Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 — House of Lords, 2019-03-05
Topic: Foreign Trade
Anne McIntosh (Conservative, Centre-right): My Lords, I congratulate my noble friend on moving this statutory instrument, which I welcome. I have a few questions about it What has changed since this instrument was considered in the House of Commons is that the Government have published Implications for Business and Trade of a No Deal Exit on 29 March 2019. Paragraphs 41 and 42 flag up a particular case study and the implications for financial services. I shall not rehearse all the arguments, but it concludes that, in, "the absence of action by EU authorities to mitigate risks in some areas of financial services, there could be some disruption in a no deal scenario" When this instrument was considered in Committee in the other place, a number of issues were raised, and I hope that more details may be put to the House this evening Page 21 of the impact assessment very helpfully sets out that the importance of the financial services sector to the UK is approximately £4.5 trillion, and it itemises various aspects of how that is broken down: "Approximately £4.5tn … is currently invested in the UK’s capital markets (both primary and secondary) through pensions funds, insurance policies and individual private savings" That is a not inconsiderable sum; it brings many jobs, primarily to London, but also to other financial centres such as Leeds and Edinburgh A number of comments were made about the size of the statutory instrument considered in Grand Committee yesterday, where all the regulations were lumped together. The Government cannot win, because putting them all together leads to criticism. However, there has been justified criticism about this mix-and-match, rather piecemeal approach. My noble friend referred to a number of regulations that have already been considered and have a crossover effect on this statutory instrument and others that will follow. If it is confusing for your Lordships’ House, imagine how much more confusing it is for those who have to abide by this rather scatter-gun approach The specific questions I would like to put to my noble friend relate to costings. There is a rather interesting table—Table 3 in the impact assessment—which may be in language that I do not understand. It gives a "Summary of anticipated costs by SI" but it is blank; it just has crosses against it. I am not very good with figures, but "X" is not a figure. This was raised by my right honourable friend Nicky Morgan, who chairs the Treasury Select Committee which has spent an inordinate amount of time, quite rightly, scrutinising this in the other place. If your Lordships’ House does not have those figures, how on earth are firms operating in financial services expected to know I understand that a figure of £1,900 has been given as a costing for each firm, but I do not know whether that is purely for familiarisation or if it also goes to the cost of complying with the regulation for business. Should we simply multiply that figure by the number of companies operating in the sector? It would be very helpful to understand exactly what the costs will be My second question is on the SI’s regulatory reach, particularly the rather formidable array of regulatory authorities that companies will come under, quite rightly, for continuity purposes. That includes the Prudential Regulation Authority, the Financial Conduct Authority, the Bank of England, as my noble friend mentioned, and the Treasury. I have a concern about the duration of the powers. My noble friend very kindly explained that, in one scenario, it will be two years from exit day in the event of no deal. I hope that this statutory instrument and the others we will consider will not be needed, because I fervently hope that we will have a deal and an orderly exit. In other circumstances, the deadline is 12 months, and I am mindful of the fact that my noble friend referred to the loss of passporting rights. We cannot imagine what the cost of that loss will be until we have left the European Union; it took us years to establish passporting rights, and now we are giving them back. I understand that there is a temporary arrangement giving London-based clearing houses licences to carry on doing business with EU-based customers, but that is only valid for 12 months. Already we have identified two different dates with which all the firms operating in the City will have to comply My last question relates to the concern that has been expressed by the City of London about the ongoing lack of clarity, shall I say, regarding contract continuity, cross-border data references and uncleared derivatives. It may well be that my noble friend does not have the answer this evening—it may not form part of this statutory instrument covering all the regulations before us this evening in this one instrument—but it is causing concern in the City of London, and I would be very grateful if he could assuage those fears.