Financial Services Bill: Briefing for Lords Stages

On 28 January 2021, the second reading of the Financial Services Bill is scheduled to take place in the House of Lords.

The Financial Services Bill is a government bill intended to improve the UK’s regulatory framework for financial services following the end of the Brexit transition period. The bill completed its House of Commons stages on 13 January 2021. It was introduced in the House of Lords on 14 January 2021.

The bill includes measures in a wide range of areas, including some related to Brexit and some aimed at making other improvements to the regulatory framework. The Government states that the measures will support the UK’s position as an international financial centre and enhance the sector’s competitiveness, while maintaining high consumer protection standards. Provisions include:

• A new regulatory regime for investment firms. The bill would provide the Financial Conduct Authority (FCA) with additional powers to set rules for such firms, while also containing measures to make the FCA more accountable.
• Implementing recent updates to international standards on banks’ prudential requirements (Basel III and 3.1).
• Dealing with issues arising from the withdrawal of the interest rate benchmark the London interbank offer rate (LIBOR).
• Establishing a new regime to allow certain investment funds based overseas to be marketed to UK clients, including retail investors.
• Introducing a new debt respite scheme.

The bill received cross-party support in the House of Commons. Several government amendments were made, including applying money laundering regulations to electronic money institutions. No opposition amendments were made. Opposition amendments defeated on division included:

• bringing buy-now-pay-later credit services into the scope of FCA regulation; and
• requiring that, when making rules, the FCA should have regard to the UK’s target of reaching net zero greenhouse gas emissions by 2050.

Other concerns raised included whether the bill would provide excessive delegated powers to the UK financial regulators and whether a new corporate offence of failure to prevent economic crime should also be introduced.