Financial Services Bill

I also support the amendments tabled by my noble friend Lady Noakes. It is clear that if the Government give an exactly identical responsibility or objective to each of the three tripartite bodies without saying which shall be subordinated to which, or giving the ultimate power to supervise financial institutions back to the Bank of England as we advocate on these Benches, further clarification of the respective powers of each institution and of possible additional powers that may be needed becomes very necessary. Earlier in the debate, the Minister, who is not in his place, criticised me for saying that macro-prudential regulation should be carried out separately from micro-prudential regulation. I did not mean to suggest that the same people who supervise the smallest building society should carry out macro-prudential supervision, or the "big picture" stuff. However, if you are responsible for the big picture, which we have come to call "macro-prudential supervision", you must also have the ability to supervise the major players in the financial markets. Macro-prudential and micro-prudential supervision are part of the same supervisory function. I did not mean to say that the same people should do it; obviously they cannot. However, prudential supervision should ultimately be the responsibility of the Bank of England. Therefore, the FSA—in whatever form it may continue—should either be a part of the Bank of England or report to it so that the governor has the ultimate power to supervise those major financial institutions which are major players in financial markets. My noble friend Lady Noakes also touched on the question that I referred to earlier. My understanding, from the chief executive of the FSA shortly before he resigned, is that it is no longer possible for the United Kingdom to set regulatory policy, and that we have already surrendered to the three new regulatory bodies and are right to do that. This is quite extraordinary, considering the role that our financial markets play in global financial markets as a whole. We have the leading international financial centre here. The Minister also commented that having a single regulator was the right thing to do, and that we were right to have put the previous nine financial regulators together in one. I agree with him, but why are we going to subordinate our regulatory system to the new European regulatory architecture, which has three bodies—that is, separate bodies for banking, securities and insurance and pensions? If you read this Bill you would have no idea about the European regulatory framework against which it is being formulated.