Dame Angela Eagle
MP for Wallasey · Labour · United Kingdom
“The Kremlin increasingly relies on proxy organisations to pursue its objectives, seeking to undermine our security while maintaining a degree of plausible deniability. The so-called GRU Volunteer Corps is a clear example of that approach. It is not an independent force or a loose collection of volunteers.”
“This Government have introduced support for the Jewish communities who have been threatened and directly targeted by IRGC proxies. Just a couple of days ago, my right hon. Friend the Prime Minister announced an extra £250 million for policing to ensure that we can support and protect our Jewish communities.”
“I will move on to the Islamic Movement of Companions of the Right. The IMCR has publicly claimed seven attacks at UK locations linked to Jewish and Israeli communities and to Persian-language media, including the antisemitic arson attack on four Hatzola ambulances in Golders Green on 23 March.”
“We expect platforms to act responsibly and not to provide space for state threat-linked activity, propaganda or recruitment. We will be keeping a close eye on that, as well as liaising with social media companies to tell them about how this law impacts them.”
“The IRGC Quds Force and the IRGC Intelligence Organisation, together with the Ministry of Intelligence and Security, form the Iranian intelligence apparatus. As a key component of the Iranian state’s security apparatus, the IRGC is answerable directly to Iran’s Supreme Leader.”
“It provides a targeted and proportionate means of disrupting those involved in foreign power threat activity based on the recommendations of Jonathan Hall KC, the independent reviewer of state threat legislation. To answer the hon.”
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“I know the Competition and Markets Authority wants to get rid of its prosecuting function to the SFO. Some people, such as Jonathan Fisher QC, have argued that we need one big super-enforcer in the criminal sphere, because regulators will always have more interest in taking the easier, quicker and cheaper route, taking the regulatory approach rather than the criminal approach.”
“By the way, without meaning to be rude, you have three minutes to answer this or the Chair will cut you off. Dr Hawley: Absolutely, it is an issue of the law and of enforcement—law is only as good as its enforcement. We need a fairly wide consensus among the enforcement community, non-governmental organisations and academics in this space. We need a massive boost to economic crime enforcement in this country. With the FCA, what we hear is it is much easier for them to bring civil actions, and that is what they do. For corporates, they are not using the corporate criminal liability laws that we think need to be used to ensure real deterrence, and that corporate wrongdoing, when it does occur—by the few bad people—is properly held to account and prosecuted.”
“Otherwise, large companies are beyond the law; the “failure to prevent” offence brings them within the reach of the law.”
“Q Finally, because you answered that so fast, do you think that the way to deal with the larger global companies is vicarious liability, rather than “failure to prevent”? Should we be thinking of introducing a law saying that after a company gets beyond a certain size, we switch to vicarious liability, because this idea of directing mind is simply not present in larger global corporates? Dr Hawley: It is a really complicated issue, which I am very pleased the Law Commission is looking at. One of the options is vicarious liability. Some people feel a bit uneasy about vicarious liability and say it is too strong, but that is where you need the best legal minds of the Law Commission. However, the immediate gap can be immediately filled by the introduction of the “failure to prevent” offence.”
“The Leader of the House appears to think that he can dispense with that principle because he does not want spontaneity in debates to disappear. He must not—does she agree?—let the perfect get in the way of the good. He must recognise that these are temporary issues in a pandemic, and that we all wish to return to this place being the lively, crowded, interesting, challenging place that it is when the green Benches are completely full.”
“It would be a good thing if the Leader of the House would actually listen to the statements that are happening at the moment. I add my congratulations to the right hon. Lady on the superb work she is doing on the Procedure Committee in these very difficult times in which we find ourselves. I note that the first questions on this statement came from two very well-liked and effective Leaders of the House—the Leader of the House’s esteemed predecessors, to whom he should listen. Does the right hon. Lady agree that the situation we have now has created two different classes of MP? Behind each MP, there are the constituents that they represent, and they have the right, having been elected to this House, to represent them in the same way as any other Member of the House.”
“If the ask was to do everything on day one, there would be an impact on resources; if we have a sensible framework and approach, I think we can manage.”
“If we take the investment firms prudential regime, which is in the Bill, our colleagues at the FCA were leaders in that space, setting the pace and direction in the EU. So I think we have the expertise and the experience. When I think about resources, there are areas where we will need to consider hiring more people, in particular the area of prudential expertise—that is a specific area within the FCA where we will need to hire. We will need to consider our resourcing carefully, as more parts of the acquis are onshored, but currently, where we stand, we think we are capable of moving around our resources in order to meet the demands. The impact that it could have is of course the speed at which we are able to turn to the different pieces of legislation.”
“Q Mr Mills, I wonder whether you could say a little more about the resource implications of the Bill. An awful lot of our financial services regulation—well, all of it—used to go on in the European Union, but now that is ending and all these complex and technical issues are being onshored. That must be the cause of a huge amount of extra technical work for the FCA, and in fact for the PRA. Is the FCA getting any extra resources? Are you trying to import all the people who used to live in Brussels back into the FCA? Sheldon Mills: As I said, we have a significant amount of expertise in the United Kingdom. The reason we have that expertise is that—I have to be careful how I put this—much of the financial services legislation that has come about in the EU, the UK has fully participated in, often leading on the legislation.”
“We are clearly engaged with negotiations and discussions with the European Securities and Markets Authority in relation to a range of regulatory activity, so I am confident that we will not have any significant gaps or issues that would cause issues for the UK financial services industry or for those who wish to come and play an active role in that industry.”
“On what I think you are referring to as the competitive regulatory system that we might enter into, I can assure you that we are engaged internationally through all international bodies. We play leadership roles in the ESB, the Financial Stability Board and all sorts of international bodies in financial services. Therefore, we are key actors in regulatory systems and the latest approaches to regulation across the world, and that will also support our being a sensible regulatory environment in which firms wish to operate.”
“For example, if we have to approve new ways of doing things, onshore all these things and get new systems up and running, those who might wish to carry on can just shift to the internal market and carry on doing things, without having to wait for all the consultations that you and your colleagues will be doing to try to re-establish a UK-based regulatory system. Sheldon Mills: The starting point is that the foundations of the system are clear to all financial services markets in the UK, so there will not be a gap that means organisations will not know the type of regulatory system that they expect when they are authorised a licence to operate in the UK. We will ensure that that is maintained and is clear throughout the transition and into the future.”
“Q Mr Mills, I am glad you think you can manage but, given that this onshoring is happening, we have already seen the beginnings of some quite fierce competition—if I may put it in a non-technical way—to nick some of the financial services that we have in this country and to take them abroad. We have already seen quite a competitive and non-co-operative environment develop, seeing who can get what when we are outside the European Union. That is an entirely new form of activity that somehow you have to take account of, and that has not had to be taken account of in the past. Are you sure that will not cause your resources to be stretched in a way that you had not anticipated?”
“The important thing for us, as regulators, is that the Bill provides us with sufficient flexibility to meet the needs that we face as we move through the transition and into the future. In a sense, the Bill is silent on whether we are divergent or equivalent. Equivalence is a policy matter for Government, as opposed to a matter for us. All we need is sufficient flexibility to ensure that we have an appropriate regulatory system, depending on how Government policy emerges in relation to equivalence.”
“Q Thank you. It appears that the EU will not be in a position to offer us any equivalence, or to certify any of the things that we are doing as equivalent, until at least the middle of next year. There are noises that we will be diverging in some of the areas that we are re-onshoring. You said that would be the exception rather than the rule. Can you give us a bit more information on how divergence will work? I am concerned that the Bill has its Committee stage this side of the transition, and then its Report stage the other side of the transition, when we might be in a different situation. Are you planning for there to be big importations of new stuff into the Bill at the last minute? Sheldon Mills: The Bill is a matter for Government to take through Parliament.”
“Q Just to make that clear, you are basically saying that you are neutral on the amount of divergence or equivalence, and that you can cope with whatever is thrown at you? Sheldon Mills: Neutral is too strong a word. My point of view is that we are interested in what I would call outcomes-based regulation. Equivalence can be done in one of two ways within the bounds of equivalence: it can be done line by line and letter by letter, or it can be done on the basis of seeking to meet equivalence objectives within an outcomes-based regulatory system. We are moving towards the position of the latter. Overall, equivalence is a matter for Government.”
“We would not ordinarily use those people in our consumer protection work, and they have different skills and are involved in different activities. I do not think that we will be any less vociferous in protecting consumers. During the crisis, those who watched us saw that we were at the forefront of ensuring that we tried to provide relief to consumers during the pandemic. We will continue in that vein. As the FCA’s conduct regulator, I am committed to ensuring that the consumer is at the heart of everything we do.”
“Q Finally—I am conscious that I have put questions only to you, but I am sure colleagues will put questions to other witnesses—you were saying at the beginning that part of what the FCA has to do is protect financial services in this country and create a good environment for them, as well as protect consumers and ensure market stability. There is only so much bandwidth, so will all the work relating to onshoring compromise consumer protection? Sheldon Mills: I do not think so at all. To give an example, it may look like it would take an army of 50 or 60 people to do the work of the investment firms prudential regime, but in reality it takes around 10 people to do that work. These are significant specialists in the technical architecture of designing prudential regulation.”
“Lots of work has been done and lots of work remains to be done, and, as you can imagine, we are speaking very frequently to the regulators here in the UK, and also working through the national working group to ensure that customers are transitioned on a fair and transparent basis.”
“Q I was wondering, Daniel, whether there are any dangers in the move away from LIBOR. Obviously, we know about the dangers of staying with it, but are there things that keep you awake at night about the transition? Daniel Cichocki: As the Committee can imagine, from an industry perspective, we are absolutely focused on ensuring that the transition away from LIBOR—which is the right thing to do—is done in a way that treats customers fairly and consistently. There is an awful lot of work being done at both an international and domestic level to agree standardised approaches to transition, where possible, but also to ensure that there are clear expectations from our regulators—here in the UK, it is the Financial Conduct Authority—about how that transition should be done.”
“After speaking to our members in the industry, that message from the UK conduct authority has been heard loudly and clearly. All of us who are focused on moving away from LIBOR are acutely aware of the history of the benchmark and committed to ensuring that we move away from it in the right way and in a manner that treats customers fairly.”
“Daniel Cichocki: We are one voice from the perspective of the banking and finance industries, but it is important also to recognise that, within the overall national working group in the UK, there are voices that, rightly and properly, represent the end users of LIBOR, be they corporates themselves or the representatives of corporates. Although those voices are important in our national transition working group, it is equally important to address the concern that you articulate, which is absolutely right: the guidance that the FCA has provided to all firms that are transitioning their customers that the process should not be used to move customers on to inferior terms or rates that would be expected to be higher than LIBOR would have been.”
“Q Obviously, LIBOR is a benchmark. Any benchmark is a sign of some of the profit that can be made on a transaction. If there are differences of approach or changes, there are areas where customers can be fleeced or left out of pocket without, in some ways, even realising it because of the very technical nature of these kinds of transactions. To what extent do you have a consumer protection voice helping you with these changes? Do you think that the protections for consumers who may be disadvantaged during this transition are strong enough?”
“Q Obviously we will be keeping an eye on that as it happens. Mr Hills, the industry has been lobbying the Government, Parliament and regulators to design regulations that will make UK firms more internationally competitive. Indeed, all of us in the room would share the aim of protecting our financial services industry. Do you think that the Bill achieves that? Simon Hills: Yes, I think it does. The important thing is that the Bill achieves that by setting expectations of how the Basel 3.1 framework is implemented in an internationally coherent way. The PRA has to think about not only international competitiveness, but financial services equivalence, and the Bill achieves that.”
“Q So you are not too worried about divergence because you do not think there will be very much of it. Simon Hills: I do not think that it is in the interests of the UK financial services industry and banks to introduce a divergent regime. We are talking about the importance of the City, and we want people to bring their money to the City for the right reasons, not the wrong ones. UK Finance members are certain that it is in no one’s interest to diverge from internationally agreed frameworks because that creates the risk that we bring in the wrong sort of people.”
“It is important to recognise that the FCA has an international role, because the FCA is the regulator of the administrator of LIBOR, so what the FCA, through this Committee, decides in the UK will have an international impact.”
“Q Do the provisions of continuity and safe harbour apply in America as it converts away from LIBOR? Are the things that you are asking the Committee to consider putting in the Bill happening in other jurisdictions? Paul Richards: In the US, the alternative reference rates committee, which is the group equivalent to the sterling risk-free reference rates working group, has proposed legislation that is not identical to the UK’s but has the same effect, and so the concepts of continuity of contract and protection through safe harbours in the UK context will be recognised, we think, internationally as well. Of course, we are not dealing here just with the proposals under New York law. We are having to look more generally. The EU has a proposal for legislation as well.”
“It needs to be looked at in this context: can anything be done to strengthen the wholesale market?”
“Q Okay. You did not answer the question from my right hon. Friend the Member for Wolverhampton South East earlier about whether you had asked the Government for this and they had said, “No, the FCA can do it; we’re not putting it on the face of the Bill,” and so you have come here to make the argument again, or whether it is work that you are in the process of doing and you have got to the stage where you want to make these proposals, as the Bill has arrived. Have the Government considered this and said no, or is it something that you have just proposed? Paul Richards: No, I hope that the Government will consider this and say yes. I hope that that will happen, but it needs to be looked at in the context of the Bill as a great help to the market.”
“Q I understand your point about how those things would calm things down in the changeover, but why do you not trust the FCA to do this? Why does it have to be in the Bill? Paul Richards: The FCA has great powers under the Bill and I am sure that it will exercise them wisely, but we are dealing here with law internationally, and anything that can be done to strengthen that—and the Bill has the capacity to do that—will be helpful. I hope that it will also be helpful to the FCA.”
“Q Catherine, you said that the City of London welcomes the Bill. What more would you have liked to see in it that is not in it? Catherine McGuinness: The Bill must be viewed as part of a package with what we then heard from the Chancellor’s announcement. It is a first step, but it does not set out an ambitious overarching strategy for financial services for the future. This is a critical part of our economy and we would suggest that we need that strategy as we move forward. The Chancellor’s announcement last week and the emphasis on openness, innovation and green seem to us to be a significant next step, but we need to look at an overall direction for this important part of the economy.”
“We are not saying we want it done to us without us being in the room, but we do think there is probably more to do to create a more coherent strategy for going forward.”
“Q Emma, does TheCityUK have any thoughts on the same question? Emma Reynolds: We agree entirely with what Catherine has just said. I think the Chancellor has made a start prior to the consideration on Second Reading of the Bill. He obviously set out certain key reforms in certain areas, most notably in green finance. He also launched a number of calls for evidence and taskforces. Working in partnership with Government, industry would like to see the Government come forward with a strategy that pulls all of that together. That is not an easy thing to do, but we are a world-leading financial services sector in the UK, and we want to see that continue. This is a question of partnership with the Government.”
“It is worth saying that although we are technically equivalent right now, and that will not change until 1 January, there will need to be responses from regulators, in terms of new regulation going forward. We have the rise of FinTech, which brings its own challenges, but is a great asset to the UK. We have green finance, as well as some of the socioeconomic trends that have been accelerated by covid. All of these bring new challenges, and so our regulation cannot afford to sit still. We want to avoid unintended divergence when the EU and the UK are facing some of the same challenges. We may go about making our rules in a very different way, but if we could achieve broadly the same outcomes, that could mean we were equivalent, and that would provide advantages to those of our members who trade here and in the EU.”
“Q There is this tension between equivalence, which you fairly unambiguously said you wanted a few minutes ago, and the argument made that we should leave the European Union so that we can have competition and—this argument is made implicitly—make our own regulations, so that we can make ourselves more competitive. Do you think that divergence could make us more competitive, or is it more likely to be destructive to UK financial services’ ability to trade globally? Emma Reynolds: If you are a global company that trades across borders, not just in the EU but in other jurisdictions, what you really want is the same or a similar set of rules. You certainly want global norms and standards on which those rules are based. There is no clamour for significant divergence from what we have.”
“I was nearly late because I came from a panel in the US speaking about the importance of a regulator-to-regulator discussion about some of these issues, and the role the sector might play in helping to develop thinking. It is possible that we may diverge, but it is in the interest of customers and businesses that there should be well regulated financial markets, with consistent rules and regulations over cross-border challenges.”
“It is in all our interests—the EU’s, ours and the institutions in the sector—to have a set of global standards around global issues. So, yes, there is a risk of divergence from either side. Keeping the conversation going as the regulation develops is going to be critical. Taking the green question, for example, we have the EU, which is fairly advanced with its own taxonomy. We are now going to be looking at our own taxonomy, and I think that is a great thing that we should be doing. I also think that green finance is an area in which we can really lead the way, including in regulation. It will be important that we look at how those systems mesh together, and this is a conversation that the sector is encouraging our regulators to have with other countries, too—not simply the EU.”
“Q Thank you. Catherine, we are coming out of the European Union, where we used to wield great heft in the technical discussions around this regulation. I assume that is still the case. I speak from my experience as Treasury Minister. Are you worried that, untethered, the EU will go off in a different direction and regulate in a way that makes it much harder for us to trade into the single market? Catherine McGuinness: I would say two things here. First, if we are not at the table helping to shape the regulation, there is, of course, the risk of divergence from either side as we exercise our own autonomy. I think that global standards are going to be critical for all of us, because we are talking about markets that operate across borders.”
“We would encourage that to continue, because we think it is one of our strengths, and it gives us that competitive edge.”
“On your question about protectionism, I think there is a live debate right now in the EU. One EU interlocuter put it to us very succinctly the other day as the trade-off between location and efficiency. European business has access at the moment to deep and liquid capital markets in the UK, which they find very useful, and which they cannot find in the EU currently. We would like to see that continue—that is in the interests of businesses not only here, but on the continent—but you are right that there is a live debate about what happens next, and whether location is more important to the EU. That debate is going on not only in the EU; covid has accelerated the trend towards protectionism, which is why it is so good to see that the UK Government are taking such an open approach in the Bill.”
“However, our industry thinks it is incredibly important that there be a deal, because that would leave the door open for the EU granting equivalence in certain areas of financial services, and for other agreements that are essential to services more generally, such as provisions around data; frankly, if there is not a better agreement on that between the two sides, that could be very difficult, not only for our members, but for other service industries, too. I hope that answers your question on deal versus no deal. There is nobody in our industry I could name who wants a race to the bottom. That is not the way to make yourself more competitive. We view the UK’s high standards as giving us an competitive edge. We have some of the highest standards in the world. We do not think that there will be a race to the bottom in that way.”
“Q With our leaving the EU, there has already been some competitive behaviour on the part of certain countries in the EU that shall remain nameless, which are trying to grab some of our business. Emma, do you think that that kind of dynamic, competitive, semi-predatory behaviour is going to trigger a kind of race to the bottom? Would whether or not there is a deal in the next few weeks make any difference to how you would contemplate that activity? Emma Reynolds: I hope you do not mind if I take your last question first, because I think it sets the scene for the rest of your questions. There is very little in the deal for financial services, if there is a deal.”
“May I revisit the question about how the UK can retain its voice in setting standards?”
“Q Thank you, Emma. Catherine, I know this is a slightly invidious question, but I am going to ask it anyway. Do you think the FCA is properly equipped and resourced to take up the duties that the Bill confers on it? Catherine McGuinness: Yes, but I think it is welcome that the FCA, under its new leadership, is also carrying out a review. That is appropriate. Clearly, we are asking a new role of it, and it is absolutely appropriate that it should review how it operates as it takes that on. I am very confident in our regulators, but I am also pleased to hear that the FCA is carrying out its review. Secondly, I would go right back to my point around the need for scrutiny and challenge in that space. That should involve not just the Joint Select Committee, but looking at the Treasury’s role.”
“We should really look at next year as part of this new chapter for financial services, and look at how we can make clear our place in standard setting, and in that conversation around global standards.”
“Q Please do. Catherine McGuinness: I feel I missed a couple of points there. It is true that part of the way we will retain our global leadership in standard setting is by bilateral dialogue and co-operation, regulator to regulator, with other countries. There is also the question of how we work with the multilateral organisations. We need to take a good look at how we engage, on our new footing, with the Basel committee—how we engage with other global standard setters. We have a good story to tell. I think next year gives us a very good opportunity, as we take up the presidency of the G7 and with COP26 coming up. I have already mentioned our potential leadership on green standards.”
“In that sense, it is difficult to give a definite answer of what else would need to be in the Bill. Those are the points that we are looking at with great interest in relation to the final adoption of the Bill.”
“Adam Farkas: Given that it is providing a framework for the future regulatory architecture in financial services, I am not suggesting that these are missing, but I will list what is important for the industry: that the framework is predictable—that is key for the players—that the framework provides transparency, so that when the rule making is happening under the Bill, the process is transparent; that it is possible for the industry to engage, so when different rules or pieces of the rules are consulted on, there is sufficient accountability provided, but that is not for us to decide on; and that sufficient time is provided for implementation—that is always a critical issue for the industry. I think that what is proposed in the Bill goes very far on all those points.”
“Q Adam, I wonder whether there is anything that you would have liked to see in this Bill that is not there, given that it is an initial first step. Is there anything that you think should have been paid attention to and dealt with in this Bill that has not been?”
“Q We heard earlier today about the shift away from the LIBOR benchmark—which is obviously another part of the Bill—by the bond markets, and that they want continuity of contracts to be in the Bill, particularly for tough LIBOR contracts that cannot be phased into something else. They also want a safe harbour provision to minimise the possibility of legal challenges on how LIBOR is interpreted as it exists. Do you agree with that? Adam Farkas: I agree that this is an issue that will need to be addressed. There is a question as to whether it needs to be addressed in this particular Bill or in the context of the future rule making by the FCA, but the points raised are valid ones and we also agree with them.”