Minutes of first FSMB Committee sitting

The Hansard report for the FSMB debate on 19 October has been published.

The witnesses giving evidence were, first, Victoria Saporta from the PRA and Sheldon Mills and Sarah Pritchard from the FCA.

• Victoria Saporta highlighted the importance of best international practice being for operationally independent regulators to pursue technical rulemaking based on the framework and objectives set by Government – and the FSMB, she said, achieves this, alongside the necessary greater accountability for the regulators. She also said she considers the Bill achieves the right balance with the secondary competitiveness objective;
• Sheldon Mills commented that the ability for regulators to transpose retained EU law into UK law gives an opportunity to think in terms of what is needed for the UK finanical services system, and that the competitiveness objective gives a spur for regulators to think about growth and competitiveness in pursuing their primary objectives. Finally he said the powers and requirements on regulators to review their rules are also important to ensure the rulebook is at all times efficient;
• Sheldon Mills commented, when asked about the Government intention to give Treasury power to require a regulator to make, amend or revoke rules in matters of significant public interest, that independence needs to be at the heart of the financial system, and that he understood the Government intends to preserve this. Neither he nor Vicky Saporta had seen the amendment and so reserve judgment on it;
• The panel discussed what the metrics and transparency might be to show how regulators would meet the secondary objective;
• Sheldon Mills was asked about financial inclusion and the need for a “have regard” power, which he reiterated that he did not think was necessary given FCA’s existing remit and powers;
• Sheldon Mills was quizzed on access to cash and the current lack of in person banking was criticised.  He noted FCA’s new, stronger guidance and agreed it is important to ensure all institutions should be willing to speak to their customers about their plans.  There was not time for a question about free to use cash points.  However, in a later session David Postings said he was confident the plans for free to use ATMs and shared banking hubs would work.

Next came David Postings of UK Finance and Emma Reynolds of TheCityUK. They were quizzed on competitiveness and intervention powers. David Postings also said they he was not sure the Bill is the right mechanism for tackling fraud. Later, Chris Helmsley said that the Bill’s provisions would not prevent the PSR from implementing its plans. The Committee was also concerned about the sweeping powers the Bill seems to give Treasury to rewrite EU laws with minimal parliamentary oversight. Emma Reynolds said she did not see that there would be a concern that there could be a time when there would be no applicable laws.  They spoke of the potential need for a change in mindset within the regulators.

Chris Helmsley of the PSR was pleased with the additional powers the PSR would not get which it does not currently have, and said that the PSR has the necessary experience and resource to effectively regulate payment systems that use digital assets, although it is a challenge.

Charlotte Clark of the ABI and Karen Northey of the IA also spoke about competitiveness and key markets with which the UK completes, as well as the arguments for and against regulatory objectives taking account of net zero.

The afternoon witnesses included:

• Jon Cunliffe, who spoke of the importance of the UK now taking the opportunity to bring its own best practice into law. He gave as an example the proposals for a strong and simple prudential framework for banking, which would not have been possible before Brexit. He, alongside the other regulators, supports strongly the need for regulatory independence;
• Paddy Greene from Which? who focussed on the importance of free and appropriate access to cash and reimbursement for APP scam victims;
• Natalie Ceeney from the Cash Action Group and Martin Coppack of Fair by Design, to speak of the separate needs for access to cash and access to banking services. Natalie Ceeney said the Bill should perhaps consider the need for face-to-face services and FCA powers. Martin Coppack was critical that the Bill does not properly address the “poverty premium”. Both agreed that access to cash is vital;
• representatives from the building society and credit union sectors, who were broadly pleased with what the Bill would bring them;
• CIFAS, which noted that if a high limit for APP reimbursement was set, it not only provides protection for victims but really passes the losses onto the banks, making it easier in some ways for fraudsters to have no moral dilemmas about who they are stealing from. He also noted that three issues have caused an increase in fraud – social media, organised crime taking an interest in it, and faster payments; and
• Martin Taylor, former external member of the FPC, who said that the proposed intervention power is “a shockingly bad idea”.

The Committee has additionally published several written submissions it received from key financial institutions and industry associations.