The new regime introduced by clause 22 revolves around activities covered by the so-called Gibraltar order, which provides Gibraltar-based firms accessing UK markets and UK-based firms accessing Gibraltar markets with rights equivalent to the passporting rights conferred on European economic area firms. Certain regimes conferring rights on UK and Gibraltar firms sit outside the remit of the Gibraltar order, as they are authorised not under the Financial Services and Markets Act but under separate regulatory regimes, and therefore need to be addressed separately.
The majority of these regimes are not as central to the UK-Gibraltar bilateral relationship as the regimes under clause 22, as they represent smaller sub-sectors such as e-money and payment services. The Government are requesting a delegated power to make provision for these regimes, which will allow the Treasury to safeguard the rights that Gibraltar firms currently exercise, to ensure that the legislative framework works efficiently and, wherever possible, to subject these regimes to principles and mechanisms similar to those in the new section 32A of and schedules 2A and 2B to the Financial Services and Markets Act, to ensure consistency with the rest of the regime introduced by clause 22.
Regarding the regime introduced by clause 22, it is right and proportionate that the Government are able to make adjustments to take account of the UK’s and Gibraltar’s new position outside the European Union and in relation to the regimes not captured by the Gibraltar order. The power that the Treasury is requesting is not unlimited, but is constrained at multiple levels. The power is limited in scope, as it only applies to a narrow pool of legislative regimes, as described in clause 23, which are not covered by clause 22. Further, this power can be exercised only in a manner that is compatible with the objectives set out in clause 23, such as financial stability and consumer protection. In addition, the Treasury must consult the FCA, the PRA and the Government of Gibraltar before making certain regulations. Finally, all regulations made in the exercise of this power will be subject to the affirmative procedure, giving Parliament effective oversight of the exercise of these powers by the Treasury.
The clause is crucial to ensuring a consistent approach to regulatory supervision, co-operation and other relevant standards and requirements across different financial services regimes. It achieves the right balance between accountability and effectiveness, so I recommend that the clause stand part of the Bill.
Given that some of the areas caught by this part of the regulation were previously quite esoteric, but might not be so esoteric in the not-too-distant future—I am thinking of electronic money, which a few years ago would have been a tiny amount of transactions and is now very much larger—can the Minister reassure the Committee that, if the size and importance of these transactions grow, they are confined in the right area of the law for regulation? Does the Treasury have any views on how to take account of the changing importance and size of this area and to change the regulations around it in future? As we see, the pandemic has meant that many people who used to use cash no longer use it. Payment services and e-money are growing areas and could grow rapidly.. Is he convinced that this is the right regime to have in and around areas of perhaps rapid evolution?
I thank the hon. Lady for that relevant question about how we intend to apply these powers to smaller regimes that are of increasing significance to consumers and potentially to stability. As a Government, our intention is to ensure that existing cross-border activities are not disrupted in any way. We are asking for the ability to update these regimes to reflect the growing relationship and the evolving domestic mechanisms and principles.
To some extent, many of these areas being looked at now—crypto-assets, stablecoins and so on—are evolving globally and there is is a spectrum of approaches, so we need to examine the appropriateness of the application. We would work to examine closely where the risks are, and therefore where the application of new and evolving orthodoxies of regulation would apply to Gibraltar. We are committing to ensuring that the necessary legislative arrangements are in place in any event, but we rule nothing out in terms of scope and application to new sectors as the world of financial services evolves, which it has done considerably in recent years.