FSMB: Committee debates access to cash and more

On 1 November, the Public Bills Committee debated further clauses of the FSM Bill in the morning and afternoon sessions.  They discussed:

• Clause 46 and Schedule 7 on the PSR: Andrew Griffith explained that these clauses were designed to give the PSR the same powers as PRA and FCA have. It was relevant for him to apologise for the Government inability to table its proposed intervention power, which would apply to the PSR’s activities also. The clause and schedule were agreed;
• Clause 47 and Schedule 8, and amendments 16-18 and 40-42 and new clauses 10-12 on access to cash were discussed: Martin Docherty Hughes spoke to his proposed amendment, explaining the drop in ATMs in his constituency, meaning people from rural Scotland may have to go to Glasgow for cash, while businesses have nowhere to deposit cash they take. Shaun Bailey echoed this, and noted that for many people, also, paying for cash is unacceptable. Siobhan McDonagh also spoke to the necessity of access to free cash, noting that for customers who can only take out £10 per time, some machines are charging £2 to enable them to do this. She said she does not believe the FCA will force through free access unless the legislation tells it to. Tulip Siddiq said Clause 47 goes “nowhere near” far enough in ensuring cash is available for those who depend on it and said that is the key concern of those who have tabled amendments. She noted that the Bill would be undermined if it cannot legislate for free access and deposit for cash. Andrew Griffith, while agreeing with all the sentiment, said that up to now, there has been no substantive legislative framework for access to cash, so this is a major development. However, he said the Treasury would publish a policy statement “in due course” – when pressed, he said as soon as possible after the Bill is passed. He agreed it was essential for FCA to collect data. He urged that the Clause stand, without the amendments, the main reason being that nothing can happen before the Bill becomes law, and that the Government does not feel it is appropriate for legislation to stipulate that access to cash must be free as this may have unintended consequences and result in legislation that is too prescriptive. After some negotiation, and some acknowledgement by Andrew Griffith that perhaps FCA had come too late into intervention on bank branch closures, amendments were withdrawn and Clause 47 and Schedule 8 agreed to;
• Clause 48 and Schedule 9 on wholesale cash distribution were agreed to;
• Clause 49 and Schedule 10 on applying the SMCR to CCPs and CSDs, and potentially also to RIEs and CRAs in the future, were agreed to;
• Clause 50 and clause 11 and several Government amendments on CCPs in financial difficulties would expand the existing resolution regime and give BoE greater powers. It was agreed that the changes should be brought in as soon as possible after Royal Assent, and the Clause and Schedule (with amendments) agreed to;
• Clause 51, Government amendments 32 and 33 and schedules 12 and 13 on insurers in financial difficulties will enhance the powers of the authorities to better protect policyholders. Among other things, the proposals will require FSCS to provide top up payments to policyholders affected by write-downs, and introduce provisions for the enforcement of contracts while an insurer is undergoing a write down or certain insolvency procedures. These were agreed to;
• Clauses 52-59 on a mix of substantive and technical amendments to FSMA was debated. These include the power for PRA and FCA to take action against firms that are no longer authorised, and to impose conditions on changes in control. All clauses were agreed to;
• Clause 60 and 60 on the Bank of England levy delivers on the commitment to replace the cash ratio deposit scheme, and were agreed to;
• Clause 62 on liability of PSPs for fraudulent transactions would enable and require the PSR to take action to improve reimbursement of APP scam victims. The clause removes barriers that EU legislation had put on PSR powers and places a duty on it to take action in relation to Faster Payments in particular. Tulip Siddiq said the opposition fully support the amendment but think the Government must go further on protecting against fraud. She also asked why the clause ignores the risks that EMIs and crypto firms pose. Emma Hardy noted the evidence from both Barclays and Which? that said similar powers should be given to PSR in respect of other schemes also. Andrew Griffith said he believed this was the case.  After some heated debate as to whether Mr Griffith was saying the EU had prevented the UK from leglisating against fraud, the Clause was agreed to;
• Clause 63 and Schedule 14 on credit unions will allow credit unions to broaden their business into specific products and services and set a framework for further expansion. Tulip Siddiq, supporting the principles, said the Bill did not go far enough to address the outmoded legislative framework within which credit unions have to operate. The clause and schedule were agreed;
• Clause 64 on reinsurance for acts of terrorism will support effective management and oversight of money on public accounts to ensure they comply with expectations and requirements on them.  Emma Hardy queried whether reinsurance for acts of flooding might also be considered at some point. Andrew Griffith said that is a matter for another department. The Clause was agreed to;
• Clause 65-73 with Government amendments and a new Clause 13 on miscellaneous amendments to the Banking Act and for the chair of the PSR to be a member of the FCA board were discussed. These include a new growth and international competitiveness objective and a new regulatory principle to consider net zero. It would also give Treasury power to consider whether a payment system using digital settlement assets or a digital settlement asset provider is likely to threaten financial stability and should therefore be recognised. Tulip Siddiq sought clarification (which was given) that the FCA and PSR are not to be merged.  The clauses were agreed to.

The final day of Committee will be on 3 November.