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Amendment 64 is identical to one that was debated in Committee in another place. They debated a number of amendments, although they did not spend as long as we are going to spend, quite rightly, on all this. However, this was one that debated in another place. I should start by repeating what my honourable friend the Financial Secretary made clear there, which is that the FPC's responsibility to monitor the perimeter of regulation is not only for the outer perimeter covered by Amendment 64. It also has responsibility for the inner perimeter, between those firms regulated prudentially by the PRA and those that fall outside the PRA's regulation; that is one of the FPC's most vital roles. To do this effectively, the FPC must monitor whether activities outside the perimeter of regulation or outside the PRA's scope are being undertaken in such a way
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I do not agree that the way to ensure that the FPC undertakes the role effectively is to place it under an inflexible and bureaucratic requirement to produce an annual report on the matter. In particular, it seems unrealistic to expect the FPC to produce recommendations within 30 days of coming into formal existence. We need to allow it to use its own judgment and discretion to decide what activities might pose a risk and how and when it should investigate them.
Amendment 65 would amend the FPC's power to make recommendations to the Treasury to extend the scope of the PRA's ability to obtain information from unauthorised persons. Given its expertise in systemic financial stability, new Section 90 gives the FPC a power to make recommendations to the Treasury if it believes that the ability of the PRA to obtain information from those outside the perimeter of regulation is needed for financial stability reasons.
Lord Sassoon: I am very grateful to the noble Lord. I should have been referring to new Section 9O in the previous amendment as well. What can I say, other than that the hour is late? I was thinking, "Why is there a typo in my speaking notes?". I probably have a flood of notes coming from the Box on the matter, but the noble Lord got there first-in fact, I see I have only one.
As I was saying, new Section 9O gives the FPC a power to make recommendations to the Treasury if it believes that the ability of the PRA to obtain information from those outside the perimeter of regulation is needed for financial stability reasons. Removing the words "it considers that" from subsection (4) of new Section 9O -O for orange-would defeat the purpose of the recommendation power, which is to allow the FPC to make its own expert judgment about the need for the PRA to be able to obtain information that is relevant to financial stability from the wider class of person and make recommendations to the Treasury accordingly.
It is important to note that the decision to extend the PRA's power still lies solely with the Treasury and is subject to approval by both Houses. It will be for the Treasury to look at the recommendation from the FPC alongside other information from the PRA and others and make a call on whether the power needs to be extended.
I shall now address Amendments 53, 87 and 88, all of which deal in some way with transparency and publication requirements around the FPC's direction-making powers. Amendments 53 and 88 would require
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What the second part of this means is that a direction may be revoked as long as the Bank sends a notice in writing to revoke it. The Bank does not have any discretion to revoke a direction without sending a notice in writing. The Bank cannot revoke a direction orally. I hope that provides reassurance on why Amendment 87 is unnecessary.
I return briefly to Amendment 42, where we began, and an important question asked by the noble Lord, Lord Eatwell, about why, in his interpretation, the FPC can endanger the FCA's objective of making sure that markets function well. I hope I have got his key question right, because it is an important one. I will try to explain why I believe that it is a misunderstanding and how it actually works. The strategic objective is an overarching umbrella objective to provide a common goal for the regulator and, in that sense, it acts as a mission statement. It is an objective which has been amended in line with the recommendation of the Independent Commission on Banking; it was endorsed by the Joint Committee and now reads "ensuring that markets function well". Legally, actions taken by the FCA in discharging its general functions need only be compatible with the strategic objective but must advance one or more of its operational objectives. As such, it is the operational objectives which provide the crucial mandate for the FCA to act in these areas. The Treasury Committee states that the case has not been made for the strategic objective. The Government believe that the strategic objective will act as a high level mission statement that brings together the diverse aspects of the FCA's work and, as such, it will serve a useful
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It might also be worth adding that effective mission statements commonly clarify an organisation's purpose. They usually set out the aims of an organisation and its key target for shareholders. They do not go into detail of an organisation's goals or targets and the approach taken in achieving them. The FCA's strategic objective clearly meets these criteria. It gives an overall purpose or aim to the FSA, which is to ensure that markets function well, and it clarifies that this only refers to the relevant markets as defined in new Section 1F in Clause 5.
It is therefore important to understand the different status of the strategic objective, or umbrella objective, as compared with the operational objectives. The Government's position is that we disagree with the Treasury Committee's assertion that a mission statement has no place in primary legislation. Indeed, it has precedence. With that understanding of the different levels of objective that are in operation here, I believe that the amendment is not necessary and the noble Lord's fears are unfounded. It is not in any sense a drafting flaw that the strategic objective, because of its different nature, is not covered by the function that we are talking about. I hope that on that basis the noble Lord will be reassured and can withdraw the amendment.
Lord Eatwell: I wonder if I have got it right. The noble Lord's argument about the position being somehow at a different level does not work. What works in the definition of the FCA's general duties is the following: the Bill states that the FCA must discharge its functions to,
Consequently, the only way in which the FCA can pursue its strategic objective is via one of the operational objectives. Consequently, if you do not prejudice the operational objectives, you do not prejudice the strategic objective. It therefore has nothing to do with higher levels, but simply relates to the word "and" at a relevant point that I had missed-for which I apologise-in the general duties of the FCA. Is that correct?
Lord Sassoon: My Lords, I believe that the drafting is fine. I reiterate that in discharging its general functions, the FCA must act in a way that is compatible with its strategic objective but which advances one or more of its operational objectives. The drafting is, I believe, appropriate, but I will of course have another look to see whether the "and" is appropriate. The noble Lord's colleague in another place was, I am sure, given a clearer explanation by my colleague the Financial Secretary on exactly this point. Of course I will look again, but my belief is that the drafting works. If, on reflection, it does not, I will, in the customary way, write to all noble Lords who have taken part in this discussion.
Lord Eatwell: My Lords, I am grateful to the noble Lord for working through this particular bran-tub. The point that I was trying to make on the amendment is that the drafting is right, but not for the reason he gave. That was why I apologised for not having spotted the relevant "and" in the drafting of the responsibilities of and pursuit of objectives by the FCA.
Perhaps I may comment on a couple of the other amendments in the group. The issue raised by Amendment 47 has not been satisfactorily dealt with by the piece that the noble Lord read from the Financial Stability Report. There was a meeting, and a willingness to provide information was expressed, but no requirement. The issue here is the requirement because it is imperative that the FPC has knowledge of the leverage ratios of regulated persons, and Amendment 47 ensures that it will. I urge the Minister to have a look at that amendment and see whether I am not right and it is perhaps a good idea to have this requirement rather than the informal relationship which he described earlier.
I am grateful to the Minister for the elucidation on publications and other bodies. I suppose it really means other relevant bodies, but then people would have a great debate about relevance. I hope that my research centre at Cambridge University is included, since it is devoted to financial regulatory issues. That is just a commercial.
Amendment 64 was about the scope of financial regulation. I would like to go away and consider the words of the Minister, and think about the issue of the scope and boundaries. As he said, it is enormously important and we have got to get it right. I am not at all convinced that I have got it right here, so it would be helpful for me to have a think about it, look it over again, and come back to this issue if necessary on Report.
Baroness Noakes: My Lords, in moving Amendment 42A, I shall also speak to Amendment 62A in this group. These are probing amendments. Amendment 42A deletes line 38, on page 5. New Section 9F of the Bank of England Act 1998 sets up the functions of the FPC, and subsection (1)(c) creates the function of making recommendations. Amendment 42A deletes this function.
Amendment 62A deletes a lot of lines, but in practice deletes the whole of new Sections 9N to 9Q, inclusive, which detail the functions created by new Section 9F. The purpose of tabling these amendments is to probe why the FPC needs the power to make recommendations, and what the legal significance of this function is in practice.
When I first saw the Bill, I was mystified by the need to create a statutory power to make recommendations. I was not familiar with that being a requirement, so I
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The Minister wrote to noble Lords with an interest in this Bill yesterday, following the first Committee day, which I was unable to attend. In the letter he said that the Treasury has a common law power of recommendation, but that bodies created by statute need a specific power. I find that pretty odd, given that bodies created before 2010 managed perfectly well without a statutory power of making recommendations. Indeed, the Bank of England has managed perfectly well for over 300 years without any kind of power to make recommendations.
New Section 9N allows the FPC to make recommendations within the Bank. I found it difficult to get my head around making recommendations within the Bank. The FPC is a committee of the Bank's court, and that is under Section 9B. Under new Section 9N, this committee can tell the corporate body in which it is housed what it thinks that body should do. What is the purpose of that? More to the point, what is the effect? The Bank, which acts through its court, fulfils its own function, and as far as I can see, those functions do not include paying any particular attention to what one of its committees says. I do not believe that the functions of the Bank or its court are changed by the Bill in this respect. If I am wrong on this, I know that the Minister will correct me. However, I am completely mystified about what making recommendations within the Bank means in practice. The Committee discussed the circularity of this in the context of the financial stability strategy under proposed new Section 9A, which covers the FPC making recommendations to the court. I must say that I was no wiser after reading both Hansard and the Minister's letter on this point.
Proposed new Section 9O-9 Oscar-would allow the FPC to issue recommendations to the Treasury. However, while the FPC has to take notice of any recommendations made to it by the Treasury and has to respond to them-that is set out in proposed new Section 9D-there does not appear to be any reciprocal provision requiring the Treasury to respond to the FPC's recommendations. If that is the case, why on earth do we have to provide in legislation for the FPC to make recommendations to the Treasury?
Proposed new Section 9P covers the FPC making recommendations to the FCA and the PRA-and does contain requirements for the FCA or the PRA to comply or explain their non-compliance. This seems to be the only part of the Bill dealing with the FPC's recommendations that make sense and has any real-world impact.
Will the Minister explain why, in drawing up the functions of the FCA and the PRA, no reference is made to their duties in respect of the FPC recommendations? If it is necessary as a matter of law to set up a power to make recommendations, why is there no requirement to set up a reciprocal duty or requirement of compliance with the recommendations?
Finally, proposed new Section 9Q allows the FPC to make recommendations to the whole world. The justification for this is that it may make recommendations to bodies such as the Financial Reporting Council. However, since the recipients of these recommendations can-as far as I am aware-do what they like with them, I fail to see the point of the provision.
I looked at the June 2012 FSR, which has been referred to already this evening. The executive summary makes either six or seven recommendations, depending on how one interprets "recommendation". In six instances it states that the committee "recommends" that other people should do things, but in one instance it states that banks "should" continue to do something. I have no idea whether that constitutes a recommendation. In any event, most of the recommendations were addressed to the FSA-which will be the PRA and the FCA in due course-and two or three, depending on one's interpretation, were addressed to banks. That is interesting because making recommendations to banks was not mentioned at all in the extraordinary recommendation-making powers, although clearly this will be an important part of their activity.
Perhaps I ought to be less worried about the scope of the recommendation-making power that is not bounded by space or time, because it appears to be of little substance. If my noble friend tells me that it does have real substance, we would look to constrain it in some way so that it did not include the ability to tell the whole world how to act.
In summary, this is a set of largely one-sided recommendation-making powers that might amount to something of importance-or alternatively, not much more than window dressing. We should be told. I beg to move.
Lord Hodgson of Astley Abbotts: My Lords, I have some sympathy with my noble friend's amendment. When the Minister replies, perhaps he will focus some remarks on proposed new Section 9Q, which is the declaratory piece about the whole world. It seems that either the parliamentary draftsmen are saying, "Because you said certain people were included, you must include everybody else", or it is otiose.
It would also be helpful to have some suggestions about the sort of events and recommendations that might fall under new Section 9Q, so that the Committee gets some understanding of the purpose behind this clause, if it is anything other than declaratory. to avoid, for parliamentary draftsmen's reasons, the view that, because certain parties have been suggested, by definition they could make recommendations to nobody else.
Viscount Trenchard: My Lords, I also support my noble friend's amendment. In particular I think that this whole section is unclear and muddled. It is extraordinary
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Similarly, in making recommendations to the Treasury, if it is a committee of the court, it should be the court that makes those recommendations. We are getting very confused. The difference between the FPC, dealing with macroprudential regulation as a committee of the Court of the Bank of England, and the PRA not as a committee but a different body, but again within the Bank of England, is strange. I just think it all needs to be clarified a bit more.
Lord Eatwell: My Lords, I first address the amendment moved by the noble Baroness, Lady Noakes. I am now very puzzled by the status of recommendations, given that a recommendation is not necessarily something which needs to be followed. Given that there seems to be no indication, as the noble Baroness, Lady Noakes, pointed out, about the reactions to recommendations, it is difficult to assess the status of this concept within the structure of the Bill. My Amendment 69 simply deals with the offending new Section 9Q and deletes it. It states:
the world. I am sure the world would be very grateful, but we should not expend public money on making recommendations to the world, and especially not on confirming them in writing. It would be interesting to know who these "persons other than those" are defined to be when we are talking about the context of macroprudential regulation; we are not talking about relationships, say, with individual firms or whatever. The noble Baroness, Lady Noakes, has picked up on some important and valuable obscurities in the Bill and it would be helpful if the Minister could elucidate them.
A sort of bran-tub of my amendments has again been grouped together. I am sorry about that but I am not responsible for the groupings. I could ungroup them but that would be tedious for everyone, so let us deal with them. Amendment 48 is included in the group, which again has been tabled in the context of directions. It refers to the point made with respect to the nature of directions. The Bill states in proposed new Section 9G(4) that:
I understand entirely what the drafting is supposed to do, but given the level of conglomeration and concentration in the financial services industry, I do not think that this will work as it is quite possible to refer to,
but for there to be only one firm of that description. It is quite possible for that to happen. If this may not "relate to" in the sense that it may not have a relationship to, that would rule out, say, a reference to,
if it just so happened that the set of persons of that description contained but one element-just one firm of that type. We can see that there are various niche firms and highly specialised companies in the City. I can think of very highly specialised money brokers of which only one performs a particular role in the money markets. Perhaps my amendment would have been more helpful if it had changed the word "relate" to "refer", so that the direction could not refer to an individual specified regulated person. That would be inappropriate and would go beyond what the FPC is designed to do. However, I am nervous that the activities of the FPC may be unreasonably limited by the possibility that there might be just one specific regulated person within a given class of persons to which the FPC wishes to issue a direction.
This is very dangerous in the sense that it may be enormously important that a direction should be operational within a specified period. It may be important for the financial stability of Britain that actions take place within a month or six weeks, or whatever the period might be. Being unable to require that provisions be implemented within a specified period seriously weakens the ability of the FPC to pursue effectively the stability objective. I am also a bit worried about the term "specified means", but again, I am not sure what it means. Perhaps the Minister could help me on that when he replies. I really think that the business of a specified period should be looked at very carefully indeed for fear of weakening the powers of the FPC.
"The recommendations may relate to all regulated persons or to regulated persons of a specified description, but may not relate to the exercise of the functions of the FCA or the PRA in relation to a specified regulated person".
Again, this is the problem. It is quite possible that a generic description could apply to just one regulated person. Therefore, this is the same point that I made with respect to Amendment 48. The word "relate"-that is, "have a relationship to"-could result in the FPC not being able to make recommendations because the specified activity was performed by only one particular institution.
Finally, Amendment 69 is where I follow on from the noble Baroness, Lady Noakes, and comments that have been made by the noble Lord, Lord Hodgson,
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namely, the rest of the world. With those comments, I look forward to hearing the Minister's comments on the amendments in the name of the noble Baroness, Lady Noakes, and the various amendments in my bran-tub in this case.
On this group of amendments around the levers and powers of the FPC, I will start with Amendments 42A and 62A in the name of my noble friend Lady Noakes, and I will follow with Amendment 69 from the noble Lord, Lord Eatwell. These amendments seek to remove the FPC's powers to make recommendations. As my noble friend has said, she does not seek to remove those powers but to probe how they will operate and why they are necessary in some particulars, although Amendment 69 is intended to remove the wider recommendation power.
I say at the outset that recommendations will be the primary means by which the FPC will seek to address systemic risks, and I do not think that any noble Lords who have spoken are challenging that. It is a question of how they will operate and whether some of the power is redundant, but I hope that we would agree that recommendations will be at the heart of the FPC's ability to do its job. My noble friend talked a bit about how it used to work; once upon a time there was, of course, regulation by the governor's eyebrows, and a carefully calculated arching could elicit all sorts of reactions from the City.
I suggest that recommendations to industry from the FPC will fulfil a broadly similar-if more wordy-role to that of the governor's eyebrows, by allowing the committee to highlight risks or unsustainable behaviour. However, recommendations, unlike the governor's eyebrows, will have and need to have legal backing. The Bill allows the FPC to make recommendations to the PRA and FCA. In a moment I will come back to where the reciprocal requirement on those two bodies to follow through on the explanations is-to the Bank, to the Treasury and to other persons.
On the PRA and FCA, the question was: where is the duty? I am slightly puzzled by this, because it seems very clear, in new Section 9P(3), that the FCA and the PRA have a clear duty to comply or explain. They must either,
Then there is the question of recommendations that are made within the Bank. I can see how, on the face of it, we seem to be back into Alice in Wonderland territory. Actually, the FPC is a decision-making body separate from the Bank itself within the legal construct of the Bill. It has no control over policy functions that are the responsibility of the Bank and therefore it is right and necessary that the FPC is able to make
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The nature of the recommendations to the Treasury will be rather different, because they are going to be aimed at the Treasury's use of its powers to make secondary legislation. The decision as to whether or not to use those powers of secondary legislation must be for the Treasury alone. Of course, any recommendation from the FPC will be taken into account but it is not appropriate to require the Treasury to respond formally in the way that the regulatory bodies would be required to.
Lord Hodgson of Astley Abbotts: Just to be clear, the FPC is going to make recommendations within the Bank, so that the governor of the Bank, wearing his hat as chairman of the FPC, writes to himself as governor-is that what will happen? Have I got this right? I presume that the two deputy governors will also join in and send it in one door and walk next door to receive it-is that right?
Lord Sassoon: My Lords, that is broadly right. [Laughter.] We should remember that the FPC will be made up of a different group of people, including independent members, who will be making recommendations. Taking the example I gave of the supervision of payment systems, the FPC, with its independent members and statutory responsibilities, could be making recommendations to the Bank regarding its supervision of payment systems. It would therefore be a mischaracterisation-it really does not matter who signs a letter to whom, it would be the FPC making a recommendation to the Bank. To reduce it to a suggestion that the governor will be writing to himself would be a mischaracterisation of an important power that should have a degree of formality around it, in the same way that the FPC will be required to exercise its powers of making recommendations for other regulatory bodies.
Baroness Noakes: My Lords, I thank the Minister for the explanation that he is trying to provide, but I feel a little as if we are in Alice in Wonderland. Can the Minister give me an example in the real world where people within organisations behave in the way in which we seem to be expecting the Bank of England to behave?
Lord Sassoon: My Lords, I am not sure whether one can distinguish the world in which we are talking about financial regulation from the real world. This is the real world. It is a world in which these are very important powers that go to the heart of ensuring the financial stability of the UK. This is not a frivolous point. It may appear on the surface to be Alice in Wonderland territory but, if the FPC is to exercise the really significant powers in the system that it is being given or the responsibility for financial stability, it must first have the levers. One of the important constituencies that it will be addressing-and it would be totally remiss of the Government and this Bill to
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An awful lot of things could be left unsaid which one would assume would somehow happen. This is not one where it would be safe in any way to do so because, if we did not have this power to make recommendations, there could be a significant risk that the FPC would not have the powers-the levers-over critical areas of the supervision and the regulation of the financial infrastructure that underpins so much of our financial system. One only has to look at recent events to see how computer glitches and apparently relatively simple IT problems can have very significant consequences. I suggest that the FPC would have a huge hole in this armoury if it was not able to make recommendations also directed at those who supervise the infrastructure.
Lord McFall of Alcluith: On this point, can I remind fellow Peers that I have invited the Governor of the Bank of England along tomorrow morning, so I suggest that they ask him the very important question: "Will he enjoy writing letters to himself in the future?".
Viscount Trenchard: The Minister just said that the FPC is to be a separate committee with strong statutory powers. I find it very hard to reconcile this with its being a committee of the Court of the Bank of England. This is different from the MPC, which is not a committee of the court but is a committee of the Bank. It would be more logical and comprehensible if at least it were acknowledged-as it clearly is-that the FPC is not a committee of the court but a strong semi-separate body. However, the Bill says that it is a committee of the court, in which case it cannot have any powers beyond the powers of the court.
Lord Sassoon: My Lords, the clear advice on the drafting of the Bill-notwithstanding other constructions that my noble friends are putting on this-is that the FPC should have the clear power to make these recommendations. I remember now that I, almost on a daily basis, am writing letters of perhaps a similar kind when I write to my boss the Chancellor-when, for example, he is wearing his hat as the chair of a Cabinet committee-for clearance or to seek permission for some policy matter. I certainly write letters within the Treasury on a regular basis to deal with formal matters, which is broadly similar territory to what we are talking about.
I have talked about the importance of clarity and transparency. It is perhaps worth underlining that one of the things that this power does is to ensure-because FPC recommendations will be published in the meeting record of the FPC-that the public are informed that, if a recommendation has been made by the FPC to the Bank, it is recorded and is open to public scrutiny.
I think that it was my noble friend's construction that the FPC cannot have powers beyond those of the court. I correct him on that: if the Bill confers such powers on the Financial Policy Committee, it does indeed have powers that the court does not have.
Viscount Trenchard: In that case, does my noble friend the Minister not think that it would be right to recognise the FPC as a committee of the Bank and as separate from the court, having its own powers as given in the Bill? The position would then be logical. At the moment, it is stated that it is a committee of the court. If I were a member of the court, I would not find it easy to understand any structure where a committee of the court-that is, the board-had powers which were independent of and separate from those of the court itself.
Lord Sassoon: My Lords, that is the situation; my noble friend might find it difficult now. If he or anybody else was appointed-as they have been-to the interim FPC or the formal FPC if and when it becomes established, they will of course receive extensive briefing on all these matters. This is not the right place to discuss how the FPC fits into the architecture of the Bank-that is dealt with in other provisions. Although my noble friend may not like it, the FPC, however it is constituted-I do not think that his construction would alter the point-simply must have these important powers, which are unequivocally the powers of the FPC and not those of the Bank. That is the case however the FPC fits into the architecture. I am glad that we have probed this matter but, without this provision being in the Bill, the FPC would be unable to make recommendations and would not therefore be transparent and open to parliamentary or public challenge.
These are important matters, but I think that I should turn, if the Committee will permit me, to Amendment 69, relating to the FPC's ability to make recommendations to people other than those whom we have discussed so far. Amendment 69 would remove one of the FPC's most versatile and useful levers for addressing systemic risks. Perhaps the best way of explaining this is by addressing the challenge given to me by my noble friend Lord Hodgson of Astley Abbotts to provide examples of what we are thinking about and why the power is necessary.
For example, the FPC may wish to make a recommendation to the Financial Reporting Council regarding corporate governance standards, or to the European Banking Authority about a risk to the UK financial system stemming from European banks-that very much links in with our recognising earlier that systemic risks may come from overseas and should not be ruled out. Equally, here is a power taking on board the challenge from the noble Lord, Lord Eatwell, about international linkages. Here is a power that gives an important ability to the FPC to make recommendations to an international authority.
In some circumstances the committee may wish to make a recommendation directly to industry in order to address a systemic risk. It is appropriate to set this power out in the Bill because, as in the case for all the other powers of directions, the FPC is a creation of legislation and its powers must be set out in legislation. Including the power in the Bill also makes it possible to make provisions for the publication of any recommendations that the FPC makes. New Section 9R requires that any recommendations made under new Section 9Q be included in the record of the relevant
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Amendment 50 would allow the FPC to dictate to the regulators the precise timetable for implementing directions. It is similar to a recommendation of the Joint Committee that the FPC should be able to direct the precise timing and means of implementation where this is,
The FPC will have significant influence over the timing of a direction. The committee will be able to make a recommendation as to how and when a direction should be implemented. These recommendations can be made on a "comply or explain" basis. This will require the regulator to implement the direction in line with the FPC's recommended timetable or explain publicly why it has not done so. But the Bill consciously prevents the FPC from directing the precise timing of implementation, because it will be the PRA and the FCA which hold the expertise identified by the Joint Committee to implement a direction most effectively and ensure that unintended consequences are avoided. I believe that the Bill as drafted strikes the right balance.
Lord Eatwell: My Lords, I want to refer to that discussion on Amendment 50. First, the amendment would not give the FPC the power to specify a precise time. It could specify a period: by the end of the month, within six weeks, within two months, or whatever it might be. The notion of a precise time is an inaccurate reading of the amended subsection. Secondly, while it is clearly right that the PRA and the FCA may have specialist knowledge at the micro level of the regulatory system, we are giving these powers to the FPC because it has specialised knowledge with respect to macro- prudential measures. If the FPC feels that it is urgent, for macroprudential reasons, that measures be taken within a specified period and it has the specialised knowledge, it seems to me that denying it the ability to require something to be done within a given time seriously weakens its effectiveness.
Lord Sassoon: My Lords, we could discuss at some length what the meaning of a "specified period" might be. Clearly it could, if interpreted as the noble Lord says, be by a certain month end. Equally, it could mean tomorrow, on the day after tomorrow or at the beginning of next month. I did not want to detain the
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There are scenarios that could be highly undesirable if they led to consumer detriment because the FPC had been specific about the timing of implementation. On the other hand, the arrangements that I have explained at some length, which mean that the FPC could issue the direction on a "comply or explain" basis, would put the individual supervisor or regulator in a position where it had to come back and justify very clearly why it had taken a particular course of action. I believe we have struck the right balance here, which avoids the difficulties to which I have referred.
Turning to Amendments 48 and 66, I will go straight to the critical issue that I was asked about on a couple of occasions in different ways. There may be other points that need to be made, but I will be clear on the questions about whether the FPC can be specific about one firm. The FPC can describe a type or class of firms even if that, in practice, only captures one firm. This is allowed so long as the FPC targets the risk and not the firm. The FPC is not allowed to say: "Do X to Barclays or prevent RBS from doing Y". However, in the circumstances that the noble Lord postulated, where a firm was the only one in a particular area or type of business, the FPC would not be prohibited or prevented from describing a class of one in those circumstances.
If the direction is a generic direction and there is only one person who satisfies that generic description, it does relate to-that is, it has a relationship to. I think it is just the wrong verb. If you said "refer to", you would be entirely right. "Relate to" is wrong. Perhaps later, over a glass of wine, we can turn to the Oxford English Dictionary, but I believe the word "relate" does not mean what the noble Lord has suggested it means. The word "refer" would mean that, but "relate" means "to have a relationship to", and in the case that I have just described, it would certainly have a relationship to a specified regulated person.
Lord Sassoon: My Lords, my clear understanding of the drafting here-and like these other drafting points that we have dealt with, if I have got it wrong I will of course write-is that a specified regulated person is the key thing, which in the examples I gave
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If the FPC were to make a direction related to regulated persons of a specified direction which happened only to be a class of one firm, then I am clear that that is what is intended here. If I have got it wrong, which I do not believe I have, I will clarify the situation. I wish I had the complete Oxford English Dictionary. It would be quite difficult to bring it in to discuss it over a glass of wine, but I have the Concise Oxford English Dictionary at my fingertips and it might help the noble Lord to say that the concise edition defines "relate" interalia as meaning "having reference to". I do not know whether that helps him, but perhaps we can move on.
We were on Amendments 48 and 66, and I think that that particular point was the major one here concerning the Committee. I would just say more generally that we are absolutely committed to maintaining clarity of responsibilities and distinguishing micro or firm-specific roles from the macro role. We do not want any lack of clarity here, but on the situation which the noble Lord postulates, I hope that I have satisfied him that indeed the drafting is correct. After that long and interesting discussion, I would ask my noble friend to consider withdrawing her amendment.
Baroness Noakes: My Lords, given the hour I shall not prolong any further what has been an interesting debate. I would like to thank my noble friend and the noble Lord, Lord Eatwell, for taking part in 50-odd minutes of discussion. My noble friend says that these recommendations to which my amendments were addressed are a lever, and that they need legal backing. I frankly do not see that. I am going to read with great care what my noble friend has said, in particular about making recommendations within the Bank, to the rest of the world and indeed to the Treasury, none of which seems to have any legal effect and is just simply a way of writing down something that might happen. I will not prolong the agony any further this evening and I beg leave to withdraw the amendment.
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