Question to the HM Treasury:

To ask Her Majesty's Government, further to the Written Answer by the Earl of Courtown on 3 February (HL543), whether the Banking: Conduct of Business sourcebook rule 2.3.7CG(3), published in the Financial Conduct Authority Handbook, that “the cost of a currency transfer service includes the margin between the exchange rate that would be offered to a majority of persons of the class at whom the promotion is directed and a currently applicable interbank exchange rate, calculated using an independently published interbank spot rate”, will be applied to providers calculating the currency conversion charge for consumers under the Cross Border Payments Regulation to ensure that providers show the full cost payable by a consumer.

The Second Cross Border Payments Regulation (CBPR2) updates rules on the transparency of currency conversion charges within the European Union. The UK has left the EU, and during the transition period EU laws that currently apply, or will start to apply during the transition period, will apply to the UK. Under the terms of section 8 of the EU Withdrawal Act 2018 (and as further amended by the EU Withdrawal Agreement Act 2020) the Government has the power to fix deficiencies in EU legislation retained following the transition period.

The Financial Conduct Authority's (FCA) Principles for Businesses and Handbook Banking: Conduct of Business sourcebook (BCOBS) also apply to UK providers of currency transfers services. BCOBS 2.3.7CG(3) is guidance (not a rule) so is an example of one way to comply with the relevant FCA rule (at BCOBS 2.3.7BR).

As stated in its Policy Statement PS19/3 making BCOBS 2.3.7CG(3) (‘General standards and communication rules for the payment services and e-money sectors’), the FCA acknowledged that CBPR2 would impact cost disclosure requirements, particularly in relation to credit transfers. The FCA has since convened a group of industry representatives to discuss and agree on a common presentation format of the information required by CBPR2. The FCA has stated that it will continue to monitor the progress and if it does not see improvements in cost disclosure to customers, it will consider consulting on additional rules and guidance.