The work of the Sub-Committee on Financial Services Regulations: January 2024

This is a House of Commons Committee report.

Fourth Report of Session 2023–24

Author: Treasury Committee

Related inquiry: Financial services regulation consultations

Date Published: 1 February 2024

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Contents

1 Remit and approach of the Sub-Committee

1. We set up the Treasury Sub-Committee on Financial Services Regulations (‘the Sub-Committee’) in June 2022 to examine changes to regulations proposed by the Financial Conduct Authority (FCA), the Bank of England, the Prudential Regulation Authority (PRA) or the Payment Systems Regulator (PSR).

2. The Sub-Committee takes a targeted approach to scrutinising proposed regulations put forward by these regulators. It has agreed to consider regulatory proposals which:

  • have been put forward by a regulator for which the Treasury Committee has oversight responsibility;
  • are at consultation stage, when the Sub-Committee could best exert influence; and
  • contain a draft text which has legal effect.

3. When reviewing such proposals, the Sub-Committee considers the following factors in determining the degree of additional scrutiny warranted:

  • does it have a significant impact on consumers?
  • does it have a significant disproportionate cost for firms?
  • does it incorporate any politically significant proposals?
  • is it a new activity that has not been regulated before?

4. The Sub-Committee takes a view on what form of additional scrutiny is appropriate for each regulatory proposal consultation, and is a forum for oral evidence when merited. Depending on the subject, external deadlines, and the amount of oral and written evidence the Sub-Committee decides to take, an inquiry may give rise to a report to the House, published by the Treasury Committee. Other inquiries may simply consist of oral evidence without a report. Furthermore, the Treasury Committee may choose to raise issues relating to proposals considered by the Sub-Committee—such as the broader regulatory approach—with the relevant regulators during its regular scheduled accountability sessions.1

5. The Sub-Committee will also, from time to time, consider draft affirmative Statutory Instruments (SIs) laid by the Government in relation to the Edinburgh Reforms and financial services regulation more widely. The Sub-Committee indicated its intention to look at such SIs in correspondence with the Economic Secretary to the Treasury.2

6. The Sub-Committee continues to hold a sifting meeting around once every two months, and publish Reports regularly. Each Report will include a rolling Annex, outlining all the proposals the Sub-Committee has looked at during the current Session, and will be published on both the Sub-Committee and Treasury Committee’s websites.

7. This is the fourth such Report on the work of the Sub-Committee on Financial Services Regulations. It covers the period of the Committee’s work in the period between July 2023 and January 2024.

Specialist Advisers

8. Under Standing Order No. 152(4)(b), the Treasury Committee appointed two Specialist Advisers to assist the work of the Sub-Committee. Sue Lewis and Simon Gleeson were appointed on 22 September 2022, and reappointed in September 2023.

9. Simon Gleeson is a former partner and consultant at Clifford Chance in London. His experience includes advising governments, regulators and public bodies as well as banks, investment firms, fund managers and other financial institutions on a wide range of financial services regulatory issues. He was the lead legal advisor to the main UK banking and financial services industry bodies regarding Brexit.

10. Previously a senior Treasury official, Sue Lewis is an independent board member and consultant specialising in financial services consumer issues. She is on the boards of Surviving Economic Abuse and the International Longevity Centre, and a lay member of the Institute and Faculty of Actuaries Regulatory Board. Her previous experience includes chairing the FCA’s independent Financial Services Consumer Panel and Trustee Director at The People’s Pension. Sue also advises international organisations on financial education, financial inclusion, and financial services consumer protection regulation.

Other developments relevant to the Sub-Committee

Treasury Committee Report on the Edinburgh Reforms

11. On 9 December 2022 the Rt Hon. Jeremy Hunt MP, Chancellor of the Exchequer, announced a package of measures to reform the UK’s financial services rules. These measures were referred to as the Financial Services “Edinburgh Reforms.”3 Several were to be implemented by regulatory changes subject to consultation, and were consequently subject to scrutiny by the Sub-Committee.

12. On 8 December 2023 we published a Report examining overall progress on the Edinburgh Reforms, based in part on HM Treasury analysis provided to us.4 We found that while some reforms had been achieved, others had not yet been delivered despite claims to the contrary, while some could not necessarily be considered reforms at all. The Sub-Committee will continue to scrutinise components of the Edinburgh Reforms package as they come to consultation.

Establishment of a Lords Committee on financial services regulation

13. Under the terms of the Financial Services and Markets Act 2023, a new duty has been imposed on Regulators to provide copies of consultations on financial services regulations to a select committee in each House of Parliament, or a joint committee should one exist. The duty applies to consultations issued by the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), Payment Systems Regulator (PSR), and the Bank of England in respect of rules relating to central counterparties and central securities depositories.5

14. Our Sub-Committee will continue to receive consultations on behalf of the House of Commons, as it did before any legislative requirement was enacted. The House of Lords has agreed to establish its own committee on financial services regulations.6 We note that a Lords Liaison Committee Report states that “it would be desirable” for the new committee to “avoid duplication and instead aim for complementarity”.7 Our Sub-Committee will continue to carry out its scrutiny of new regulatory consultations as and when they are published. The full Committee will naturally continue to consider the wider context of the regulators work, as it has always done. Consideration of the existing acquis could prove a rich seam of work for the Lords Committee.

2 Sift meetings and decisions

July 2023 sift

15. At its meeting on 18 July 2023, the Sub-Committee considered the proposals set out in Table 1, and reached the following decisions:

Table 1

Consultation Paper

Sub-Committee decision

PRA (CP10/23)

Solvent exit planning for non-systemic banks and building societies

Seek oral evidence on the consultation

PRA (CP12/13)

Review of Solvency II: Adapting to the UK insurance market

Seek oral evidence on the consultation

FCA (CP23/15)

The Framework for a UK Consolidated Tape

Write to the Chancellor of the Exchequer and the FCA

PRA (CP10/23): Solvent exit planning for non-systemic banks and building societies

16. The solvent exit scheme proposed in the consultation constituted a significant change in the management of failing small banks. We took oral evidence from the Prudential Regulation Authority (PRA) on 13 September 2023, noting the context of the collapse of Silicon Valley Bank in March 2023, which, despite being non-systemic, had caused significant repercussions. At that session, Sam Woods, Chief Executive of the PRA, explained his belief that facilitating solvent exit would benefit shareholders as there was less destruction of assets than under insolvent exit. He added that the resolution of Silicon Valley Bank had gone “well” in “an extremely high-pressure and very rapid situation”, and that its collapse had “made clear to us the level of concern and discomfort there might have been around discontinuity of access to current accounts for both business and potentially individuals”. He said that “to get better” at solvent exit for non-systemic banks could assist in reducing such risks.8

PRA (CP12/23): Review of Solvency II: Adapting to the UK insurance market

17. The Solvency II regime governs the prudential regulation of insurance firms in the UK. This wide-ranging PRA consultation included a number of proposals for reform of Solvency II, in accordance with the Government’s priorities.9 In oral evidence on 12 September 2023, we asked the PRA about subjects including:

a) the time taken to implement the Government’s desired reforms, and when any resulting economic benefit might be felt;

b) the possible effect on UK investment resulting from changes to the Matching Adjustment10;

c) benefits and risks to insurance policyholders arising from the reforms; and

d) the effect of reforms on costs accrued to industry and whether, if these reduced, any such reduction should be passed onto consumers.11

We will continue to monitor the reforms as they progress over the year ahead.

FCA (CP23/15) The Framework for a UK Consolidated Tape

18. The FCA proposed a regulatory framework to enable the establishment of a single Consolidated Tape for bonds.12 The proposed framework allowed for one provider to be chosen through a tender process, essentially creating a monopoly.

19. We wrote to the Chancellor of the Exchequer on 25 July 2023 asking why he considered intervening to establish a monopoly was the correct policy, rather than allowing the market to provide the service. He replied that market participants had highlighted a need for more and easier market data access. He argued that industry engagement suggested it was unlikely that a tape would emerge in an open market, justifying a more interventionist approach.13

20. We also wrote to the FCA to ask whether it had analysed why no consolidated tape had emerged in the market without intervention, and what assessment it made of the costs and benefit of allowing more than one tape to emerge in competition. The FCA said that current regulations offered few benefits or commercial incentives to operators of a tape. It set out in more detail the relative advantages and disadvantages of having multiple or single tapes. It noted that a review of the proposed regulatory framework would take place halfway though the first five-year contract for a single tape.14

October 2023 sift

21. At its meeting on 17 October 2023, the Sub-Committee considered the proposals set out in Table 2, and reached the following decisions:

Table 2

Consultation Paper

Sub-Committee decision

FCA (CP23/20)

Diversity and inclusion in the financial sector - working together to drive change

Include consultation as part of ongoing inquiry

PRA (CP18/23)

Diversity and inclusion in PRA-regulated firms

Include consultation as part of ongoing inquiry

FCA (CP23/21)

Consumer Credit - Product Sales Data Reporting

Write to FCA

PRA (CP15/23)

Securitisation: General requirements

Seek oral evidence on the consultation

FCA (CP23/17)

Rules relating to Securitisation

No further immediate action

PRA (CP14/23)

Pillar 3 remuneration disclosure

No further immediate action

PRA (CP16/23)

Updating UK Technical Standards on the identification of global systemically important institutions

No further immediate action

FCA (CP23/18)

Quarterly Consultation: September 23, No. 41

No further immediate action

FCA (CP23/19)

Future Regulatory Framework, the Insurance Distribution Directive

No further immediate action

PRA (CP17/23)

Capitalisation of foreign exchange positions for market risk

No further immediate action

FCA (CP23/20) and PRA (CP18/23), relating to diversity and inclusion

22. Following the publication of a discussion paper in 2021,15 the FCA and PRA consulted on measures that would require certain firms within the regulatory ambit to

a) establish, implement and maintain a diversity and inclusion strategy;

b) collect, report and disclose certain diversity and inclusion data; and

c) determine and set appropriate diversity targets.

Firms with fewer than 251 employees would be exempt, as they are from wider Government requirements on pay gap reporting. The consultation suggested a one-off cost of £561 million across the whole sector, with average ongoing costs of approximately £102,500 a year for large firms, and less than £30,000 for small firms.16

23. In July 2023 the Treasury Committee launched an inquiry into Sexism in the City, which is ongoing.17 Questions about the regulators’ proposals have been included as part of that inquiry and its terms of reference.

FCA (CP23/17) Rules relating to Securitisation and PRA (CP15/23) Securitisation: General requirements

24. The FCA and the PRA both published concurrent consultations on changes to their rules around securitisations, as part of their process of moving onshored legacy EU rules into their rulebooks. Both regulators stated in their consultations that the proposed new rules “would largely preserve current requirements.”18

25. We wrote to the FCA asking whether its proposed changes would allow the UK to expand its securitisation market, and whether the changes would facilitate lower borrowing costs for UK firms. We will publish this correspondence and the FCA’s response in due course.

January 2024 sift

26. At its meeting on 9 January 2024 the Sub-Committee considered the proposals set out in Table 3, and reached the following decisions:

Table 3:

Consultation Paper

Sub-Committee decision

FCA (CP23/29)

Access to cash

Seek oral evidence on the consultation

Bank of England

Consultation on the codes of practice for wholesale cash distribution market oversight

Seek oral evidence on the consultation

PRA (CP26/23)

Operational resilience: Critical third parties to the UK financial sector

Seek oral evidence on the consultation on the work of the PRA

PRA (CP19/23)

Review of Solvency II: Reform of the Matching Adjustment

Seek oral evidence on the consultation on the work of the PRA

FCA (CP23/24)

Capital deduction for redress: personal investment firms

Seek oral evidence on the consultation

PRA (CP23/23)

Identification and management of step-in risk, shadow banking entities and groups of connected clients

Seek oral evidence on the consultation on the work of the PRA

FCA (CP23/26)

Implementing the Overseas Funds Regime (OFR)

Write to FCA

FCA (CP23/28)

Updating the regime for Money Market Funds

Write to FCA

PRA (CP20/23)

Ring-fenced bodies: managing risks from third-country subsidiaries and branches

No further action

FCA (CP23/27)

Reforming the commodity derivatives regulatory framework

Write to FCA

FCA (CP23/29): Access to Cash; and the Bank of England consultation on the codes of practice for wholesale cash distribution market oversight

27. The Financial Services and Markets Act 2023 requires the FCA to “[seek] to ensure reasonable provision” of cash deposit and withdrawal services for personal and business current accounts across the UK. Non-exhaustively, the proposed regime would require designated firms to:

a) undertake cash access assessments to determine whether additional cash access services are required to address local deficiencies as a result of a material reduction or change in service;

b) respond to cash access requests from local residents;

c) ensure they do not close cash facilities, including bank branches, until any additional cash services identified as needed in the relevant assessment are available; and

d) provide customers with clear information about where they can access cash services and how to raise concerns about a deficiency in cash access in their local area.

The scope of the consultation does not extend to wider issues relating to closure of bank branches, or to the acceptance of cash by businesses.

28. Given the possible impact of changes in cash access rules on businesses and communities, as well as on the financial sector, we will seek oral evidence on the consultation. We will seek to consider the Bank of England’s consultation on codes of practice for wholesale cash distribution market oversight at the same evidence session.19

PRA: CP26/23: Operational resilience: Critical third parties to the UK financial sector

29. Critical third parties (CTPs) are organisations or persons that HM Treasury has designated as critical because their failure could threaten the stability of, or confidence in, the UK financial system. Examples include cloud web service providers. Regulators can impose duties on CTPs, direct them to take actions, and carry out enforcement should a CTP fail in those duties and actions. HM Treasury has not yet designated any CTPs; the consultation expects that 20 entities may eventually be designated.20

30. The PRA’s consultation on CTP resilience would result in a joint regulators’ supervisory statement to set out how CTPs should comply with requirements placed upon them. It would also set requirements for CTPs in Bank and PRA Rulebooks and FCA Handbook.

31. We will seek to raise the consultation as part of upcoming oral evidence on the work of the PRA.

PRA: CP19/23: Review of Solvency II: Reform of the Matching Adjustment

32. Reform of the Matching Adjustment is an important part of changes to Solvency II, alongside those considered in our July sift.

33. Widening the range of investment able to be included in Matching Adjustment portfolios will reduce the amount of capital an insurer has to hold. This represents a significant change to the insurance market. The consultation states that changes will affect all Solvency II firms, the Society of Lloyd’s including its members and managing agents, and all insurance and reinsurance undertakings that have a UK branch and have applied to use the Matching Adjustment.21 Given the significance of these changes, we will therefore seek to raise this consultation as part of upcoming evidence on the work of the PRA.

FCA: CP23/24: Capital deduction for redress: personal investment firms

34. Personal investment firms (PIFs) are firms that mainly provide advice and arrange deals in retail investment and pensions products. PIFs are subject to prudential regulation by the FCA. The FCA’s consultation proposes strengthening its prudential requirements on PIFs, so that they hold more capital for redress. This is because some £757 million of the £973 million that consumers received in redress from the Financial Services Compensation Scheme between 2016 and 2022 resulted from PIFs leaving the market. FCA analysis suggests that a very small proportion of PIFs was responsible for the majority of this redress.22

35. The FCA seeks to ensure that PIFs hold more capital—a minimum of 28 per cent—against their potential redress liabilities, moving more towards a ‘polluter pays’ approach. Given this could be costly for PIFs, most of which are not causing significant problems, the Committee will seek oral evidence on the consultation.

PRA CP23/23: Identification and management of step-in risk, shadow banking entities and groups of connected clients

36. Step-in risk is the risk that a bank provides financial support to an unconsolidated entity that is facing stress, in the absence of, or in excess of, any contractual obligations to provide such support. The PRA is proposing a regulatory framework around how firms manage step-in risk. This includes requiring firms to undertake regular assessments to ensure they identify and manage step-in risk, consider mitigative action, and evaluate the assessment they make.23

37. As this is a new area of rule-making, we will seek to consider the consultation as part of upcoming oral evidence on the work of the PRA.

Further correspondence

38. We will write to the FCA with questions on each of the following consultations:

a) FCA CP23/26: Implementing the Overseas Funds Regime (OFR): including to ascertain the FCA’s views regarding HM Treasury responsibility for equivalence decisions;

b) FCA CP23/28: Updating the regime for Money Market Funds: including to ask about the effect of the measures on UK-based MMFs international competitiveness;

c) FCA CP23/27 Reforming the commodity derivatives regulatory framework: to ask whether the proposed reforms could have prevented events in March 2022 at London Metal Exchange associated with nickel trading.24

3 Continuing work

Further work arising from the June 2023 sift

Multi-occupancy building insurance

39. The Sub-Committee took oral evidence on CP23/8, an FCA consultation relating to multi-occupancy building insurance.25 The cost of insurance for multi-occupancy buildings has increased significantly since the Grenfell Tower fire in 2017. The consultation included proposals intended to support residents in multi-occupancy buildings by requiring leaseholders to be given more information about the insurance they receive. The proposal would seek expressly to include leaseholders as ‘customers’ for the purposes of the FCA’s rules. This would require insurers and brokers to show how they have considered the interests of leaseholders when designing, pricing and distributing their products, as well as ensure that the product provides fair value to leaseholders as well as any other customers.

40. We took evidence from the Leasehold Advisory Service, the Financial Services Consumer Panel and the FCA.26 We thereafter wrote to the Secretary of State for Levelling Up, Housing and Communities to clarify:

a) the timeframe for any required legislation to ban commissions on building insurance being paid to landlords and freeholders; and

b) the work being undertaken to manage commissions to freeholders for services besides insurance over which leaseholders had no control.27

In his response on 22 September, the Secretary of State confirmed his intention to ban commissions on insurance premiums being passed onto leaseholders.28 This has since been included in the Government’s Leasehold and Freehold Reform Bill.29

Cost-benefit analyses

41. The Sub-Committee noted that the Financial Services and Markets Act 2023 made provision for Cost Benefit Analysis [CBA] Panels “dedicated to supporting the development of the regulators’ CBA [ … ] The CBA Panels will also be able to review the regulators’ CBA methodology and processes by examining published CBAs”.30 The Committee wrote to the FCA to ask how they intended to implement the requirement for Panels, and change their processes to make best use of the Panel once constituted.31 In their response, the FCA told us they were in the process of recruiting panel members. The panel would review a draft CBA and provide feedback, and then be sent a final CBA for further comment before its publication. The FCA expected the new panel to produce an annual report, including explaining any areas where the CBA Panel’s opinion on an analysis differed from the FCA teams involved in preparing it.32

Further work arising from the December 2022 sift

42. We took oral evidence on 22 February 2023 relating to FCA CP22/20: Sustainability Disclosure Requirements (SDR) and investment labels, which we first considered during our December 2022 sift. We then wrote to the FCA to ask for more detail regarding enforcement and international convergence.33

43. The FCA published its final policy statement in November 2023, recognising the concerns raised by the Sub-Committee.34 This included a specific annex on international compatibility.35

Further work arising from the October 2022 sift

PSR CP22/4 - Authorised push payment (APP) scams: Requiring reimbursement

44. The Sub-Committee’s previous reports summarise the work we have undertaken so far to scrutinise the Payment Systems Regulator’s (PSR’s) proposed approach to requiring banks to reimburse victims of Authorised Push Payment fraud.36 This has included:

a) consideration of the PSR’s initial proposal, PSR CP22/4, at our October 2022 Sub-Committee meeting;

b) receiving oral evidence in December 2022 from the PSR, Pay.UK (the industry body proposed in the consultation paper to undertake much of the work to design and deliver the mandatory reimbursement scheme), and the Financial Ombudsman Service;37

c) further exchanges of correspondence with regulators and others, as set out in our previous quarterly Report;38 and

d) the publication of a Report, Scam reimbursement: pushing for a better solution.39.

45. In October 2023 the PSR published a summary of how banks and other payment firms had performed in tackling APP scams during 2022. These performance figures therefore pre-date the upcoming final implementation of new rules on APP scam reimbursement. The PSR committed to publishing this data annually.40

46. In December 2023 the PSR published its final policy statement relating to APP scams reimbursement. It confirmed that the maximum level of reimbursement per claim would be £415,000, with an excess of £100. It confirmed 7 October 2024 as the final date by which firms must comply with the new rules.41 We shall continue to monitor the effectiveness of the PSR’s new policy on APP scam reimbursement over the period to come.

Annex: Consultation Paper tracker, as of 9 January 2023

Sift

Regulator

Consultation Paper

Sub-Committee decision

Oct 22

PRA

PRA (CP6/22)

Model risk management principles for banks

Not considered - does not meet Sub-Committee criteria

Oct 22

PRA

PRA (CP7/22)

Credit Unions: Changes to the Regulatory Regime

No further immediate action

Oct 22

PRA

PRA (CP8/22)

Remuneration: Unvested pay, Material Risk Takers and public appointments

Write to the PRA

Oct 22

PRA

PRA (CP9/22)

Depositor Protection

No further immediate action

Oct 22

PRA

PRA (CP10/22)

Insurance special purpose vehicles: Further updates to authorisation supervision

No further immediate action

Oct 22

PRA

PRA (CP13/22)

Amendments to the PRA’s approach to identifying other systemically important institutions (O-SIIs)

No further immediate action

Oct 22

PRA and FCA

PRA (CP11/22) and FCA (CP22/13)

Margin requirements for non-centrally cleared derivatives: Amendments to BTS 2016/2251

No further immediate action

Oct 22

FCA

FCA (CP22/11)

Winding down ‘synthetic’ sterling LIBOR and US dollar LIBOR

Not considered – does not meet Sub-Committee criteria

Oct 22

FCA

FCA (CP22/14)

Broadening retail access to long-term asset funds

Write to the FCA

Oct 22

FCA

FCA (CP22/15)

Calculating redress for non-compliant pension transfer advice

No further immediate action

Oct 22

FCA

FCA 22/16

Office for Professional Body Anti-Money Laundering Supervision: Sourcebook update

Not considered – does not meet Sub-Committee criteria

Oct 22

FCA

FCA (CP22/17)

Quarterly Consultation No. 37

No further immediate action

Oct 22

FCA

FCA (CP22/18)

Guidance on the trading venue perimeter

No further immediate action

Oct 22

FCA

FCA (CP22/19)

Creation of a baseline financial resilience regulatory return

No further immediate action

Oct 22

PSR

PSR (CP22/4)

Authorised push payment (APP) scams: Requiring reimbursement

Write to the PSR, oral evidence session and report

Dec 22

PRA

PRA (CP12/22)

Risks from contingent leverage

Write to the PRA on both CP12/22 and CP14/22

Dec 22

PRA

PRA (CP14/22)

Review of Solvency II: Reporting phase 2

Dec 22

FCA

PRA/FCA (CP22/20)

Sustainability Disclosure Requirements (SDR) and investment labels

Write to the FCA, and oral evidence session

Follow-up correspondence issued and published

Dec 22

FCA

FCA (CP22/21)

Synthetic US dollar LIBOR

Not considered – does not meet Sub-Committee criteria

Dec 22

FCA

FCA (CP22/22)

Proposed extended asset retention requirement for firms under the British Steel Pension Scheme consumer redress scheme

No further immediate action

Dec 22

FCA

FCA (CP22/24)

Broadening access to financial advice for mainstream investments

Write to the FCA

Jan 23

PRA and FCA

PRA (CP15/22) and FCA (CP22/28)

Remuneration: Ratio between fixed and variable components of total remuneration (‘bonus cap’)

Raise in oral evidence with the PRA

Jan 23

PRA

PRA (CP16/22)

Implementation of the Basel 3.1 standards

Raise in oral evidence with the PRA

Write to stakeholders

Jan 23

FCA

FCA (CP22/23)

Regulatory fees and levies: policy proposals for 2023–24

Write to the FCA

Jan 23

FCA

FCA (CP22/25)

Proposed regulatory framework for pensions dashboard service firms

No further immediate action

Jan 23

FCA

FCA (CP22/26)

Quarterly Consultation Paper No. 38

No further immediate action

Jan 23

FCA

FCA (CP22/27)

Introducing a gateway for firms who approve financial promotions

Write to the FCA and HM Treasury

Jan 23

PSR

PSR (CP22/5)

Authorised push payment scams Measure 1 Metric C process: revised approach

No further immediate action

Jan 23

PSR

PSR (CP22/6)

PSR regulatory fees 2023–24

No further immediate action

March 23

FCA

FCA (CP23/1)

Insurance guidance for the support of customers in financial difficulty

Write to the FCA

March 23

FCA

FCA (CP23/2)

Streamlining our rules on structured digital reporting of financial statements

No further immediate action

March 23

FCA

FCA (CP23/4)

Value for Money: A framework on metrics, standards, and disclosures

Not considered – does not meet Sub-Committee criteria

March 23

FCA

FCA (CP23/5)

Debt packagers: feedback on CP21/30 and further consultation on new rules and perimeter guidance

Write to the FCA

March 23

PRA and FCA

FCA (CP23/3) and PRA (CP1/23)

Financial Services Compensation Scheme - Management Expenses Levy Limit 2023/24

Write to the Financial Services Compensation Scheme

March 23

PRA

PRA (CP2/23)

Moving Senior Managers Regime forms from the PRA Rulebook

No further immediate action

March 23

PRA

PRA (CP3/23)

Dealing with insurers in financial difficulties

No further immediate action

Apr 2023

FCA

Quarterly Consultation Paper No. 39

No further immediate action

Apr 2023

PSR

Proposed revised penalty statement consultation

No further immediate action

Apr 2023

PRA

The Strong and Simple Framework: Liquidity and Disclosure requirements for Simple-regime Firms

Write to the PRA

Apr 2023

PRA

Remuneration: Enhancing proportionality for small firms

No further immediate action

Apr 2023

PRA

The non-performing exposures capital deduction

No further immediate action

Apr 2023

FCA

Regulatory fees and levies: policy proposals for 2023/24

Write to the FCA

June 23

FCA

Multi-occupancy building insurance

Oral evidence taken, July 2023

June 23

FCA

Primary Markets Effectiveness Review -- Feedback to DP22/2 and proposed equity listing rule reforms

Not considered – does not meet Sub-Committee criteria

June 23

FCA

Strengthening Protections for Borrowers in Financial Difficulty: Consumer Credit and Mortgages

Raised with FCA during course of ongoing scrutiny, July and Dec 2023

June 23

FCA

Remuneration: enhancing proportionality for dual-regulated firms

No further immediate action

June 23

FCA

Expansion of the Dormant Assets Scheme - Second phase

No further immediate action

June 23

PRA

The Bank of England’s approach to enforcement: proposed changes and clarifications

Raise with PRA during course of ongoing Committee scrutiny

June 23

PRA

Regulated fees and levies: Rates proposals 2023/24

No further immediate action

June 23

FCA

Changing the scope of the baseline financial resilience regulatory return

No further immediate action

June 23

FCA

Quarterly consultation - No 40

No further immediate action

June 23

FCA

Occasional paper April 2023

No further immediate action

July 2023

PRA

Solvent exit planning for non-systemic banks and building societies

Seek oral evidence on the consultation

July 2023

PRA

Review of Solvency II: Adapting to the UK insurance market

Seek oral evidence on the consultation

July 2023

PRA

PRA statement on the review of rules

Not considered – does not meet Sub-Committee criteria

July 2023

FCA

The Framework for a UK Consolidated Tape

Write to the Chancellor of the Exchequer and the FCA

Oct 2023

FCA

Diversity and inclusion in the financial sector - working together to drive change

Include consultation as part of ongoing inquiry

Oct 2023

PRA

Diversity and inclusion in PRA-regulated firms

Include consultation as part of ongoing inquiry

Oct 2023

FCA/PRA

Margin requirements for non-centrally cleared derivatives: Amendments to BTS 2016/2251

Not considered – does not meet Sub-Committee criteria

Oct 2023

FCA

Consumer Credit - Product Sales Data Reporting

No further immediate action

Oct 2023

PRA

Securitisation: General requirements

No further immediate action

Oct 2023

FCA

Rules relating to Securitisation

No further immediate action

Oct 2023

PRA

Pillar 3 remuneration disclosure

No further immediate action

Oct 2023

PRA

Updating UK Technical Standards on the identification of global systemically important institutions

No further immediate action

Oct 2023

FCA

Quarterly Consultation: September 23, No. 41

No further immediate action

Oct 2023

FCA

Future Regulatory Framework, the Insurance Distribution Directive

No further immediate action

Oct 2023

PRA

Capitalisation of foreign exchange positions for market risk

No further immediate action

Jan 2024

FCA

Access to cash

Seek oral evidence on the consultation

Jan 2024

Bank of England

Consultation on the codes of practice for wholesale cash distribution market oversight

Seek oral evidence on the consultation

Jan 2024

PRA

Operational resilience: Critical third parties to the UK financial sector

Seek oral evidence on the consultation on the work of the PRA

Jan 2024

PRA

Review of Solvency II: Reform of the Matching Adjustment

Seek oral evidence on the consultation on the work of the PRA

Jan 2024

FCA/PRA

Prudential assessment of acquisitions and increase in control

Not considered – does not meet Sub-Committee criteria

Jan 2024

PRA

The PRA’s approach to the authorisation and supervision of insurance branches

Not considered – does not meet Sub-Committee criteria

Jan 2024

FCA

Capital deduction for redress: personal investment firms

Seek oral evidence on the consultation

Jan 2024

PRA

Funded insurance

Not considered – does not meet Sub-Committee criteria

Jan 2024

PRA

The Prudential Regulation Authority’s approach to policy

Not considered – does not meet Sub-Committee criteria

Jan 2024

Bank of England

Bank of England Levy Framework Document

Not considered – does not meet Sub-Committee criteria

Jan 2024

PRA

Identification and management of step-in risk, shadow banking entities and groups of connected clients

Seek oral evidence on the consultation on the work of the PRA

Jan 2024

FCA

Implementing the Overseas Funds Regime (OFR)

Write to FCA

Jan 2024

FCA

Updating the regime for Money Market Funds

Write to FCA

Jan 2024

PRA

Ring-fenced bodies: managing risks from third-country subsidiaries and branches

No further action

Jan 2024

FCA

Reforming the commodity derivatives regulatory framework

Write to FCA

Formal minutes

Tuesday 30 January 2024

Members present

Harriett Baldwin, in the Chair

Dr Thérèse Coffey

Dame Angela Eagle

Stephen Hammond

Keir Mather

Anne Marie Morris

The work of the Sub-Committee on Financial Services Regulations: January 2024

Draft Report (The work of the Sub-Committee on Financial Services Regulations: January 2024), proposed by the Chair, brought up and read.

Ordered, That the Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 46 read and agreed to.

Annex agreed to.

Resolved, That the Report be the Fourth Report of the Committee to the House.

Ordered, That the Chair make the Report to the House.

Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.

Adjournment

Adjourned till Wednesday 31 January 2.00 pm.


Witnesses

The following witnesses gave evidence. Transcripts can be viewed on the inquiry publications page of the Committee’s website.

Wednesday 13 September 2023

Sam Woods, Deputy Governor for Prudential Regulation, Bank of England, Chief Executive Officer, Prudential Regulation Authority; Charlotte Gerken, Executive Director, Insurance Supervision, Bank of England; Gareth Truran, Director, Prudential Policy, Bank of EnglandQ1–86


List of Reports from the Committee during the current Parliament

All publications from the Committee are available on the publications page of the Committee’s website.

Session 2023–24

Number

Title

Reference

1st

The digital pound: still a solution in search of a problem?

HC 215

2nd

Edinburgh Reforms One Year On: Has Anything Changed?

HC 221

3rd

Appointment of Nathanaël Benjamin to the Financial Policy Committee

HC 443

Session 2022–23

Number

Title

Reference

1st

Future of financial services regulation

HC 141

2nd

Future Parliamentary scrutiny of financial services regulations

HC 394

3rd

The appointment of Dr Swati Dhingra to the Monetary Policy Committee

HC 460

4th

Jobs, growth and productivity after coronavirus

HC 139

5th

Appointment of Marjorie Ngwenya to the Prudential Regulation Committee

HC 461

6th

Appointment of David Roberts as Chair of Court, Bank of England

HC 784

7th

Re-appointment of Sir Dave Ramsden as Deputy Governor for Markets and Banking, Bank of England

HC 785

8th

Autumn Statement 2022 – Cost of living payments

HC 740

9th

Appointment of Ashley Alder as Chair of the Financial Conduct Authority

HC 786

10th

The work of the Sub-Committee on Financial Services Regulations

HC 952

11th

Fuel Duty: Fiscal forecast fiction

HC 783

12th

Appointment of Professor Randall Kroszner to the Financial Policy Committee

HC 1029

13th

Scam reimbursement: pushing for a better solution

HC 939

14th

The work of the Sub-Committee on Financial Services Regulations

HC 952-i

15th

Regulating Crypto

HC 615

16th

Tax Simplification

HC 723

17th

The appointment of Megan Greene to the Monetary Policy Committee

HC 1395

18th

The work of the Sub- Committee on Financial Services Regulations

HC 952-ii

19th

The venture capital market

HC 134

20th

Tax Reliefs

HC 723

1st Special

Defeating Putin: the development,implementation and impact of economic sanctions on Russia: Government Response to the Committee’s Twelfth Report of Session 2021–22

HC 321

2nd Special

Future of financial services regulation: responses to the Committee’s First Report

HC 690

3rd Special

Jobs, growth and productivity after coronavirus: Government response to the Committee’s Fourth Report

HC 861

4th Special

Autumn Statement 2022 – Cost of living payments: Government response to the Committee’s Eighth Report

HC 1166

5th Special

Fuel Duty: Fiscal forecast fiction: Government response to the Committee’s Eleventh Report

HC 1242

6th Special

Scam reimbursement: pushing for a better solution: Payment Systems Regulator’s response to the Committee’s Thirteenth Report

HC 1500

7th Special

Regulating Crypto: Government Response to the Committee’s Fifteenth Report

HC 1752

8th Special

Tax Reliefs: Government Response to the Committee’s Twentieth Report

HC 1875

9th Special

Venture Capital: Government Response to the Committee’s Nineteenth Report of Session 2022–23

HC 1876

Session 2021–22

Number

Title

Reference

1st

Tax after coronavirus: the Government’s response

HC 144

2nd

The appointment of Tanya Castell to the Prudential Regulation Committee

HC 308

3rd

The appointment of Carolyn Wilkins to the Financial Policy Committee

HC 307

4th

The Financial Conduct Authority’s Regulation of London Capital & Finance plc

HC 149

5th

The Future Framework for Regulation of Financial Services

HC 147

6th

Lessons from Greensill Capital

HC 151

7th

Appointment of Sarah Breeden to the Financial Policy Committee

HC 571

8th

The appointment of Dr Catherine L. Mann to the Monetary Policy Committee

HC 572

9th

The appointment of Professor David Miles to the Budget Responsibility Committee of the Office for Budget Responsibility

HC 966

10th

Autumn Budget and Spending Review 2021

HC 825

11th

Economic crime

HC 145

12th

Defeating Putin: the development, implementation and impact of economic sanctions on Russia

HC 1186

1st Special

Net Zero and the Future of Green Finance: Responses to the Committee’s Thirteenth Report of Session 2019–21

HC 576

2nd Special

The Financial Conduct Authority’s Regulation of London Capital & Finance plc: responses to the Committee’s Fourth Report of Session 2021–22

HC 700

3rd Special

Tax after coronavirus: response to the Committee’s First Report of Session 2021–22

HC 701

4th Special

The Future Framework for Regulation of Financial Services: Responses to the Committee’s Fifth Report

HC 709

5th Special

Lessons from Greensill Capital: Responses to the Committee’s Sixth Report of Session 2021–22

HC 723

6th Special

The appointment of Professor David Miles to the Budget Responsibility Committee of the Office for Budget Responsibility: Government response to the Committee’s Ninth Report

HC 1184

7th Special

Autumn Budget and Spending Review 2021: Government Response to the Committee’s Tenth Report

HC 1175

8th Special

Economic Crime: responses to the Committee’s Eleventh Report

HC 1261

Session 2019–21

Number

Title

Reference

1st

Appointment of Andrew Bailey as Governor of the Bank of England

HC 122

2nd

Economic impact of coronavirus: Gaps in support

HC 454

3rd

Appointment of Richard Hughes as the Chair of the Office for Budget Responsibility

HC 618

4th

Appointment of Jonathan Hall to the Financial Policy Committee

HC 621

5th

Reappointment of Andy Haldane to the Monetary Policy Committee

HC 620

6th

Reappointment of Professor Silvana Tenreyro to the Monetary Policy Committee

HC 619

7th

Appointment of Nikhil Rathi as Chief Executive of the Financial Conduct Authority

HC 622

8th

Economic impact of coronavirus: the challenges of recovery

HC 271

9th

The appointment of John Taylor to the Prudential Regulation Committee

HC 1132

10th

The appointment of Antony Jenkins to the Prudential Regulation Committee

HC 1157

11th

Economic impact of coronavirus: gaps in support and economic analysis

HC 882

12th

Tax after coronavirus

HC 664

13th

Net zero and the Future of Green Finance

HC 147

1st Special

IT failures in the financial services sector: Government and Regulators Responses to the Committee’s Second Report of Session 2019

HC 114

2nd Special

Economic Crime: Consumer View: Government and Regulators’ Responses to Committee’s Third Report of Session 2019

HC 91

3rd Special

Economic impact of coronavirus: Gaps in support: Government Response to the Committee’s Second Report

HC 662

4th Special

Economic impact of coronavirus: Gaps in support: Further Government Response

HC 749

5th Special

Economic impact of coronavirus: the challenges of recovery: Government Response to the Committee’s Eighth Report

HC 999

6th Special

Economic impact of coronavirus: gaps in support and economic analysis: Government Response to the Committee’s Eleventh Report

HC 1383


Footnotes

1 In our routine work, we hold regular oral evidence sessions with the FCA and the PSR and PRA. We also hold evidence sessions with the Bank of England after the publication of every Monetary Policy and Financial Stability Report.

2 Treasury Sub-Committee on Financial Services Regulations, Correspondence from the Chair to the Economic Secretary to the Treasury, relating to the illustrative statutory instruments published as part of the Edinburgh Reforms, dated 31 January (22 February 2023); Treasury Sub-Committee on Financial Services Regulations, Correspondence from the Economic Secretary to the Treasury, relating to the illustrative statutory instruments published as part of the Edinburgh Reforms, dated 13 February (22 February 2023)

3 Gov.uk, accessed 11 November 2023

4 Treasury Committee: Edinburgh Reforms One Year On: Has Anything Changed?, Second Report of Session 2023–24, HC 221

5 Financial Services and Markets Act 2023, section 38, section 50(14), and paragraph 13 of Schedule 7

6 Liaison Committee, House of Lords, A committee on financial services regulations, HL Paper 267. The Report’s recommendations were approved by the House of Lords on 4 December 2023.

7 Liaison Committee, House of Lords, A committee on financial services regulations, HL Paper 267, para 15.

8 Oral evidence taken on 13 September 2023, HC (2022–23) 1139, Qq49–60

9 HM Treasury, Review of Solvency II: Consultation -- Response, November 2022

10 Reform of the Matching Adjustment is subject to separate consultation, which was considered by the Sub-Committee in October 2023: see CP19/23 Review of Solvency II: Reform of the Matching Adjustment, 28 September 2023

11 Oral evidence taken on 13 September 2023, HC (2022–23) 1139

12 Financial Conduct Authority, CP23/15: The Framework for a UK Consolidated Tape, July 2023, p.3, para 1.6

13 Correspondence with the Chancellor of the Exchequer relating to FCA CP23/15, dated 25 July 2023; Correspondence from the Chancellor of the Exchequer relating to FCA CP23/15, dated 7 August 2023

14 Correspondence with the Financial Conduct Authority relating to FCA CP23/15, dated 25 July 2023; Correspondence from the Financial Conduct Authority relating to FCA CP23/15, dated 25 August 2023

15 See, for example, Prudential Regulation Authority, DP2/21: Diversity and inclusion in the financial sector, 7 July 2021

16 Financial Conduct Authority, Diversity and inclusion in the financial sector -- working together to drive change (CP23/20), September 2023, p.54. The average cost to small firms varies depending on the activities they undertake

17 Treasury Committee, ‘Sexism in the City’, accessed 12 January 2024

18 Financial Conduct Authority: CP23/17 Rules relating to Securitisation, August 2023 and Prudential Regulation Authority: CP15/23 – Securitisation: General requirements, July 2023

19 Bank of England, Consultation on the codes of practice for wholesale cash distribution market oversight, 30 November 2023

20 Prudential Regulation Authority, CP26/23 Operational resilience: Critical third parties to the UK financial sector, 7 December 2023

21 Prudential Regulation Authority, CP19/23: Review of Solvency II: Reform of the Matching Adjustment, 28 September 2023

22 Financial Conduct Authority, CP23/24: Capital deduction for redress: personal investment firms, November 2023

23 Prudential Regulation Authority, CP23/23: Identification and management of step-in risk, 5 December 2023

24 Financial Times, ‘The day nickel trades gave LME a rude awakening’, 21 June 2023

25 Financial Conduct Authority, CP23/8: Multi-occupancy building insurance, 21 April 2023 [accessed 23 June 2023]

26 Oral evidence taken on 12 July 2023, HC (2022–-23) 1711

27 Treasury Sub-Committee on Financial Services Regulations, Correspondence with the Secretary of State for Levelling Up, Housing and Communities, 25 July 2023

28 Treasury Sub-Committee on Financial Services Regulations, Correspondence from the Secretary of State for Levelling Up, Housing and Communities, 22 September 2023

29 Leasehold and Freehold Reform Bill, Clauses 31 and 32 [Bill 13, 2023 –24]

30 Explanatory Notes to the Financial Services and Markets Bill [Bill 146 [2023–23] - EN], para 1000

31 Treasury Sub-Committee on Financial Services Regulations, Correspondence with the Financial Conduct Authority relating to Cost Benefit Analysis, dated 30 June 2023

32 Treasury Sub-Committee on Financial Services Regulations, Correspondence from the Financial Conduct Authority relating to Cost Benefit Analyses, dated 14 July 2023

33 Correspondence from the Chair to the FCA, dated 9 March 2023; Correspondence from the FCA to the Chair, dated 23 March 2023

34 Financial Conduct Authority, ‘Policy Statement: Sustainability Disclosure Requirements (SDR) and investment labels’, November 2023, page 77

35 Financial Conduct Authority, ‘Policy Statement: Sustainability Disclosure Requirements (SDR) and investment labels’, November 2023, Annex 3

36 Treasury Committee, Fourteenth Report of Session 2022–23, The work of the Sub-Committee on Financial Services Regulations, HC 952-I, Chapter 2

37 Oral evidence taken on 13 December 2022, HC 939

38 Treasury Committee, Fourteenth Report of Session 2022–23, The work of the Sub-Committee on Financial Services Regulations, HC 952-I, Chapter 2

39 Treasury Committee, Thirteenth Report of Session 2022–23, Scam Reimbursement: pushing for a better solution, HC 939

40 Payment Systems Regulator, ‘PSR published first APP scams performance report’, 31 October 2023

41 Payment Systems Regulator, ‘Policy statement: Fighting authorised push payment scams: final decision’, December 2023