My Lords, we all accept that the financial services sector is integral to the prosperity of the wider economy. However, we have also seen what happens when light-touch regulation and excessive risk-taking by financial institutions conspire to produce the perfect storm, culminating in the recent financial crisis. The aftermath of this, of course, is still an impediment to growth in the UK. An appropriately regulated financial sector will be key to the economy’s resurgence, and I am confident that the reforms that we are making to the regulatory system in this Bill will ensure this.
However, at Second Reading and in Committee, my noble friend Lord Sassoon listened to concerns from noble Lords on all sides of the House that the regulators would be excessively focused on their remits and would act in a disproportionate way which might constrain the financial services sector from acting to support activity in the wider economy. That is why a commitment was made to return with an amendment that would require the PRA and FCA to consider the wider impact of their actions.
Amendment 44 delivers on this commitment. It requires the FCA and PRA to have regard to the desirability of sustainable growth in the economy of the United Kingdom in the medium or long term. This is a concept with which of course it would be extremely difficult to disagree. Sustainable economy growth is desirable, and it is important that the regulators will now be required to show how they have considered this in carrying out their general functions.
To a certain extent, this gets back to the amendments that we have just debated. The regulators should not be the agents of the industry that they regulate. Regulation itself is not about enhancing the international competitiveness of our domestic financial sector, even if that is an outcome when regulation is proportionate and effective. This amendment recognises the link
between an apparently appropriately regulated financial sector and the growth of the wider economy, and requires that the regulators bear it in mind. That is why the amendment I have tabled strikes an appropriate balance: it creates an expectation that the regulators must think carefully about the impact that their regulation may have on the wider economy; this is absolutely right. Seen in the light of the recent financial crisis, it is clear that taking appropriate regulatory action in good time would have served to safeguard sustainable economic growth in the medium to long term. This amendment will ensure that the regulators consider the wider economic impact of their actions. I beg to move.