FSM Bill 9th Grand Committee session

The 9th Lords Grand Committee session on the FSM Bill took place on 21 March. Topics debated were:

• the proposal to limit the powers of PRA to prevent a matching adjustment being applied to a portfolio of high risk or illiquid assets, the ring-fencing regime and the SMCR. All amendments were suggested by Baroness Kramer, who noted their pertinence given recent issues in the banking sector. On the insurance point, she was concerned that “Solvency UK” would go to far in reducing buffers.  On the banking side, she expressed concern about the “watering down” of ringfencing – as with Solvency UK, she acknowledged that some changes would be welcome but was concerned at the willingness of the Government to take the stance that if a bank is resolvable its ring-fencing features can be removed. Her proposal would prevent any changes being made other than in primary legislation. And, finally, she also proposed that no key element of the SMCR could be changed other than through primary legislation.  Many people spoke in support, and Baroness Penn explained the Government’s position, saying that there are controls in place, particularly as regards amending the SMCR, but she felt the amendments went too far. The amendments were withdrawn;
• an amendment that would require the Government to publish its plans for Digital ID within 6 months of the Act being passed, with supporting amendments on AI. The discussion quickly turned to the development of a UK CBDC, with the Lords discussing many of the issues currently under consultation. The amendment was withdrawn;
• an amendment that would update the MLRs to deal with unintended consequences that could prevent necessary help being given to Ukraine. This turned into a wider debate on whether the KYC and CDD requirements overall work as they should.  The amendment was withdrawn;
• an amendment that would prevent PSPs refusing access to payment services on account of a person exercising their freedom of expression. After a short debate, the amendment was withdrawn;
• a proposal to require factoring companies to be regulated by FCA. Many Lords expressed surprised that factoring services were not already regulated. The Government believes that the current approach of enforcing standards through industry bodies and voluntary codes is more likely to drive positive outcomes. The amendment was withdrawn;
• an amendment that would require Treasury to publish a review of how to incentivise pension fund schemes to invest in high-growth firms and green infrastructure. Baroness Penn said the Government is fully committed to the objective of unlocking pensions capital for long-term, productive investment, and has made that commitment in the Spring Budget.  It will shortly consult on various measures. The amendment was withdrawn.

The 10th session will take place on 23 March.