Lord Pitt-Watson (Lab)

In moving my Amendment 22, I will also speak to government Amendments 58 and 59. Amendment 22 is developed from our discussions in Committee. Payment systems are essential national infrastructure. They allow households to pay bills, businesses to trade and financial institutions to transfer funds securely. As technology changes how we pay, those systems must continue to evolve, becoming more efficient and capable of supporting new services while remaining trusted and resilient. The Bank of England has a critical responsibility to protect and enhance UK financial stability. The Bank is also working with the Government and other authorities to support safe innovation in payments and digital finance. The Bank has welcomed this measure and will reinforce that work while preserving the primacy of financial stability. Amendment 58 places the Bank’s role in facilitating innovation on a clear statutory footing. When exercising certain key functions for recognised payment systems, recognised digital settlement asset service providers, and in-scope service providers, the Bank must, so far as is reasonably possible, facilitate innovation with a view to improving the quality, functionality and economy of those systems and related services. The objective is expressly secondary and does not require the Bank to facilitate innovation where doing so would undermine its primary financial stability objective. This change will also bring the regulation of systemic payment systems and digital settlement assets into closer alignment with the Bank’s supervision of other financial market infrastructure. The Bank already has a secondary innovation objective for central counterparties and central securities depositories. Providing a comparable objective for payment systems and digital settlement assets provides the Bank with a clear and consistent statutory framework. Amendment 58 also ensures that the Bank can be held accountable under its new objective. It enables the Treasury to make recommendations about aspects of the Government’s economic policy for the Bank to have regard to when considering how to advance its financial stability and secondary innovation objective in relation to payment systems. Those recommendations must be published and laid before Parliament. The Bank must explain the action it has taken, or its reasons for not acting, and provide updates where required. The Bank’s annual reports must now also explain how it has advanced the secondary innovation objective and engaged with interested stakeholders. Amendment 59 reinforces that accountability by requiring the Bank to publish a stand-alone annual report on both secondary innovation objectives. The report must explain how objectives have been embedded in the Bank’s operations, processes and decisions, and how it has advanced them with respect to relevant functions. This will give Parliament and industry clear sight of how the objectives operate in practice. Amendment 22 is consequential. It ensures that the mechanism already in the Bill for co-ordination between the Financial Conduct Authority, the Prudential Regulation Authority and the Bank with respect to relevant payment functions makes appropriate reference to regulator objectives, which would now include the Bank’s secondary innovation objective. In summary, these amendments together place the Bank’s role in facilitating safe innovation on a clear statutory footing, while preserving financial stability as its primary objective. They also provide stronger and more transparent accountability for how the Bank applies the objectives in practice. I hope that noble Lords will join me in supporting these amendments.