John Glen
MP for Salisbury · Conservative · United Kingdom
“I welcome the Chief Secretary to her new position, but what words of comfort could she give the residents of Salisbury in Wiltshire, a unitary authority? We are not part of a combined authority and we do not have a metro mayor.”
“Sam Moody is my constituent. He is the chief executive of Rockhopper. During my time in this House, he has been absolutely scrupulous in following the laws of this country and respecting the Falkland Islanders.”
“I listened carefully to what the Minister said about the process, and I respect that. But most people who take a pretty level-headed, pragmatic view of the need for a transition over time still cannot get their heads around the short-term reality: when we have so much turmoil in the middle east, why would we extend the time that we are no…”
“It is 55 days till the Budget. Given the market’s reaction to the Prime Minister’s statement on Tuesday, and given that our gilt rates are higher than those of our peers in the G7, could we have a debate on the implications of higher taxes for growth?”
“Before the hon. Lady makes her statement on Thursday, will she, when reflecting on the arrangement in Wiltshire that would embrace Wessex—although we have been told that that is not the Government’s view—address the prevailing concern that the people of rural Wiltshire will be considerably worse off without having the opportunity to embra…”
“I recognise that the Minister wants to come to what the Government are going to do, but does he not accept that the decisions already made in the last two years—with respect to the price of employment and the national living wage, the cost of employment with regard to legislation, and business rates—have depressed the appetite of many sma…”
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“It has been extremely hard work, but the professionalism of your team has been exemplary, and I am extremely grateful to all of them for the conversations that we have had. Sometimes they were difficult, but they were always positive and proactive in looking for solutions, for which I am extremely grateful. On the relationship between Gibraltar and the United Kingdom on financial services, it is important to remember that when the United Kingdom joined the European Union in 1973, because the United Kingdom was responsible for Gibraltar’s external relations, we joined with you. As a consequence of that, for many years, up until 2001, we were striving to enjoy the benefits of that membership. With that came the responsibilities of adhering to the many directives and complying with regulations that were passed from Brussels.”
“Q Minister, thank you very much for taking the time to join us as we start our scrutiny. It would be helpful for the Committee if you could set out the nature of the relationship between the UK and Gibraltar on financial services, whether you welcome the measures in this Bill, and what you see as the most significant elements of the legislation. Albert Isola: I thank you and your team in the Treasury, as well as the regulators at the PRA and the FCA, who have engaged with us over a three-year process of looking at all the areas of market access, all the challenges and opportunities, and how, post Brexit, we can best replicate what we had under the European Union, as that ends and we begin something new. It has been an interesting and almost enjoyable journey.”
“Thank you very much. It was extremely helpful of you to set the context for the Committee. I have no further questions. I will invite my colleagues to probe a bit further into what you have experienced in the past few years, and how you see the future.”
“In summary and in conclusion, the Government believe that these four instruments are necessary and vital for the UK’s financial services regulatory architecture, and I sincerely hope that the Committee will join me in supporting the regulations this afternoon.”
“It also makes arrangements for the conversion or cancellation of any existing bearer shares. It brings those remaining collective investment schemes, including open-ended investment companies formed before 26 June 2017 and all unit trusts not authorised by the Financial Conduct Authority, in line with companies formed under the Companies Act 2006, which are already prohibited from using bearer shares by the Small Business, Enterprise and Employment Act 2015. Complying with the global forum’s recommendation will help ensure that the UK maintains its position at the forefront of the international community, continuing to set standards that help improve offshore tax compliance and fund our vital public services.”
“Bearer certificates are anonymous and infinitely transferable, making them an easy means of facilitating illicit activity such as tax evasion or money laundering. It is for this reason that UK companies have been prohibited from issuing them since 2015. A 2018 report from the OECD’s global forum noted that although the UK had mostly addressed its 2013 recommendations on the prohibition of bearer shares, “a small cohort of entities and arrangements…are still able to issue bearer shares or equivalent instruments.” The report went on to recommend that the UK abolish bearer shares. This instrument implements that recommendation and prohibits the remaining entities capable of issuing bearer shares or certificates, which include certain types of collective investment schemes, from doing so.”
“Until the Financial Conduct Authority introduces a prudential regime for investment firms, about which I have spoken to the chief executive just today, following Royal Assent to the Financial Services Bill, investment firms will remain subject to the existing prudential framework. Finally, let me turn to the content of the draft Bearer Certificates (Collective Investment Schemes) Regulations 2020. The UK has played a leading role in transforming tax authorities’ ability to work across borders to tackle emerging international tax risks. Maintaining the UK’s position and driving forward this agenda is a central pillar of the Government’s no safe havens strategy, which aims to improve offshore tax compliance so that everyone pays what they owe.”
“The most important of these is enabling the PRA to apply an “other systemically important institutions” buffer and a systemic risk buffer to relevant institutions to address particular financial stability risks. In line with requirements of article 21a of CRD V, the instrument also allows holding companies in scope to apply for supervisory approval. The framework and scope of the approval regime will be administered by the PRA and the instrument will also ensure that the PRA has the appropriate tools to ensure compliance with it. Although the capital requirement directives were created with banks in mind, they also extend to investment firms. However, the risks faced and posed by investment firms are substantially different to those of banks. The instrument therefore excludes non-systemic investment firms from the scope of CRD V.”
“This instrument will allow for the transposition of CRD V into UK law, as is legally required under the terms of the withdrawal agreement. It will also ensure that the legislation that transposes CRD V continues to operate effectively in the UK after the end of the transition period. As with previous capital requirement directives, the Government will delegate the majority of the responsibility for implementation to the independent Prudential Regulation Authority, which has the requisite technical knowledge and expertise to ensure an effective and proportionate implementation. This instrument therefore only includes provisions that are legislatively necessary to ensure that the PRA can effectively implement CRD V. The instrument makes changes to the macroprudential toolkit to preserve the current level of macroprudential flexibility.”
“Specifically, this SI amends and revokes aspects of retained EU law and related UK domestic law, makes a small number of necessary clarifications and a minor correction to earlier financial services EU exit instruments, and provides sufficient supervisory powers for the financial services regulators to effectively supervise firms during and after the end of the transition period. Moving on to the draft Financial Holding Companies (Approval etc.) and Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020, the fifth capital requirements directive—known as CRD V—continues the EU’s implementation of the internationally agreed Basel standards, which further enhance international prudential standards and regulation and aim to help ensure the safety and soundness of financial institutions.”
“Our approach meets our legal obligations and ensures that the UK’s resolution regime remains robust and in line with international standards. We have interacted with industry and stakeholders to help explain exactly what the change means for them. Turning to the content of the draft Securities Financing Transactions, Securitisation and Miscellaneous Amendments (EU Exit) Regulations 2020, the SI is vital in ensuring that the UK has a fully effective legal and regulatory financial services regime at the end of the transition period. The approach taken aligns with the general approach established by the European Union (Withdrawal) Act 2018, providing continuity by retaining existing legislation at the end of the transition period, but amending where necessary to ensure effectiveness in a UK-only context.”
“We have also taken account of concerns raised by industry on elements of the directive that could pose potential risks to financial stability and consumers by tailoring the approach for the UK market. Subsequently, we are not transposing the provisions in the directive that firms do not need to comply with until after the end of the transition period. We are also sunsetting specific provisions so that they cease to have effect in the UK after the end of the transition period, as well as inserting provisions to ensure that the elements that remain in effect after the end of the transition period continue to operate effectively. The sunsetted provisions will cease to have effect in the UK from 11 pm on 31 December 2020.”
“Thank you, Sir David. It is a pleasure to serve under your chairmanship yet again. The second bank recovery and resolution directive updates the EU’s bank resolution regime, which provides financial authorities with powers to manage the failure of financial institutions in a way that protects depositors and maintains financial stability while limiting the risks to public funds. Under the terms of the withdrawal agreement, the UK has a legal obligation to transpose the directive by 28 December 2020, and the first statutory instrument satisfies that obligation. In transposing the BRRD II directive, the Government have been directed by the commitment to maintain prudential soundness alongside other important regulatory outcomes, such as consumer protection and proportionality, when leaving the EU.”
“The purpose of the buffers is to allow the regulators to continue to be able to address financial stability risks, including those posed by large institutions. The right hon. Gentleman asked about hidden charges in remittances and referenced an answer I gave on 3 July about their cost. I am sorry, but I will have to write to him on that matter as well. I am sorry that I cannot offer him a clear answer now. I do not want to busk it.”
“In our transposition of BRDD II, we have considered which provisions would not be suitable for the UK resolution regime after leaving the EU, while still maintaining that prudential soundness and the other important regulatory outcomes, such as consumer protection and proportionality. We have also taken into account concerns raised in consultation responses about the potential risk to financial stability and consumers. Given the complexity of those considerations, I am happy to write to the right hon. Gentleman to set things out more clearly. The right hon. Gentleman asked about the extent to which CRD V changes the capital requirements regime. The capital buffers instrument is being introduced partly to ensure that the current macroprudential flexibility is maintained.”
“Given the links across each of the financial services instruments and the importance of them coming into force before the end of the year, it is appropriate for the Committee to consider them together, and it is the most effective use of parliamentary time. It is also the case that the SIs could not have been brought forward sooner. Several of the provisions in the instruments fix deficiencies in changes to EU regulations that have only recently become applicable during the transition period. The right hon. Gentleman asked three specific questions about the SIs and then one about the process. He first asked about the extent of the changes from the BRDD II resolution regime. Under the terms of the withdrawal agreement, the Government will implement EU legislation, such as this regime, that evolved during the transition period.”
“I listened carefully to what the right hon. Gentleman had to say, and he is, as always, the model of courtesy and constructive opposition. The substantive challenge that he offered was about the value, legitimacy and appropriateness of a four-in-one SI debate. It is vital that we deliver each of these financial instruments before the end of the transition period both to ensure continuity and a fully functioning and effective legal and regulatory regime from 1 January 2021 and, in the case of the draft Bearer Certificates (Collective Investment Schemes) Regulations 2020, to ensure that the UK meets its international obligations.”
“Gentleman for the constructive way that he has brought his points to the Committee. I hope that the Committee is sufficiently satisfied to support the regulations. Question put and agreed to. DRAFT SECURITIES FINANCING TRANSACTIONS, SECURITISATION AND MISCELLANEOUS AMENDMENTS (EU EXIT) REGULATIONS 2020 Resolved, That the Cttee has considered the draft Securities Financing Transactions, Securitisation and Miscellaneous Amendments (EU Exit) Regulations 2020.— (John Glen.) DRAFT FINANCIAL HOLDING COMPANIES (APPROVAL ETC.) AND CAPITAL REQUIREMENTS (CAPITAL BUFFERS AND MARCRO-PRUDENTIAL MEASURES) (AMENDMENT) (EU EXIT) REGULATIONS 2020 Resolved, That the Committee has considered the draft Financial Holding Companies (Approval etc.) and Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020.— (John Glen.) DRAFT BEARER CERTIFICATES (COLLECTIVE INVESTMENT SCHEMES) REGULATIONS 2020 Resolved, That the Cttee has considered the draft Bearer Certificates (Collective Investment Schemes) Regulations 2020.— (John Glen.)”
“It will deliver several existing Government commitments and ensure that the UK maintains that world-leading standard. It goes beyond the simple process of onshoring what we have had to date and what has gone live this year. It looks forward and sets out, with a new accountability framework, how the regulators will act. It also enacts a number of other smaller measures. However, I concede that it is a complex process—I do not mean that to sound patronising—whereby we have been trying to onshore and then look forward. The Bill, which we will hopefully take through Parliament, is the first in a series of steps that will involve legislation in subsequent Sessions. I hope that I have substantively, if not exhaustively, addressed the points that have been made. As ever, I thank the right hon.”
“I respect that point and I am happy to give that clarification at the earliest opportunity. The final process point that the right hon. Gentleman set out is the relationship between the onshoring programme and the Financial Services Bill that is now in Committee. The EU exit legislative programme, known as the onshoring programme—I seem to have been engaged with it all my life—is about ensuring a fully functioning legal and regulatory financial services framework at the end of the transition period. The Financial Services Bill is an important step in taking responsibility for our financial services regulation, ensuring that we maintain the highest regulatory standard and remain an open and dynamic global and financial centre now that we have left the EU.”
“Q It is good to have you before us for this first session. I have a question for each of you, but I will start with Vicky. Obviously there is a strong working relationship between the regulators and the Treasury. It would be really helpful if you could explain how your organisations worked with the Treasury on the preparation of the Bill. Victoria Saporta: Thank you for the question, Mr Glen. Yes, we worked closely together, as you would expect for a Bill that proposes to revoke elements of the acquis and give the regulators specific powers. Ultimately, of course, it is for the Government to introduce the Bill and for Parliament to take it forward. However, the working relationship was very close, and because of that we are content with the content of the Bill and the proposed measures.”
“We feel that the Bill is a good first step in that direction, to enable us to play our role in those goals and objectives for the UK financial services industry.”
“Q Shall I move to Sheldon? One of the themes that has already come out in early observations is around the commitment, or not, to maintain our highest international standards. I just ask you to make any observations about that, in terms of that commitment and how you will ensure that that continues. Sheldon Mills: We have had close interaction with you and your officials throughout the drafting of this Bill, and also the preparations for a new UK financial regulatory system, as we move to exit from the EU. We think it is important that there is an agile and confident UK financial services regulatory system, which will support the UK financial services industry and, importantly, also protect consumers and ensure market stability.”
“The provisions in front of you contain some important measures to enhance the FCA’s powers to manage an orderly wind-down—for example, to identify the point at which the benchmark is no longer sustainable and to take measures to ensure that its publication ceases in the least disruptive way possible for the many hundreds of thousands of contract holders who have mortgages or more complex financial instruments that reference the benchmark in some way.”
“Q Thank you, Sheldon. If I could move to Edwin, one of the 17 measures in the Bill deals with the wind-down of the LIBOR benchmark, which is an incredibly complex process by which we are giving the FCA power. Could you explain to the Committee how you see the FCA executing the power and using it in practice? Edwin Schooling Latter: Yes, of course. Committee members will be aware that LIBOR is a benchmark that has had a troubled past. It is also a benchmark that probably does not suit the needs of its users as well as some alternatives; but it is very deeply embedded in the financial system, so while we think it is the right thing to move towards the end of LIBOR and its replacement with better alternatives, we need to be able to do that in an orderly way.”
“That is important for our members, particularly if they are internationally active, because they want a coherent and harmonised regime across the world. If you are a UK bank operating in the UK, North America, Europe and Asia, you want one version of Basel 3.1 and you want it to be implemented in a coherent way. If not, and if there are different approaches to regulatory reporting, to how credit risk is assessed and to liquidity requirements, you have to implement a number of different versions of Basel 3.1, which will be more difficult. In terms of UK Finance’s competence in, if you like, holding the PRA to account, we have a wide range of members for whom Basel 3.1 implementation is very important. I am pleased to say that I have good working relationships with Vicky and her colleagues at the PRA.”
“Q Simon, I want to focus on your responsibilities with respect to the Basel rules and the expertise of the regulator. Can you set out the competence that you have within your organisation to do this, and could you comment on the suitability of the UK to implement its own approach to the Basel framework, perhaps with reference to what happens in other jurisdictions to give the Committee a sense of how we fit alongside international comparisons? Simon Hills : It is important to recognise that the Prudential Regulation Authority has been a strong supporter of Basel 3.1. It has been very influential in the way it was finalised, and I think that it is committed to implementing the Basel 3.1 framework in an internationally aligned way.”
“They may include terminology addressing if LIBOR should be unavailable for a day or two, and that might be the reference point those contracts would take. In that instance, without these powers, we may have seen customers falling back on to the last available LIBOR rate to the point of cessation, essentially becoming a fixed-term contract. We may have seen customers falling back on to cost of funds, which would create very diverse and disadvantageous outcomes for them. Equally, we would have seen fairly significant levels of contractual disputes beyond the end of 2021. These powers, in preventing all those negative outcomes for both customers and market integrity, are absolutely critical as part of the transition.”
“It is also very important, certainly from an industry perspective, that as a result of moving away from LIBOR on to more robust reference rates, customers who have contracts referencing LIBOR are not inadvertently affected by that transition. What this Bill seeks to do—and we are very supportive of its provisions—is to make sure there is a safety net in the form of powers being granted to the FCA, to ensure that those contracts that cannot be migrated on an active basis before LIBOR ceases have a solution so that the customer has a clear outcome for the contracts beyond LIBOR cessation. These powers are important because before 2017, and the acknowledgement that LIBOR would cease, many contracts did not have clear, robust terminology setting out what would happen if LIBOR ceased.”
“Q I am conscious of time, so I will allow others to come in, but I wish to ask Daniel about the work that you are doing on LIBOR. This is an incredibly complex area with lots of challenges, and the key issue is around the wind-down of the benchmark and the move to deal with the tough legacy contracts. Could you comment on what the Bill achieves with respect to that, whether there are any alternatives to it, and what the implications would be if we did not do what we are planning to do in the Bill? Daniel Cichocki : Certainly, the issues with the lack of sustainability of the LIBOR benchmark are very well documented, and it is important, as the Financial Stability Board has acknowledged at an international level, that we move away from LIBOR on a smooth and timely basis.”
“Will there be contract continuity and a safe harbour to minimise the risk of disruption in the market and litigation?”
“The essential point is that, in the bond market, we have moved to SONIA as the risk-free rate, and new issues have been in SONIA for over two years now. That is the first step in the process. The second step in the process is that we actively convert as many bonds as we can from legacy LIBOR to SONIA. We are making some progress there, but the third point is that we will still have tough legacy contracts that cannot be converted, either because they are too difficult to convert or because there are too many to convert by the end of 2021. In those circumstances, the provisions in the Bill are extremely helpful, because they provide for an orderly wind-down of tough legacy contracts. From that perspective, the Bill is very helpful. My questions relate to when the current definition of LIBOR is replaced by a new definition.”
“Q Thank you, Paul. The Committee will be very aware of the breadth and depth of your experience in this domain. You have gone into three quite specific issues. Could you set out, at a higher level, the LIBOR challenges that you think this Bill does not deal with, and where you think it is going to be defective? Obviously, a lot of work has been done with regulators to get to this point and we have had evidence previously about the nature of this change and the more general desire for it. Perhaps you could contextualise the specific issues you talked about with respect to continuity and the other matters you raised. Paul Richards: Thank you, Minister. First, as I mentioned, we welcome the Bill. The only question is: can it be improved to minimise disruption and litigation?”
“It does not stand up well compared to international comparators. It is a rather lengthy form, which takes a while to complete and gives the FCA a six-month period to look at approving that particular fund. The proposals in the Bill take us to a completely different level, where the FCA is able to look at fund structures across the piece rather than at each individual fund. We feel that is a big step forward. While section 272 could be reviewed and reformed, there is a different category of opportunity presented by the Bill and that is why our industry is so keen to see the Bill come forward and have the overseas fund regime baked into it as a measure that goes ahead. I will pause there in case there are comments before I move on to comment on equivalence, as you were kind enough to mention.”
“That is why we believe that the overseas fund regime is material. It is worth contrasting that with what we see at the moment. In order to help navigate these turbulent waters through the Brexit period, I was delighted that the Government heard our calls to introduce a temporary permissions regime with the Financial Conduct Authority. I am pleased to note that the Bill extends the period from three to five years for that requirement, which is very good. It also allows us to tackle two particular issues wrapped up in the overseas funds regime. First, there is a review of section 272, which is the current structure by which a fund sponsor or investment management company would seek to have their fund recognised by the FCA—our regulator here in the UK. Section 272 is okay, but it is rather cumbersome.”
“That is built on the ability of UK investors to access an innovative and ever-adapting fund market. We support this measure in the Bill wholeheartedly. At the moment, as the Minister knows, we manage around 37% of Europe’s assets, which is enabled through measures such as this. It is important for UK savers and investors; having such a variety of funds goes to the heart of having such a sophisticated savings environment in the UK. It is important to note that if there was a cliff edge—if UK investors were not able to access these funds—that would constrict consumer choice. In trying to replicate something akin to what we have at the moment, we would bring a heavy burden of extra costs on to the industry and greater bureaucracy. It would reduce significantly the number of funds to which UK investors could have access.”
“It provides much-needed reassurance to my industry, so thank you for that. The industry is very pleased to see the overseas funds regime introduced as part of the Bill. Around 9,000 funds are currently available to UK investors as a result of the current regime. The reason we feel it is in the interests of UK savers and investors to have access to such a variety of funds is that it brings to the market not only choice but much-needed competition. It means that individual investors have greater choice and an ability to tailor their portfolio in a way that makes sense to them and reflects their risk profile. It is really the foundation of why the UK is the pre-eminent fund centre, not just in Europe, but globally. As the Minister knows, the UK has long enjoyed a reputation for being an attractive centre for fund management.”
“Q 57 Chris, it is good to see you. Thank you very much for addressing the Committee. Obviously, the Bill has a large number of measures, some of which will be of more interest to your members than others. I think it would be useful for the Committee if you could set out the significance to consumers of introducing a more proportionate regime for overseas funds to access the UK based on equivalence, and why it is important for consumers to be able to access funds based outside the UK. Perhaps you could tell us what your members feel about that measure and whether you have any reservations about it. Chris Cummings: Thank you for the opportunity to speak to one of the most central parts of the Bill. May I take a moment to congratulate you and your team on introducing the Bill?”
“We feel that that was a missed opportunity to settle the fact that the UK and the EU would be equivalent, which we currently are, having adopted, rather in full vigour, the European rules under which our industry labours. We are hopeful that continuing industry efforts to encourage ESMA and the European Commission to recognise the UK as equivalent will come through, but we are more than pleased with the steps that the Chancellor announced and the comments that are carried forward in the Bill. At the moment, we see that as a first step, but we look forward to greater work being done on this in the months and years ahead.”
“We were pleased that the Chancellor took a step forward in recognising and granting equivalence to a limited measure in the House of Commons in his statement last week. We think that was absolutely in the right direction. We have been unstinting in our calls for the European Commission and our European regulator, the European Securities and Markets Authority, to respond to those in kind and move forward so that the equivalence determination could have been made by now and be working. We were sorely disappointed that in June ESMA decided not only not to make a decision on equivalence, but to defer it for a period of time until after the IFR comes into effect.”
“Q It would probably be worth talking about equivalence. I am keen at this point to get an explanation of the measure for the Committee. I am sure others will want to probe some of the weaknesses or disadvantages that they may perceive. Chris Cummings: Currently, we enjoy unfettered marketing right across the whole of Europe and the EEA. Post Brexit, naturally, that will come to an end. The way that the regulatory authorities assess whether a particular fund is suitable is to judge the equivalence of the regime of the sponsoring organisation or where the organisation is based. Having that judgment of equivalence has been one of our industry’s clear calls throughout the Brexit process.”
“The Bill is a welcome first step, but we look forward to working with the Government to develop an overall strategy for the financial services sector that could pull all the different strands together, building on what the Chancellor said last week, which was very welcome.”
“Q Emma, I will come to you first. Obviously, TheCityUK represents, as you said, a range of institutions and firms. It would be helpful for the Committee if you could set the context by summarising the industry’s reaction to the Bill, and try to give us the widest possible view of the industry’s reaction to the measures in it and what the consequences would be if we did not pass it. Afterwards, I will come to Catherine separately. Emma Reynolds: Thank you, Mr Glen. We support the measures in the Bill, and both the overarching and the stated objectives. It is absolutely right that the UK Government are onshoring the regulations. There are obviously other measures within the Bill that are extraneous to that, which we support.”
“We had a very good relationship with Government, particularly with the Treasury, but some of the other issues that we are concerned about relate more to other Departments, whether it is access to skills and talent from abroad or green finance or other issues that are not in the Bill. It is a welcome first step.”
“Q Would you like to spell out where you think anything is missing from the Bill? The second part of your answer seems to suggest that there is a lack of an overall strategy. Is that what you are seeking to say? Obviously this has been contextualised as a first step, as we get towards the end of the transition period. I have indicated, as the Minister, that there will be subsequent legislation in future Sessions. Would you like to set out in more detail where you think there are specific gaps at this point? Emma Reynolds: It is a very welcome first step. All I would say is that we, as an industry, have a broader agenda about our industry’s long-term competitiveness going forward. I would not have expected to see that in this Bill.”
“On that front, the International Regulatory Strategy Group, which both TheCityUK and the City Corporation support, has suggested that parliamentary scrutiny be strengthened and reordered, and that the role of the Treasury Committee be complemented by setting up a joint Select Committee on financial regulation to look in detail at specific pieces of financial services regulation. That would be important to strengthen scrutiny, as we hand more responsibility to the regulators. It would also be useful––and the IRSG has recommended it––to increase the transparency of decision making by both the Treasury and the regulators, and to improve scrutiny. I am not sure if I have fully answered your question.”
“Catherine McGuinness: Thank you for inviting me to give evidence. I cannot answer on the technical ability of the regulators in detail, other than to say that, in our experience, they are very capable of adapting and innovating. Indeed, we heard last week at Mansion House from both the Financial Conduct Authority and the Prudential Regulation Authority about their plans. Obviously, the regulators will be gaining significant powers under the Bill. It is important that we look at how those powers are scrutinised, including by Parliament.”
“Q May I turn to Catherine? Thank you for giving evidence. One of the issues that has come up generally is an apprehensiveness about the capacity of the regulators in terms of their technical expertise to implement detailed rules such as the Basel rules. I have been fortunate enough to have been a Minister for a while and I recognise the complexity of the dynamic between the Treasury and the regulators. There is an intimate relationship, but could you give us a view on how you see the role of the regulators in the context of this Bill? Do you see any risk that they are being asked to do something that stretches them beyond what they should normally be able to do? Could you give the Committee a sense of that responsibility and how well placed they are to do what we have asked them to do?”
“Q You are referring to the response of both yourselves and TheCityUK to the consultation on the future regulatory framework, separate and additional to the Bill? Catherine McGuinness: indicated assent .”
“Constance Usherwood: With the investment firms prudential regime, the UK authorities have played a key role in the development of the prudential regime that is specifically targeted to the business models of investment firms and making sure that it is proportionate. In that respect, we fully support the approach that is being taken today. In terms of the application to the different prudential frameworks and of the regimes versus the CRR, the bulk of our membership will probably not be directly impacted by the regime due to their size and activities. That would also tally with the approach that the EU has taken.”