The Financial Services and Markets Bill could be described as epic – in terms of proportions (346 pages), in terms of impact (biggest shake up of financial services in a generation), and in terms of the time it is taking to make its way through all parliamentary stages. The Bill was introduced in the Queen’s speech in May 2022 and given first reading that July it has finally made its way through report stage and should receive Royal Assent before we rise for summer recess.

I have written about the Bill regularly, focusing mainly on areas I have been most involved in – crypto, cash, and the ‘regulatory dash’.

The Bill will implement the outcomes of the Future Regulatory Framework review by repealing retained EU law relating to financial services. Worth noting in this context that, just this week, we have finally signed a long-delayed cooperation pact in financial services with the EU. This does not mean the UK is committing to align with the EU on regulation but both sides have committed to a regular twice-yearly meeting to discuss “voluntary regulatory co-operation on financial services issues.”

It will also transfer responsibility for these areas of regulation to the financial services regulators and contains provisions to enable the establishment of a regime to regulate fiat backed stable coins and protect access to cash.

The proposed transfer of responsibility for financial services regulation to the regulators – the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) – has been an issue that prompted much debate at Committee Stage and one that we have returned to at Report. Whilst it is essential that we ensure the independence of our regulators, that independence must not be conflated with accountability.

‘Quis custodiet Ipsos custodes?’ reminds us that our ‘watchdogs’ themselves require oversight and accountability. We must also consider whether the regulators are functioning as efficiently as possible, and we have devoted many hours of debate in the House of Lords to discussing these principles. Key issues of concern to myself and colleagues revolved around this question of accountability and efforts to improve transparency, parliamentary scrutiny, reporting requirements and whether a proportionality element to the regulatory principle would improve efficiency.

One of my proposals to improve the Bill was a requirement for both regulators to publish a report annually setting out how they have facilitated international competitiveness and growth against a range of data and analysis requirements. Whilst the Government did not accept the suggestion, they did largely adopt my drafting which I’m happy with.

It was positive to win this concession, the Government also borrowed much of my drafting on further amendments around Parliamentary scrutiny of our Regulators. The changes will require the Financial Conduct Authority (FCA), the Prudential Regulatory Authority (PRA), and the Payment Systems Regulatory (PSR) to set out how recruitment to their statutory panels has been consistent with their statements of policy as part of their annual reports.

The Government has also introduced a new power for the Treasury to require the panels to produce annual reports. The Treasury will then be required to lay these reports before Parliament. The Treasury (rather than the regulator) will also be responsible for appointing the complaints commissioner.

During report the Minister said, “The Bill also already introduces measures to strengthen the quality of the regulators’ cost-benefit analysis, including the introduction of new, independent panels to support the production and development of CBA….The Government is grateful to my noble friend Lord Holmes for raising this issue in Grand Committee, and again through Amendments 44 and 47 today. The Government has reflected on that earlier debate and introduced Amendments 43 and 46, which will require both the FCA and the PRA to appoint at least two members to their CBA panels from authorised firms.”

One important change that the Government was forced to accept after they lost a vote in the Lords - although it was subsequently reversed in the Commons - was the addition of a financial inclusion ‘must have regard’ duty in the consumer protection objective. It must be an imperative for our financial services sector to function well for all citizens. Currently the fact that so many are either excluded from access to financial products or that those with the least are forced to pay more for services cannot be right.

The Bill also covers access to cash. Here the Government made several concessions in response to arguments at Committee stage. The Minister said:

“I recognise the strength of feeling on this matter in both Houses, in particular on ensuring free access to cash for individuals…. Over 1.2 billion cash withdrawals in the UK last year were from free-to-use cash machines and we have heard impassioned contributions highlighting the reliance on cash by some of the most vulnerable in our society. Therefore, the Government has tabled amendments which will require the FCA to seek to ensure reasonable provision of free cash access services for current accounts of personal customers. This forms part of the regulator’s wider duty of seeking to ensure reasonable access to cash.”

It is positive that the Government has made these moves, but I tried to push them to go further by arguing that our cash network should be designated as critical national infrastructure and that all businesses with a physical presence should be mandated to accept cash. What point fighting for free and reasonable access to cash if there are no places to spend it?

Although I am a staunch supporter of cash, I am fully aware that the future is digital. This means we must ensure not only that that future is accessible but, equally crucially, that the transition to it is similarly so. I asked the Government to consider an access to digital financial services review.

Finally, on crypto, the Bill offers a solid start to a sensible regulatory approach by setting out a framework for digital assets. Unlike in Europe, where the Markets in Crypto-Assets (MiCA) regulations offer a wide ranging, comprehensive, and separate, bespoke framework for markets in cryptoassets, the UK framework brings the regulation of crypto asset related activities within the existing UK regulatory framework. The Bill recognises cryptoassets as "financial promotions," which avoids needing to define what type of token something is in order to figure out who regulates it. Basically, if it's finance and you are promoting it to consumers, it is a financial promotion, and the FCA regulates you.

The Bill, like Europe, will put in capital requirements for stable coins, referred to in the bill as “digital settlement assets”. The Bank of England will oversee fiat-backed stable coins as a payments system. The Bill also gives the regulators the power to "designate activities" that are subject to regulation.

That is almost a wrap on the crypto, cash and regulatory aspects of this important Bill. We are completing the final stages and awaiting the Royal Assent when the Bill will become an Act. Then we will be able to see the new law at work – hopefully delivering for financial services and fintechs, but ultimately for us all as citizens. It is within our grasp – a country in which we are financially enabled, financially included with responsible, accountable regulators overseeing an innovative and exciting digital future.