Financial Services (Regulation)

Oral Answers to Questions — Trade and Industry – in the House of Commons at 12:00 am on 19 July 1989.

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Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian 12:00, 19 July 1989

To ask the Chancellor of the Duchy of Lancaster what representations he has received on the regulation of financial services.

Photo of Francis Maude Francis Maude Parliamentary Under-Secretary (Department of Trade and Industry)

I refer the hon. Gentleman to the reply that I gave to his hon. Friend the Member for Coventry, North-West (Mr. Robinson) in response to question 7.

Photo of Mr Alexander Eadie Mr Alexander Eadie , Midlothian

Given the answer that the Minister gave to my hon. Friend the Member for Coventry, North-West when he expressed great doubts about the working of the regulations, will he accept that an error was made when the regulations for the City were not made statutory? Does he agree that there is an abundance of evidence that when Governments meddle with legislation and make regulations permissive rather than mandatory, they find themselves in trouble? The Government are running into trouble, and the Minister should make that confession to the House.

Photo of Francis Maude Francis Maude Parliamentary Under-Secretary (Department of Trade and Industry)

I do not think that the hon. Gentleman heard correctly the supplementary question put by the hon. Member for Coventry, North-West, which had nothing to do with the Financial Services Act 1986 but related to a different kind of investigation under a different piece of legislation. He did not express any views about the efficacy or otherwise of the Financial Services Act. I can reassure the hon. Member for Midlothian (Mr. Eadie) on the issue of whether financial service regulation should be statutory. His question can be answered satisfactorily—it is indeed statutory.

Photo of Charles Wardle Charles Wardle , Bexhill and Battle

Has my hon. Friend had an opportunity to consider the EEC proposals for a single banking licence? Would not the creation within the Community of the largest unified market in the world for banking services present the City with considerable opportunities?

Photo of Francis Maude Francis Maude Parliamentary Under-Secretary (Department of Trade and Industry)

It undoubtedly would. We hope that the Community will move swiftly to complete the single market in life insurance and in investment services as well. The banking directive, to which my hon. Friend refers, will make the Community a more open market for banking than the United States.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

Is the Minister aware that despite the authorisation requirements of the Financial Services Act, a number of the big, rogue fish who were responsible for running companies—a number of which had to close—are now surfacing in other guises in various parts of the City? Why are they not being cleaned out of the City, especially as FIMBRA, the Securities Association and a number of self-regulatory bodies are cleaning out their employees, who were only taking instructions from those rogue fish?

Photo of Francis Maude Francis Maude Parliamentary Under-Secretary (Department of Trade and Industry)

Since the Financial Services Act came into force it has been illegal to carry on investment business without being authorised by the Securities and Investments Board or one of the regulatory bodies. It is impossible for any of those to whom the hon. Gentleman referred to operate a legal investment business without being authorised. Anyone with a record of misbehaviour can be prevented from operating. If the hon. Gentleman knows of anyone who is operating without authorisation, I should be grateful if he would supply me with details immediately.

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

Does my hon. Friend agree that despite the overtures from the Opposition, the Government have struck the right balance between total free licence for the City and total state regulation? While the Government cannot anticipate future needs, I am sure that they will respond as necessary. Is it not true that experience both of companies legislation and of financial services legislation has already shown that the Government's middle-way approach of encouraging and supporting the self-regulatory process in the City has been a great success and should be continued?

Photo of Francis Maude Francis Maude Parliamentary Under-Secretary (Department of Trade and Industry)

My hon. Friend is right. It is essential that financial services legislation has full statutory backing, but it is equally essential that it should be flexible and responsive because the regulatory bodies need to be sufficiently fleet of foot to keep abreast of the changes in the market place.

Photo of Mr Bryan Gould Mr Bryan Gould , Dagenham

May I ask the Minister a question that he has ducked twice already? Will he publish the County NatWest report before the end of the Session and in time for the House to question Ministers on it?

Photo of Francis Maude Francis Maude Parliamentary Under-Secretary (Department of Trade and Industry)

I am astonished that the hon. Gentleman can find it in himself to quibble with the reply that I have already given him. I said that we would publish the report as soon as it was proper to do so. It would be a remarkable proposition to suggest that we publish it before it is proper to do so.

Photo of Mr John Marshall Mr John Marshall , Hendon South

The financial services sector takes a great interest in the Barlow Clowes affair. When does my hon. Friend expect to receive the ombudsman's report on that?

Photo of Francis Maude Francis Maude Parliamentary Under-Secretary (Department of Trade and Industry)

I cannot do that because I do not answer for the ombudsman. He must conduct his investigation in the way that he thinks proper. I am sure that he will want to complete his investigation as soon as possible.