I speak to Amendments 89 and 90 in my name. A recurrent theme in the reforms to which we have come back several times this afternoon and this evening has been to increase competition in the banking system. This should engage not just the banks but their regulators too. We tabled these two amendments, Amendment 89 relating to the FCA and Amendment 90 relating to the PRA.
The proposal for the PRA is to add an additional objective to promote competition in a way that is as far as possible consistent with its main duty of providing financial stability. The difference between the amendment tabled by the Government and my amendment is sufficiently small that I think we can accept the measure as taking us forward on that front. However, the parliamentary commission also believed that a change was needed to the architecture of the FCA’s objectives. I wish to put the other side of the case. A fear which many in the financial world share is that the FCA will give too much emphasis to bringing about change through enforcement, will wait until something goes wrong and then intervene heavily. However, the FCA, when properly directed, can be a very powerful force for improving competition.
As the Minister has set out, the present architecture has the overall strategic objective of ensuring that relevant markets function well, and has three operational objectives below that: namely, the appropriate degree of protection for consumers; enhancing the integrity of the UK financial system; and promoting competition
in the interests of consumers. We queried whether the strategic objective did anything or even whether it could be unhelpful and could be used to trump or confuse the clarity of the operational objectives. Our preferred solution was to drop the strategic objective and promote the other three to primary objectives by deleting the word “operational”, thus ensuring that the competition objective comes into the front rank along with the other two. I am rather surprised that the Government have not supported this, particularly as they accepted the pro-competition logic in the PRA case. I was not convinced by the Government’s response with regard to providing a mission statement. My riposte to that is that the chief executive of the FCA thought the strategic objective,
“added little or nothing to the three operational objectives”.
He continued:
“You could argue that promoting effective competition in the interest of consumers and the market, enhancing the integrity of the system and ensuring an appropriate degree of protection encompass everything that is in the phrase ‘ensuring markets work well’”.
Therefore, if you can achieve something in fewer words and with fewer objectives, and the other one is largely redundant, I would dispose of it.
In my view the aspect of FCA culture that most people feel needs to be bolstered is competition. The current architecture is weaker in that respect than the proposed amendment. We have heard the opposing view from the Minister, but that is the logic behind the position which the commission took.