Financial Services Bill — Committee (2nd Day) (Continued)

Part of the debate – in the House of Lords at 9:30 pm on 15th March 2010.

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Photo of Lord Myners Lord Myners Parliamentary Secretary, HM Treasury 9:30 pm, 15th March 2010

Amendment 35A would require the FSA to issue a statement about its understanding of its financial stability objective and how it plans to use its power to achieve this. It would also require the FSA to consult the Treasury, the Bank of England and any other person whom it considers will be affected by the statement. While I agree with the sentiment of this amendment, I must argue that it is superfluous, because it is already covered elsewhere. I begin by referring the noble Baroness to new Section 3A(3) in Clause 5, which states:

"The Authority must, consulting the Treasury, determine and review its strategy in relation to the financial stability objective".

The section may not refer specifically to a statement of policy, but this is just a matter of wording. The content is clearly there.

As for the FSA consulting the Bank on its strategy for financial stability, I assure the noble Baroness that provisions for this are already in place. As noble Lords are aware, the Bank of England is a member of the Council for Financial Stability. The terms of reference for the council clearly specify that it will consider the financial stability strategies of the FSA and the Bank. Ipso facto, the Bank will have a role in scrutinising the financial stability strategy of the FSA, which already takes a proactive approach to consulting industry and consumers on its policies. I have no reason to doubt that this will be any different where the FSA's financial stability strategy is concerned. When the FSA makes rules, it is required to consult in accordance with Section 155 of the Financial Services and Markets Act. When making rules under Section 138, the FSA will still have to follow the procedures in Section 155, including consulting industry and other stakeholders and undertaking a cost-benefit analysis. It will also have regard to its general duties in respect of the desirability of maintaining the UK's competitive position and the need to be proportionate in its regulation. I hope I have clearly explained why this amendment adds nothing to the Bill, and I therefore urge the House to resist it.