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Mr. Deputy Speaker (Mr. Michael Lord): Order. The hon. Gentleman is asking the Economic Secretary not to do what he is starting to do. The amendments are quite tightly drawn, and I would be grateful if he would stick to them.

Mr. St. Aubyn: I am grateful to you, Mr. Deputy Speaker, for that point.

We believe that the Government are trying to win credibility through introducing the Bill and through what they have said during the passage of it, but unless they accept the amendments, they will not establish sufficient credibility to reassure the banks in London.

9 pm

Mrs. Liddell: I commend the hon. Member for Guildford (Mr. St. Aubyn) on his after-dinner speech. I hope that he gets the job.

On a couple of occasions during the debate, I found myself checking the subject matter of the amendments. We are talking about the cost of regulation, which the Government take extremely seriously. I am delighted to note that Conservative Members have been reading the collected speeches that I have been delivering over the past few weeks. I hope that they find a cure for their insomnia soon.

As we said repeatedly in Committee, it is important to recognise that the Bill is about the transfer of the existing structure of banking supervision from the Bank of England to the new Financial Services Authority. I stress again that the Bill is about the transfer of the existing structure of banking supervision. The Government's proposals for financial services regulation comprise a two-part process. We are taking the opportunity to transfer banking supervision at the moment because we have a Bank of England Bill before us. It is about 40 years since the last such Bill was before the House. We are currently

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consulting and drafting a financial services reform Bill, which will be introduced in the next Queen's Speech. Several points raised in the debate relate to that next stage of reform of financial services regulation.

I am grateful to Opposition Members for recognising the strength of the Government's view on the cost of financial services regulation. We have made numerous statements both in and outwith the House on the need to contain the costs of supervision.

Conservative Members have on a couple of occasions alluded to the costs of financial services regulation in this country. We have had extensive discussions with the banking community and the wider financial services industry in this country and internationally. They pay tribute to the benign nature and cost-effectiveness of this country's banking supervision. That is what we want to continue. We want to continue a regime of financial services regulation for the banks which allows them to thrive in the City of London--and, indeed, in the city represented by the Chief Secretary to the Treasury, my right hon. Friend the Member for Edinburgh, Central (Mr. Darling).

I regret that I do not find it possible to accept the amendments tabled by the hon. Member for Sevenoaks (Mr. Fallon) and his right hon. Friends. To some extent, they go against the intention fully to consult the financial services community on the future structure of the cost of financial services regulation. At present, we are operating within the structure that was laid down by the Conservative Government in the Financial Services Act 1986. We take on board the stated intentions of the Financial Services Authority on costs.

As for amendments Nos. 8 and 15, as the hon. Member for Sevenoaks pointed out, my right hon. Friend the Chief Secretary to the Treasury was specific in Hansard, column 77, of the Standing Committee proceedings about the lack of wisdom of putting in the Bill a ceiling on costs or fees that would be unnecessary and inflexible. We have already said explicitly that we expect the Bank and the FSA to bear down on costs. I am happy to repeat the Government's intention that the overall burden on the relevant institutions in aggregate should be no greater than it is today. We would prefer it to be lower.

Mr. St. Aubyn: Can the hon. Lady give a further assurance that the proportion of the burden borne by smaller banks will not grow--that the proportions borne by the smaller and larger will remain roughly the same?

Mrs. Liddell: We have made a statement about proportionality. Later this evening, we shall discuss cash ratio deposits, which are another element of the costs on banks and other financial institutions, including the building societies. A consultation process is taking place. We believe that the financial services community is best placed to advise the FSA on the costs that should be levelled and the relationship between costs and effectiveness. If costs are disproportionate to the effectiveness and the nature of regulation, the overall impact of regulation is reduced.

As for amendment No. 9, the FSA has already made it clear that, this year, it will consult on its longer-term proposals for a comprehensive charging regime covering

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all the types of firms that will be regulated by the FSA. I imagine that any right-minded person would accept that that is a logical way to proceed. I reiterate what my right hon. Friend the Chancellor said when he launched the FSA in October last year. There will be a specific statutory requirement on the FSA to be efficient and effective.

We have also concluded that we should give specific responsibility to the FSA to deal with financial crime. The Solicitor-General and I have already made extensive speeches on the matter and there can be no doubt about the Government's view on it.

Mr. Fallon: I fully take the point that the FSA is to consult on the final regime, but, as the Minister referred earlier to the Government's intentions and wishes, will she say that the Government support the principle of amendment No. 9?

Mrs. Liddell: In general terms, we have already made that clear in the debates in Committee. I would not wish anyone to assume from that that we have any attraction to the concept of caps. Caps can sometimes be used as targets. That would be a most unacceptable way to proceed. If we were to set a cap, people might believe that that was the figure aimed for. That is one of the reasons why we have a reservation about the use of caps in relation to fee setting.

Amendment No. 9 would also require the FSA to reduce its banking supervision fees for banks with good track records. The amendment does not specify whether it is the cost of regulation or the inherent riskiness of the business that should be taken into account when setting the level of fees. The FSA has again undertaken to consult this year on the future charging regime. That is a more acceptable way forward, as that consultation will take into account the costs of regulation and the riskiness of the business. I assure the House that there will soon be a whole new framework for financial services regulation, which will include a statutory responsibility on the FSA to take costs into account.

Amendments Nos. 4 and 5 relate to a large extent to the wholesale market. In that respect, we seek to rely on section 43 of the Financial Services Act 1986, which was passed by the Conservative Government and which provides for a special wholesale markets regime, with lighter-touch regulation than for retail financial services. I understand that that is sometimes referred to as the "grey paper". Section 171 of that Act makes similar provision for settlement arrangements for the wholesale money markets and, at present, only one body is regulated under that section.

The amendments would also impose a requirement to publish representations. I do not see that it would be helpful to introduce another bureaucratic requirement, because that in itself would be costly; but I can assure the House that the FSA has made it clear that it is of a mind to make available any representations it receives, provided those making the representations have not said that they wish them to be treated in confidence. I hope that, on the basis of those assurances, the House will reject the amendments.

I have to make it clear that the FSA has undertaken a major process of consultation, which is going on at the present time and which will be extended throughout this

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year. When we reach the next stage of reform of the financial services sector, the Government will publish the Bill in draft. It will be published in spring or summer this year so as to give the financial services community an opportunity to comment on the structure of the legislation. [Interruption.] I see that the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) is worried by the words "spring or summer". I am a Scot, and summer comes rather later to my part of the world, so I am always a bit variable about when spring and summer actually begin.

I accept the points made by the Opposition and recognise that they have paid tribute to the Government's determination in respect of costs. However, I must emphasise that we are currently transferring the existing structure of banking supervision from the Bank of England to the FSA and that we are in the process of a much bigger reform. We do not want to constrain the consultation that is to take place as we structure the FSA for the future, so I ask the House to reject the amendments.

Mr. Fallon: I have to say that I am somewhat disappointed, but first I want to correct the Economic Secretary on one small point. Time has passed more quickly than she thought: it is not 40 years since the last Bank of England Act was passed, but 51 years.

I am particularly disappointed that, from the point of view of the Government, the hon. Lady did not accept the principle underlying amendment No. 9. I do not believe that she addressed amendment No. 6 at all, although that omission might have been inadvertent. She may not be allowed to speak again, but I shall give way if she cares to intervene in my speech. I asked why schedule 6 alone was not subject to affirmative resolution. That would strengthen the statutory protection and give comfort to those who have to pay the fees, so there is a case for parliamentary scrutiny.


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