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Lord Newby: My Lords, I am grateful to the noble Lord, Lord Saatchi, for having raised this issue. When he first did so, a couple of weeks ago, many noble Lords, and indeed many in the City, were barely aware of the merger of the London and Frankfurt stock exchanges. It has been interesting to watch the volume of interest, comment and disunity on the issue grow with every passing day. A cloud no bigger than a man's hand has rapidly developed, like the thunderstorm earlier today. This is a major issue. It has far-reaching implications for the way in which the City, and indeed Frankfurt, operate. I suspect that there is a bumpy road to travel before the merger is consummated, if it happens.
To that extent, I share the analysis of the noble Lord, Lord Saatchi, but then our paths diverge. The problems with which we are faced in terms of the Bill stem from the fact that the merger has not yet taken place. By definition, we cannot know what form it will take. Its longer-term consequences are unclear, even to many of the players in the market. When the final structure of the new entity is clear, a view may be formed that the Bill requires amendment. The problem is that we are asked now whether it should be amended. Given the complete lack of clarity as to where the process is going, we simply cannot have the degree of certainty that would enable us to accept the amendment.
On examination of the draft amendments before the House, that view is reinforced. Frankly, Amendment No. 1 adds little to the existing provisions of Clause 2. As for Amendment No. 2, as a declaration of intent it sounds fine; however, I am at a loss to know how the FSA can ensure that the German regulator adopts measures consistent with those in the Bill--just as I am unsure how the FSA would respond if the Frankfurt regulator said, "This is the way we do it in Germany. I hope you will now amend your regulations so that they are consistent with the way in which the system operates in Frankfurt". So I fear that I cannot support either amendment.
However, this is a substantial issue. The Bill's provisions will not deal adequately with it for the longer term. I suspect that, just as some in the City have been somewhat complacent about the consequences of the merger of the two exchanges, there may be a certain complacency at the Treasury, and possibly even among Ministers, about the longer-term consequences of the merger. Therefore, although I have great sympathy with the thought behind the two amendments--and a sinking feeling that we shall be returning to financial services regulation sooner rather than later--I cannot support the amendment.
Lord Borrie: My Lords, I congratulate the noble Lord, Lord Saatchi, on a timely intervention at the previous stage in asking us to think about the important proposed merger between the London and Frankfurt stock exchanges. It is clearly relevant to so much of the Bill's provision, although, as I think the noble Lord will accept, not to the whole of it. There are aspects of the financial markets which will be unaffected. Nevertheless, it was only right that the noble Lord should bring these matters forward at the previous stage and again now.
In somewhat light-hearted vein, I congratulate him also on ensuring that the media are well aware of his proposed amendments--the Financial Times in particular. I do not, however, congratulate him on reviving a proposal of which, frankly, many of us are rather tired. The amendment seeks, inappropriately, to elevate to subsection (1) a matter that we all recognise as important; namely, the competitiveness of London and the UK in these matters. As the noble Lord knows better than any of us, the clause recognises that the authority, in discharging its general functions, should,
Perhaps I may again contrive to bore your Lordships by citing the four regulatory objectives. Surely they are unexceptionable; they are accepted on all sides of the House. They are: market confidence; public awareness; the protection of consumers; and
There may be different views on either side of the House as regards our relative keenness on regulation at all, or on having a regulatory authority such as this. But surely it is eminently appropriate that it should have public interest objectives. I have cited the four immensely appropriate public authority regulatory objectives in Clause 2, and I do not think that we want to alter the provision now. That has nothing to do with the proposed merger between London and Frankfurt.
I share the thoughts of the noble Lord, Lord Newby, in regard to Amendment No. 2. But I am not privy to the thoughts of my noble friend the Minister. Like other noble Lords, I look forward to hearing his response.
Lord Stewartby: My Lords, I was rather disappointed to hear that although the noble Lord, Lord Newby, was sympathetic to the purport of Amendment No. 2, he did not feel that he could support it. He offered two reasons, the first being that the authority would not be in a position to ensure common standards from one country to another. There is a simple answer to that. The amendment uses the expression,
The noble Lord's other reason seemed to be that these are early days; that if the Stock Exchange merger with Frankfurt goes ahead, this will be a big change and it is difficult at this stage to consider all the potential implications and, therefore, what the legislative response should be. However, I find it difficult to see how one can quarrel with the wording of the new subsection (3) (in Amendment No. 2), which has been drawn up to provide a requirement that the Financial Services Authority should do two very general and desirable things. The first is, so far as is practicable, to ensure that markets and exchanges are regulated to common standards when those markets and exchanges operate both in this country and in another; the second is to encourage overseas regulators to adopt similar measures, or measures consistent with those in the Bill, in relation to the prohibition of market abuse.
The amendment may not be perfect, although given its source--my noble friend Lord Saatchi--it is obviously of high quality. It is very important that today the amendment is not only moved but accepted by the Government. When the Bill goes back to another place it will give the Government an opportunity to table an amendment which meets the points that have been made and incorporates them
In view of the tremendous effort that has been made by the Government, noble Lords and others to put the Bill into the right form, it is unlikely that the Government will be enthusiastic about introducing another regulatory Bill on this subject in the near future. I believe that if we gave the Government more time to think how to deal with the matter we would be doing them and the Treasury a favour. Without wanting to sound sycophantic, my officials in the Treasury were some of the most intelligent and conscientious people with whom I have ever had the privilege to work. I have no doubt that for some time they have been grappling with the implications of the potential merger which has arisen at a very late stage in our consideration of this Bill and which raises new and fundamental questions about how the regulatory system will operate where there are shared markets. It would assist the House and the proper formulation of this Bill, at a late stage before it becomes an Act, if the Treasury had a further opportunity to consider this new and vitally important issue. I hope that on reflection the noble Lord, Lord Newby, will be able to support this amendment and that it will find general favour in your Lordships' House this afternoon.
Lord Desai: My Lords, I did not speak at the Report stage of the Bill. However, I detect a philosophical contradiction in Amendments Nos. 1 and 2, which have been spoken to by the noble Lord, Lord Saatchi. Amendment No. 1 and all the gloss that we have read in today's newspapers mean, more or less, that there are limits to the regulation of financial markets and there should be a hands-off attitude. Those matters which are self-regulatory ought to be left alone and the FSA should not intervene too much. Whether or not that is right, that is the gloss which has been put on the amendment. After all, as my noble friend Lord Borrie said, the competitive position has been covered in subsection (2). However, Amendment No. 2, which concerns the super-regulator, states that matters cannot be left to themselves. The logic of the amendment is that there is a need for a European financial services authority. If the noble Lord, Lord Saatchi, had said that I am sure that the noble Lord, Lord Newby, would have supported a super-European financial authority.
Given the fact that it is premature to speak of a merger and a number of matters must be sorted out, we should leave it to the markets, the stock exchanges and the financial authorities in the two countries to deal with it. Let them do their work and not complicate their lives and ours. As happens with all financial services Bills, no doubt when this legislation passes into law it will be out of date. That is in part a matter of regulating financial markets. In one, two or three years' time we shall return to the subject and have another nice Bill comprising several hundred clauses
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