Schedule 14 - Amendments of Part 24 of FSMA 2000: insolvency
Financial Services Bill
Mark Hoban (Financial Secretary, HM Treasury; Fareham, Conservative)
To help the hon. Gentleman, I must say that the schedule does not contain a specific power of veto. However—just to help him out again—there is, of course, the general power of veto that we debated a few sittings ago, which applies in this situation. We established in those earlier discussions that there may be circumstances in which the PRA would want to veto a decision taken by the FCA. I think that we agreed at that point that these were important issues and that there should be disclosure when that veto has been exercised. What I committed to—in one of my many concessions on this Bill—was that I would go back and consider whether the PRA should consult the Treasury on the use of the veto; not so much prior to exercising its veto, but about whether the details of the veto should be published. There was an issue about commercial sensitivity. That same concession applies to this situation.
These are important powers that we need to think about. There is a risk, for example, that an action by the FCA might result in a disorderly failure and that would actually be to the detriment of both consumers and the firm. The PRA and the FCA would need to agree a course of action together that will enable both regulators to act consistently with their objectives. If the regulators cannot agree, the PRA’s view must prevail, but we need to have transparency about the use of the veto, which, as I have said, is an issue to which I will return.
I will just make one other point. Which? proposes that the exercise of a veto should count as a regulatory failure and should automatically trigger an investigation. There is a very high threshold for the use of the veto; it should not be used routinely. Because we do not expect it to be used routinely, we think that when it is used a copy of the direction should be given to the Treasury, and the Treasury should be required to lay that direction before Parliament. There is quite a lot of transparency around the use of the veto. That general use of the veto can apply in this schedule, although there is no specific veto power in it.