clause 54 enables the regulators to impose conditions on new controllers of financial services firms when to do so would advance their statutory objectives. That fills a gap in the regime identified by the PRA and the Treasury Committee in its Greensill inquiry. It will give the regulators more flexibility to manage changes of control in a way that they consider appropriate with reference to their statutory objectives.

Clause 55 makes two minor technical changes to the legal framework governing the Financial Services Compensation Scheme. The Office for National Statistics reclassified the FSCS as a public financial auxiliary in 2020. To reflect that change and bring the FSCS in line with other public financial auxiliaries, clause 55 removes both the requirement for the FSCS to have an accounting officer and the Treasury’s power to require certain information in connection with accounts.

Clauses 56 and 57 are necessary to reflect the regulators’ additional rule-making responsibilities when retained EU law is repealed. Under the comprehensive FSMA model of regulation that the Bill enables, the direct regulatory requirements that apply to firms will generally be in regulators’ rulebooks rather than set out in legislation.

Clause 56 inserts proposed new section 141B to FSMA, giving the Treasury the power to make consequential changes to legislation to reflect changes to regulator rules. At the moment, domestic and EU legislation sometimes makes reference to regulator rules; the power will ensure that the legislative framework remains up to date and consistent if those rules change. It is a consequential power only.

Clause 57 enables the Treasury and regulators to make ambulatory references to regulator rules and domestic legislation respectively. That means that when the Treasury references regulator rules in secondary legislation, it can do so in such a way that the references will automatically update to refer to the current version of the rules whenever the regulator updates them, thereby ensuring that the regulator rulebooks and the legislation will remain consistent over time, without the need for constant amendments in response to respective changes.

Clause 58 allows the Treasury to amend and repeal provisions in part 9C of FSMA that were introduced by the Financial Services Act 2021, which dealt with the immediate post-Brexit priorities for financial services, including by implementing the latest Basel standards, while the wider approach to regulation was considered as part of the Government’s future regulatory framework review.

Sections 143C and 143D of FSMA create duties for the FCA to establish the investment firm’s prudential regime, and section 143G requires the FCA to have regard to certain matters when making rules as part of that regime. Those provisions will be replaced by the general approach to obligations and “have regards” that the Bill introduces, which the Committee has already considered. Clause 58 enables those sections to be amended to avoid duplication.

Clause 59 introduces small technical amendments to two provisions of FSMA that cover transitional arrangements. The amendments ensure that an existing power to make transitional arrangements under sections 426 and 427 of FSMA is updated to correctly refer to the current regulators—the FCA and the PRA—and is available to the Bank of England when it is acting as a FSMA regulator. I recommend that the clauses stand part of the Bill.

[Tulip Siddiq]

We welcome this series of technical clauses, but I have two questions for the Minister. First, will he set out what disciplinary action regulators could take under clause 53 against firms that are no longer authorised? Secondly, on clause 55, the Transparency Task Force has recommended the creation of a financial regulators’ supervisory council, which would have a number of roles, including appointing and overseeing the Financial Services Compensation Scheme, to ensure greater independence. If the Minister is aware of that proposal, what assessment has he made of it? If he is not, I would be happy to hear his thoughts about it after the sitting.

[Andrew Griffith]

I thank the hon. Lady for those points. The powers that the regulators will have in relation to formerly authorised firms will mirror those that they have in relation to authorised firms: they will have the full range of powers to seek information and to impose sanctions, remedies and conduct. The substantive purpose of the measures is to ensure that those powers are not extinguished at the moment a firm becomes unauthorised.

I am not familiar with the detail of the proposal for a financial supervisory board that the hon. Lady mentioned, but we have a good framework for the supervision of financial regulators. I and the Government will always be interested in any practical suggestions to enhance that without duplication and unnecessary obfuscation about where true responsibilities lie.

Question put and agreed to.

Clause 52 accordingly ordered to stand part of the Bill.

Clauses 53 to 59 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Joy Morrissey.)