Baroness Neville-Rolfe (Con)

My Lords, I thank the Minister for his clear explanation of these statutory instruments and the noble Baroness, Lady Kramer, for her gloss on that. Today we are considering the instrument on capital buffers as well as the Markets in Financial Instruments (Miscellaneous Amendments) Regulations. While each is described as largely technical, both help to shape the future of our financial regulatory framework. Obviously we on these Benches are happy to consider them together and to raise some questions about how they link to the Government’s wider ambitions for stability, innovation and growth. We recognise that both instruments form part of the wider process of revoking retained EU law and restating and embedding that in the smarter regulatory framework under the Financial Services and Markets Act 2023. It is important that our regime is clear and coherent and reflects the institutional responsibilities of the regulators, whether the Prudential Regulation Authority, the Bank of England’s Financial Policy Committee or the Financial Conduct Authority. For me, the most important current issue for the financial regulators is whether they are really adjusting their rules, their outlook and their culture to pursue growth and competitiveness, as they were recently required to do. Is the Minister in a position to assure us that the PRA and FCA have taken vigorous action to meet the Government’s requests and instructions on this vital point? I recall that the Chancellor wrote to them last autumn. What were the key demands, and what did they do in reply? What are the opportunities for growth, bearing in mind the current challenges outlined by the noble Baronesses, Lady Bennett and Lady Kramer? Although I do not agree with all that they said, I think it is important to debate that. I have a few other questions. On capital buffers, while the instrument is described as technical, it involves substantive changes in transferring responsibility for buffers, such as the capital conservation buffer and the global systemically important institutions buffer, to the PRA. Can the Minister clarify how the Government will ensure sufficient parliamentary oversight of these crucial prudential tools, now that they will be set directly by the regulator? As the noble Baroness, Lady Kramer, said, it is now a less transparent system, so Parliament needs a strong voice in the post-EU world. Of course, capital buffers are at the heart of keeping our financial system stable. We learned in painful ways during the financial crisis what happens when banks lack the resilience that they need in times of stress. The framework we have now is well established, but risks are evolving all the time. Can the Minister share the Government’s view on whether today’s capital requirements are still fit for purpose, particularly in the light of the growing challenges from shadow banking, digital assets and climate-related exposures? We note that the second instrument retains certain key definitions from the MiFID organisational regulation, while paving the way, as the Minister said, for the revocation of firm-facing provisions. The intention is to allow the FCA and the PRA to take forward responsibility for detailed rules, tailoring them more closely to the needs of the UK market. The Minister has explained the rationale for that, but I ask him to expand on how these changes will not only safeguard market integrity and, I think he said, prevent the gaps that might arise—but encourage innovation and investment and growth, which I think we all agree that we need if the economy is to move forward positively. What steps will the Treasury take to ensure that regulators’ rule-making in this area is aligned with the broader ambition of using financial services as a driver of economic prosperity, the point I addressed earlier?