HC Deb 30 July 1998 vol 317 cc410-1W
Mr. Love

To ask the Chancellor of the Exchequer if he will make a statement on the progress of his plans for reform of financial services regulation. [54816]

Mr. Byers

The Government have today published a draft of the Financial Services and Markets Bill for consultation, together with a consultation paper and explanatory material.

The draft Bill will give effect to the proposals to reform the financial services regulatory structure, announced in broad terms by my right hon. Friend the Chancellor of the Exchequer in his statement to Parliament of 20 May 1997, Official Report, columns 537–46. It is intended that the draft Bill will make the Financial Services Authority the single, statutory regulator for the United Kingdom's financial services industry. It equips it with all the statutory functions and powers needed to operate a single regime for authorisation and regulation of financial services business. It allows it to operate with great flexibility whilst ensuring that any burdens or restrictions imposed by regulation are proportionate to the benefits.

The Bill will provide the framework for single ombudsman and compensation schemes and a single appeals tribunal. It will introduce important new powers to deal with market abuse. It will also provide for a major element of external accountability for the regulation of Lloyd's.

The first stage of the legislative process was completed when the Bank of England Act 1998 came into force on 1 June, transferring the prudential supervision of banks to the FSA. Publication of the draft Bill is the next, important stage in the process. Full public consultation will be beneficial to ensure that the new system is efficient and effective. Comments are sought on any aspects of the Government's plans to implement the modernisation of financial services regulation by 30 October 1998. The Government also welcome the likelihood that the Treasury Select Committee will wish to be involved in the consultation.

Copies of the draft Bill and the other documents have been placed in the Vote Office and the Library of the House and can be found on the HM Treasury website (http://www.hm-treasury.gov.uk).

Since 1 June, the Financial Services Authority has made considerable progress in bringing together operations under the Banking Act 1987 and the Financial Services Act 1986. The Government have now decided, with the agreement of the Authority, that it should take further steps towards the full integration of financial services regulation that will be completed when the legislation is enacted. Accordingly, it will take responsibility for supporting the Building Societies Commission, the Friendly Societies Commission and, in relation to credit unions, the Chief Registrar of Friendly Societies in the exercise of their functions, and for acting on behalf of the Treasury in the conduct of insurance supervision under the Insurance Companies Act 1982, as soon as the necessary arrangements can be made.

To this end the Government propose to make an order under the Deregulation and Contracting Out Act 1994 to contract out the relevant insurance supervision functions to the Authority. The Authority will enter into contracts with the Treasury and with the Building Societies Commission, the Friendly Societies Commission and the Chief Registrar of Friendly Societies setting out its responsibilities in these areas. These arrangements will be in place to enable the Authority to take on these additional responsibilities in January 1999.