I was delighted to take part in the second reading of the Financial Services Bill. In a world of important legislation it is worth noting that this Bill is up there as one of the most significant we will consider, this year, as it progresses through the Lords.
John Glen, Economic Secretary to the Treasury, described the Bill, in the Commons, as “a portfolio Bill”. So it is and much of what is included is helpful if slightly disparate. In fact, I think what is not included in the Bill is, at least, as significant as what is.
During the debate I wanted to cover three areas that I believe should have greater attention: Financial Technology [Fintech], Financial Inclusion [Fininc] and the international perspective.
Fintech is a great British success story, largely thanks to the 2010 Cameron administration. One example, the innovative FCA (Financial Conduct Authority) sandbox. This regulatory sandbox allows businesses to test innovative propositions in the market, with real consumers. It has been running since 2015 and applications for Cohort 8 will open later this year. Its success can perhaps best be measured by the fact that it has inspired replications around the world. A bright star in the UK’s Fintech landscape. I believe now is the time to build on this home-grown success and extend the sandbox to all comers, at all times, not just first in class. Similarly, we must address the urgent need to support more businesses to scale up, perhaps the development of a ‘growth box’ is needed?
This would also seem an opportune moment to fully consider the UK’s approach to crypto-assets. We have an opportunity to be leading edge in our thinking and in helping to scope out the taxonomy for crypto-assets globally. Alongside this, will we mirror the EU’s approach with the Market in Crypto-Assets (MiCA) Regulations, do more, or do something different? These are urgent questions and this Bill is a valuable opportunity to address them.
The development of a Central Bank Digital Currency (CBDC) also presents an opportunity to speed up our thinking; both by experimenting and, potentially, scaling a deployment. If we scope out a hybrid CBDC we could be world leading and enable Threadneedle Street to shine even brighter beyond our shores. Currently China perhaps has a better claim to that title and there is concern that the Peoples Bank of China is so far advanced in this space that a digital yuan could become the de facto official digital reserve currency globally. And, if not China, then we may well be watching from the side-lines as Diem (Facebook’s proposed ‘digital currency’, previously known as Libra) steals the day. If only a fraction of Facebook’s social media customers convert to Diem, the impact on our economy, society, on our polity would be more than material.
In Fintech, we have an almost infinite potential, although we must remember it is a potential, not an inevitability.
Turning to an equally urgent issue, that of financial inclusion and its all too present lack in so many places. The fact that so many are still excluded from financial services or vulnerable to a potentially devastating cycle of debt and high costs that lead to a poverty trap is a stain on our society.
The Bill does include some measures that will help improve financial inclusion and is positive in terms of a) the breathing space scheme and b) the Statutory Debt Repayment Plan (SDRP). Both are 2017 manifesto commitments that would a) give someone in serious problem debt the right to legal protections from their creditors for up to six weeks, in order to receive debt advice and enter into a sustainable debt solution and b) enable those with unmanageable debts to enter into an agreement to pay their debts to a realistic timeframe. I welcome these parts of the Bill although a clear timetable for implementation is vital and currently absent.
Similarly, all of this must be reconsidered through the lens of the current Covid crisis. The Step Change Debt Charity have done research on the Coronavirus personal debt crisis and the Money Advice Trust are also active in this space, including as one of eleven partners in the ‘Taking Control’ campaign for bailiff reform. Bailiff visits were suspended during the first lockdown but are now permitted albeit without entry; which means bailiffs can charge a £235 fee despite being unable to enter premises to take control of goods. The campaign calls on the government to urgently legislate to suspend bailiff visits during the national lockdown.
Another organisation which has done so much to raise awareness of the increased risk of financial vulnerability, specifically following a cancer diagnosis, are Macmillan Cancer Support. They have campaigned for the introduction of a duty of care on financial services providers. Macmillan nurses create light where it seems none could possibly be present. By adding a duty of care requirement to this Bill we have the opportunity to play a small but important part in supporting people through their darkest hours. In the words of a cancer survivor:
“It felt like I was fighting my bank as well as fighting cancer.”
We have the solutions, if, together, we would only deploy them.
Last, but by no means least, I wanted to address the international perspective. We should always have this at the fore, and arguably more so now than ever.
From an international perspective it is clear that the Bill must do much. It is imperative that our regulators have an objective to promote international competitiveness. We must also ensure that we are round all the international tables when it comes to standard setting, not least in terms of Fintech.
When it comes to the ‘Basel regulations’, what is our underpinning philosophy? For example, investments in Africa currently glean a high risk weighting: prudential or just a tad protectionist? We need to reimagine risk right across the piece, domestically as well as internationally. Certainly not to increase or import more of it but to greater understand it, conceive of it, crucially, in real time, again, Fintech to the fore.
The Bill, portfolio for sure. It is my ambition, as it proceeds through the Lords, that colleagues and myself are able to make it more portmanteau; better able to carry us, our economy and our society through the turbulent times of 2021 and well beyond.
Related posts and background/ further reading:
Chris was a member of the House of Lords Select Committee on Financial Exclusion, 2016-2017
Chris also tabled duty of care amendments to the Financial Guidance and Claims Bill 2017. (Financial Guidance and Claims Act 2018)