Clause 28 enhances FSMA by enabling the Treasury to place an obligation on the FCA or the PRA to make rules in a certain area of regulation. Equivalent provision for the Bank of England and the Payment Systems Regulator is made in clause 44 and in paragraph 7 of schedule 7.

FSMA requires that regulators advance their objectives when they make rules, set technical standards and issue guidance. The regulators must also take into account eight regulatory principles when discharging their functions. It is generally up to the regulators to determine what rules are necessary, but as set out in the future regulatory framework review consultation in November last year, that approach may not always be sufficient. There must be a means for the Government and Parliament to require the regulators to make rules covering certain matters, in order to ensure that important wider public policy concerns are addressed. That approach has already been established in legislation through the Financial Services Act 2021, which required the FCA to make rules that applied to FCA-regulated investment firms.

Clause 28 enables the Treasury to make similar regulations and place an obligation on the regulators to make rules in a certain area. The clause aims to strike a balance between the responsibilities of the regulator, the Treasury and Parliament now that we are outside the EU. It does not enable the Government to tell a regulator what its rules should be; it simply enables the Government, with the agreement of Parliament, to say that there must be rules relating to a particular area. The FCA and the PRA must continue to act to advance their objectives and take into account their regulatory principles when complying with the requirements set under this power. The Treasury cannot require the regulators to make rules that they would not otherwise have the ability to make.

I assure the Committee that this power will always be subject to the affirmative procedure. That is the most appropriate procedure, as it means that Parliament will be able to consider and debate any requirements set in this way. It also ensures that the Government are able to act to ensure that these requirements stay up to date with changing markets, rather than setting them out in primary legislation, where they could quickly become out of date. The clause enhances the FSMA model, enabling the Treasury to ensure that key areas of financial services continue to be regulated following the repeal of retained EU law and in the future. I commend the clause to the Committee.