A once in a generation opportunity

“A once in a generation opportunity”

That was how a recent Insurance Minister described the Financial Services and Markets Bill and our chances of achieving regulatory reform.

The Bill is currently in the Lords and heading towards a heady tenth reading in the Grand Committee stage – after two additional sessions were added because of the amount of debate.

Despite the question marks over the future (in its current form) of the institution that is the House of Lords, I have to say there has been an impressive amount of highly technical and very helpful discourse, with some key actors like Lord Hunt, Lord Tyrie, Lord Bridges and Baroness Noakes putting forward large chunks of our Manifesto and briefing paper content into the sessions.

And why is this Bill so important? It is the first step to tailor our regulatory regime to the UK’s needs and remove retained EU law. It gives huge power to the regulators for rule-making, working within an overall policy framework set by government and Parliament. It’s because it’s our big chance to nail-down our long-term Manifesto point calling for a new growth and competitiveness objective on the regulator. Happily, we feel we are now very confident about achieving this call. Our campaigning for this actually began with our 2018 Manifesto – before Meghan and Harry got married, Russia hosted the World Cup, and when I could still run 5k in around 27 minutes (which would be a big ask these days)!  Now, our current aim is to also introduce, with the help of the Lords, greater accountability on the regulator, so that they will deliver proportionate regulation for our sector going forwards through introducing new requirements on the regulator that become part of its day-to-day operational necessities. These could include:

• Requiring the FCA to include a statement explaining how it has taken the competitiveness and growth objective into account when consulting on rules. An ex-ante reporting mechanism is key for BIBA’s members as we believe it would promote a shift to more emphasis on rule-making that is forward-looking rather than a system of reporting backwards on rule effectiveness which allows the FCA to ‘mark its own homework’. Ex-ante reporting would also promote openness by setting out the regulator’s reasoning at an earlier stage allowing timely Parliamentary oversight and engagement by the regulated industry to challenge assumptions, ultimately bringing about the best outcome for consumers in a cost-effective way for the sector.
   
• Establishing a joint Parliamentary Committee to scrutinise the work of the regulators.
   
• Creating a new Office for Regulatory Accountability, providing Government with independently assessed data on the performance of the regulators.

All of this would help to achieve the Government’s objective for dynamic and proportionate regulation that delivers a healthy financial services sector which we support. However, the research we recently commissioned by London Economics and the Fair Value Assessments process demonstrates that this nirvana is simply not the current lived experience by brokers.

But it’s not only proportionate regulation that is needed. The FT report recently that the UK chip designer Arm elected to float in New York over the London Stock Exchange due to onerous FCA rules including complexity and cost did not go unnoticed. Worse, Arm’s decision was taken despite an appeal to come to London from none other than Rishi Sunak.

Having a coffee this week (or to be more accurate, a hot chocolate, as it was a cold and windy day in London) with one of our larger members with branches all round the globe, they made it quite clear the current regulatory regime is a barrier to investment, which instead gets better bang for its buck in other countries. This is not where we, or we believe our Governments, want us to be.

So as you can see BIBA has some big asks. We have put these to Andrew Griffith MP - the Insurance Minister, Baroness Penn – the Treasury Lords Minister, MPs on the Bill Committee, the Treasury Bill team actually writing the Bill and interpreting the amendments, Labour Peers and many more. We are also grateful for the first class collaboration with the ABI and the London Market Group as we work together on this excellent opportunity for change.

After the Grand Committee Stage, if the Bill has been amended it is reprinted with all the agreed amendments and then moves to Report Stage for further scrutiny and further amendments can be agreed. After the Report Stage it will have its third reading in the Lords and then heads back to the Commons for the final stages with consideration of Lords’ amendments (known as ping-pong) and then – hopefully before the next election – Royal Assent!

Be assured BIBA will continue representing brokers’ position in tailored briefing papers with all actors every step of the way.