Asked by Lord Leigh of Hurley To ask Her Majesty's Government
whether it is their policy to reduce unnecessary regulation of
financial services; and if so, whether they intend to review
current Financial Conduct Authority practices to ascertain whether
that regulator is going beyond what is appropriate and necessary to
fulfil that policy. Lord Leigh of Hurley...Request free trial
Asked by
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To ask Her Majesty's Government whether it is their policy
to reduce unnecessary regulation of financial services; and
if so, whether they intend to review current Financial
Conduct Authority practices to ascertain whether that
regulator is going beyond what is appropriate and necessary
to fulfil that policy.
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(Con)
I beg leave to ask the Question standing in my name on the
Order Paper and draw your Lordships’ attention to my
register of interests.
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The Minister of State, Department for International
Development (Lord Bates) (Con)
My Lords, the Government are committed to reducing
unnecessary regulation in the financial services industry,
but also recognise the need for an effective and
proportionate regulatory regime to ensure that markets
function well and consumers are appropriately protected.
The Government do not believe that the FCA is going beyond
what is appropriate and necessary to fulfil the
Government’s policy.
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I thank the Minister for that Answer and I draw his
attention to the Queen’s Speech. I am sure he will agree
that the commitment to further strengthen our resilient
economy, following press reports, means that a specific
review in this Parliament of the somewhat opaque policies
and procedures of the FCA will be most welcome, in
particular to the financial services industry.
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We have to recognise that the review that took place in
light of the situation that occurred 10 years ago, with the
financial crisis, necessitated a wholesale reform of
consumer protection and also of the strength and stability,
including the systemic strength, of the financial services
industry. That was why these radical reforms were brought
forward: to put consumer protection at the heart of this
and to improve the conduct and authority of the mechanism
by which that is done. That comes at a cost, and the cost
has to be borne, ultimately, by consumers. That is one
reason that it is important that the FCA pays attention,
which it does, to the fact that it is required, as well as
protecting consumers, to create an efficient and effective
market for consumers so that they get good value for money
as well as protection.
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(Lab)
Will the Minister undertake to tread very carefully in this
area? We all know what we have been through in the last
decade; it was as a result of being seduced by appeals for
lighter-touch regulation, and we do not have any desire to
go through that sort of process at all. Any change will
have to be justified, not just because the industry wishes
it but as a way of respecting the needs of consumers in
this country to have a properly regulated financial sector.
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The noble Lord is absolutely right. Virtually every adult
in the United Kingdom is a consumer of financial services,
be it for mortgages, credit cards, loans, insurance
products or pensions. It is essential that consumers
continue to have confidence in the institutions that
provide those services so that they continue to do those
things, which are very much a social and economic good for
this country.
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(CB)
My Lords, does the Minister agree that, at a time when many
of our major financial institutions are embroiled in
scandals over how they have treated their customers, this
is not the time for deregulation but for more effective
regulation and, in particular, the use of more personal
accountability for malefactors?
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It is certainly a time for better regulation; I very much
agree with that. There has been a suggestion that the way
in which the FCA has conducted these matters has not
focused on the areas of greatest risk. One area it has
looked at is the small businesses, in particular, that have
been affected by the regulation, whereas perhaps,
historically, they are at lower risk. That was why the
Enterprise Act 2015 required the FCA to look at the
proportionality and the cost of regulation, particularly on
those small businesses, which I think was the right step
forward.
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(LD)
My Lords, does the Minister agree that in fact the FCA is
becoming an effective protector and guardian of individual
consumers in regard to the financial services industry?
Does he also agree that it is time now to consider
expanding its remit to small businesses, especially
microbusinesses? We do not need a repeat of the abuses that
have happened with RBS and HBOS, and an expanded, proactive
role for the FCA in this arena would be very much welcomed
by small businesses, the backbone of the country.
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Those major banks, of course, are covered by the Prudential
Regulation Authority, through the Bank, but the FCA has a
prudential role as well as its regulatory role. As I
mentioned, it is important that we recognise that where
regulations apply it is done in a proportionate and
appropriate way for consumers and also for the businesses
that are being dealt with.
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The Lord Bishop of Southwark
My Lords, when do Her Majesty’s Government intend to
implement in full the principal recommendations of the
Parliamentary Commission on Banking Standards, published in
June 2013?
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I do not have an answer for that, but I am very happy to
write to the right reverend Prelate.
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(Con)
My Lords, does my noble friend agree that one way to reduce
regulation would be to review the excessive checks being made
on politically exposed people in the UK, including me?
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I suppose we can all declare an interest in that. My noble
friend may be encouraged to hear that as a result of the
money laundering regulations that were laid before the House
in June 2017, the FCA has issued guidance on politically
exposed persons to ensure that they are dealt with on a
case-by-case basis and in a proportionate way, and that
organisations focus on those individuals who would be at
highest risk and recognise those who are at lowest risk,
which I am sure would include all Members of your Lordships’
House.
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(CB)
My Lords, UK non-life insurance brokers are regulated by the
FCA and bear the costs of that regulation. Is the Minister
aware that the relative cost in the UK is more than twice
that in Ireland, Hong Kong and Bermuda? The multiple is
bigger in France and Germany. Does he agree that this is
unhelpful to the industry and is actually evidence of
overregulation?
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I respect the knowledge the noble Earl has in this area but
there are differences in the way that the regulation is
funded in different jurisdictions. I come back to the point
that we need to look at how regulation is applied effectively
on those who are at highest risk and recognise those who are
at lowest risk. The FCA has a statutory duty to establish and
consult a small business practitioners’ panel on policies
impacting on small and medium-sized enterprises, and I think
that is the right way forward.
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(Lab)
The Minister will know that the European Banking Authority,
currently located in London, has a duty to maintain financial
stability and ensure the integrity of the system. That
authority will go after Brexit. What thinking have the
Government done on whether we should seek equivalence or
strike out on our own on a further strand of regulation?
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All those matters are being dealt with through the repeal
Bill which is going through the other place, but we have made
it very clear that financial services are extremely important
to this country. Access is extremely important. We want to be
able to continue to offer the UK’s world-beating export of
financial services to the eurozone area and around the world
after exiting the European Union.
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