The Banking Reform Bill will today have its final approval from the House of Commons after more than three years in the making.
The original intention of the Bill was to ring-fence banks’ retail arms from investment divisions but it has gone much further.
Changes have gone way beyond just the banks, whether it is capping the cost of payday lending, abolishing the approved persons regime for all deposit-taking institutions or extra FCA powers over all regulated firms.
The Treasury’s handling of the Bill has seen mounting complexity and constant change, meaning there has been little accountability.
The Bill went to the House of Lords at 40 pages and came back to the Commons at 189 pages as the vast number of amendments piled up. MPs have only had the chance to seriously examine 21 per cent of the Bill.
These are major changes to financial services and advisers’ regulation and they are not being properly examined. The rules and complexity grow with half empty parliamentary chambers spending just a couple of hours debating the issues.
For example, the Government has introduced special measures for financial services firms, which toughen up regulators’ powers ahead of enforcement. The special meaures rule was only proposed very late in the House of Lords, and a Treasury deal was agreed to bring forward an FCA guidance paper with no real Commons debate.
There are other examples of major changes being introduced very late in the process relating to capping the cost of payday loans, new FCA competition powers or new ways of raising the leverage ratio which could have an enormous impact on mortgage lending.
The Treasury toyed with the prospect of abolishing the approved persons regime for advisers, again with no public debate or scrutiny by the elected House of Commons.
In a speech in October the most senior judge in Britain, President of the Supreme Court Lord David Neuberger, attacked the Bill and highlighted concerns from a number of peers.
Former cabinet secretary Lord Andrew Turnbull said: “We are dealing with amendments to amendments to amendments which are in turn amending statutes that have already been amended more than once.”
Conservative peer and former DWP minister Lord Terence Higgins said the Bill is “unbelievably complex” while Liberal Democrat Lord Andrew Phillips said the Bill’s complexity is “quite barbaric”.
Former Labour Treasury Chief Secretary and Lord Joel Barnett said he has “never seen such a shambles brought to any House”.
At the time, Lord Neuberger said: “We have a Parliamentary debate on a Bill whose importance could scarcely be greater, a debate and a Bill which are condemned from all sides of the political divide as plainly unsatisfactory.”
As banking scandal follows banking scandal – just today Lloyds Banking Group was fined £28m over sales incentives– it is understandable the Government wants tougher financial regulation.
It was a similar story during the passage of the Financial Services Act 2012 last year when the Treasury threw in major reforms to Libor setting and payday loans at the very end of House of Lords scrutiny.
And of course, all advisers remember how the FCA threw the Treasury select committee’s recommendation to delay the RDR by one year back in their faces.
Financial services is the UK’s most important industry and regulating it is complex with unintended consequences.
Too often it lacks accountability and proper scrutiny, with rules made for political purposes, and the Banking Reform Bill is just the latest example. It needs to improve.
Samuel Dale is politics reporter at Money Marketing – follow him on Twitter here