What can the new House of Lords Financial Services Regulation Committee bring to the table? 

Joe Watts-Morgan, Client Executive
12/04/2024

The House of Lords unveiled its new Financial Services Regulation Committee earlier this year, with its first private meeting held in February. The Committee’s raison d'être will be to scrutinise the UK’s financial services regulators, specifically the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA), the Payment Systems Regulator and the Bank of England, improving their accountability to Parliament following recent concern about the powers they had gathered in the aftermath of Brexit. 

While seemingly an important role, the one critical question for this new Committee:  what can do that the current, pre-existing parliamentary committees cannot?

In 2022, the House of Commons Treasury Select Committee launched their own subcommittee on financial regulation. The House of Lords Liaison Committee responded in November 2023, recommending the Financial Services Regulation Committee’s creation and saying there was a “pressing need for enhanced scrutiny” of financial services regulation. Additionally, the Committee hopes to fulfil the Financial Services and Markets Act aim to improve the accountability of the FCA and PRA by compelling them to publish reports which explain how they will both achieve their objectives.

With a clear intent to add expertise to its ranks, the Committee’s membership includes Lord Peter Lilley, who served as Economic Secretary to the Treasury from 1987-89 and Financial Secretary to the Treasury from 1989-90, Lord Hollick, who was the previous Chair of the Economic Affairs Committee from 2014-17, and will be chaired by Lord Forsyth of Drumlean, previously a member of the Bank of England’s Monetary Policy Committee.

Reaction to the formation of the new Committee has generally been supportive. Bim Afolami MP, Economic Secretary to the Treasury, welcomed its creation, saying that he had “long been an advocate of more parliamentary accountability for regulator. Sir Robert Buckland MP, former Secretary of State for Wales and Secretary of State for Justice, also welcomed the committee, although expressed a touch more scepticism, claiming  “the lack of accountability is not unique to financial services but rather a systemic issue, which means we must go further and establish a more thorough, cross-House committee dedicated to the scrutiny of our misfiring regulatory system.”

Whilst Mr Afolami may welcome more accountability, the one yearning question for this new Committee will be what it can bring to the table that the current House of Lords Economic Affairs Committee and the House of Commons Treasury Select Committee does not already. Indeed, the House of Lords Liaison Committee touched upon this issue in their report recommending the Committee’s creation, saying that it would be “desirable to avoid exact duplication” with the Commons Financial Services Regulation sub-committee.  

In an effort to avoid crossover with these established committees, the new Committee’s focus will be on “thematic inquiries”, instead of scrutinising and approaching more recent issues affecting financial regulators. The hope is that this will allow the Committee to take a more long-term and holistic view of their performance. Furthermore, the report recommended “regular dialogue” between the chairs of the two committees to prevent this, in addition to similar actions with the House of Lords Economic Affairs Committee. This should hopefully be a simple task, with Lord Forsyth previously serving as Chair of the latter committee from June 2017-January 2022.

The Committee can clearly address a current gap in scrutiny, with a need for a specific Committee to compel financial regulators to demonstrate to Parliament how they are utilising their additional post-Brexit powers effectively. Furthermore, the Committee’s thematic approach to scrutiny for the regulators also provides a boon in this regard.

However, the devil will be in the details, as the risk for duplication of work across multiple different committees remains high, leaving the potential for simply another committee which merely scrutinises financial regulators, instead of adding a new dimension to this scrutiny. For now, time will tell if the new Financial Servies Regulation Committee will fulfil the aims the Liaison Committee had for it, and if it will be able to take a more holistic and comprehensive approach to its role.