Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2022 — House of Lords, 2022-07-05
Topic: Domestic Commerce
Joanna Penn (Conservative, Centre-right): I thank noble Lords for their contributions today and will address the points raised by the noble Lord, Lord Tunnicliffe, in his constructive speech The noble raised the forthcoming financial services and markets Bill. I will be absolutely clear that the Government are committed to maintaining high standards of regulation, while ensuring that rules are appropriately tailored to UK markets In assessing the two provisions this SI covers, the regulators have published a full cost-benefit analysis of the impact of their rules, which have applied from 1 January this year. It will be up to the PRA and FCA to consider whether any further tweaks or changes to the regimes are needed, now they are fully in force Parliament’s role has been to scrutinise the draft rules when they were published for consultation. Parliament is of course entitled to ask questions of the PRA and FCA in relation to the two prudential regimes In the future regulatory framework review consultation, the Government proposed measures setting out clearer requirements on when and how information should be provided to Parliament by regulators to support effective accountability and scrutiny. Once the reforms proposed in the FRF review are legislated for through the upcoming Bill, the measures will apply to these and future regimes. I am sure we will have much more discussion of the Government’s proposals when that Bill reaches this House With regards to the timescales for implementing the Basel 3.1 standards, as the noble Lord, Lord Tunnicliffe, mentioned, the PRA is expected to publish a consultation paper on its proposed implementation of the reforms in the fourth quarter of this year. That consultation will include a proposal for Basel 3.1 rules to take effect from 1 January 2025, which would align the UK’s implementation of the final set of reforms with the EU’s. I recognise the noble Lord’s concerns around disjointed global timelines. International alignment will be critical to the effective implementation of Basel 3.1, and it is important that jurisdictions co-operate on this to ensure that disruption to firms is minimised and to maintain a level playing field. By proposing a timeline similar to the EU’s, the PRA has already signalled a willingness to align implementation with other major jurisdictions. The PRA can set its timeline only on the basis of what it knows at present. As more information becomes available, for example on the US or EU timelines, it can of course reconsider The noble Lord, Lord Tunnicliffe, mentioned the impact of current bail-in procedures on mid-tier and challenger banks. The Bank of England considered this as part of its review of the MREL framework last year and published its updated statement of policy in December. The Government are pleased that the Bank’s updates include a glide path that will provide more advanced certainty for firms, and a longer, more flexible transition period to meet MREL. I am also pleased to see the Bank is exploring how to improve depositors’ outcomes in insolvency and, subject to the outcomes of that work, considering whether it could significantly raise or remove the transactional accounts threshold As the noble Lord will be aware, the Bank has a set of statutory objectives and powers to ensure that resolution maintains critical banking services while protecting financial stability and public funds. The Treasury has worked closely with the Bank on its MREL review, and the Government are content that the Bank’s proposed changes to the framework for setting MREL ensure that the policy continues to provide appropriate protection for financial stability and public funds, while ensuring a proportionate approach to growing firms.