In June 2021, the Treasury Committee published a Report entitled ‘The Future Framework for Regulation of Financial Services’, which concluded that it, not a new independent body, should assume responsibility for scrutinising the changes to regulations previously done at the EU level. A year later, we published a further report on the ‘Future Parliamentary scrutiny of financial services regulations’, in which we outlined our approach, including the establishment of a Sub-Committee to ‘take the lead’ on this work, and to take views on what form of scrutiny would be appropriate for each regulatory proposal which fell within its agreed remit.

And that’s exactly what we did.

With a membership mirroring that of the main Committee, and resourced by a multi-disciplinary mix of House of Commons staff, secondees and Specialist Advisers, the Sub-Committee on Financial Services Regulations has been in operation since June 2022.

The Sub-Committee published its most recent report, on its work in the first quarter of 2023, on 20 March.

The Sub-Committee ‘sifts’ open consultations on financial services regulations approximately once every two months. We take a targeted approach and have agreed to consider proposals which are at a consultation phase, contain draft changes to the regulators’ rulebooks which will have legal effect, and have been put forward by a regulator for which the main Committee has oversight.

The Sub-Committee considers a number of factors when deciding the degree of additional scrutiny for each proposal, namely:

• Does it have a significant impact on consumers?

• Does it have a significant disproportionate cost for firms?

• Does it incorporate any politically significant proposals?

• Is it a new activity that has not been regulated before?

We then decide, informed by expert advice, whether to write to regulators to request more information, invite written evidence, hold an oral evidence session, or raise the issue as part of our regular accountability sessions with the relevant regulator. Depending on the issue, external deadlines and the amount of oral or written evidence the Sub-Committee takes, we may also decide to publish a Report.

We want everyone to know that we have now taken on this role in Westminster from the European Parliament's Committee on Economic and Monetary Affairs (ECON) in Brussels. We’re keen to hear from individual consumers and their representatives, industry, and other potentially affected parties about any proposals within the Sub-Committee’s remit, and we hoped to be alerted to concerns by a wide range of those affected.

We keep on our website a running list of open consultations which will be considered at our next sift meeting, and welcome written evidence on any of the proposals.

Lots of the proposals which pass before the Sub-Committee are highly technical, and the consultations can sometimes stretch to more than 300 pages, but they have real-world implications for our constituents, so we take the role of scrutinising these proposals incredibly seriously.

Fraud is the most common crime in England and Wales and, in 2021, an estimated £584m was lost to authorised push payment (APP) scams, which occur when a consumer is tricked into sending a payment to a scammer.

The Financial Services and Markets Bill will require the Payment Systems Regulator (PSR) to establish a system for mandatory reimbursement of victims of authorised push payment fraud over the Faster Payments system. (As of the end of March 2023, the Bill is awaiting its Report stage in the House of Lords.) Instead of using its own power, as a regulator, to direct banks to reimburse the victims of APP fraud, the PSR is proposing that Pay.UK – an industry body and the operator of the Faster Payments system – make, maintain and enforce the new rules.

As part of our October 2022 sift, the Sub-Committee considered the PSR’s proposal for the new system. We had a number of questions relating to resourcing, responsibility, and the definition of certain terms such as ‘gross negligence’ when referring to a consumer’s actions.

After an exchange of letters with the PSR on the proposal, we remained dissatisfied with the answers provided and decided to call in the PSR and Pay.UK (as well as the Financial Ombudsman Service) to give evidence on the proposal. The session was informative, but unfortunately our concerns about the role of Pay.UK – a company limited by guarantee, guaranteed by the very banks it would be instructing to reimburse victims of fraud – were not assuaged.

The Sub-Committee, via the main Treasury Committee which has the power to report to the House, decided to publish a Report outlining its three major concerns about the proposals – namely, that:

• first, Pay.UK is an industry body and is inherently conflicted;

• second, outsourcing the implementation of the new rules to another organisation is a recipe for further unacceptable delay, as Pay.UK’s governance structures and a lack of regulatory powers would provide opportunities for banks and other payment providers to continue to drag their feet on reimbursement; and

• third, Pay.UK is not a regulator and thus lacks the necessary powers to enforce its rules.

The Report, ‘Scam reimbursement: pushing for a better solution’, recommended that the PSR revise its plans and retain more control over the process, in order to result in better outcomes for consumers.

The response from the regulator to our report is due by 6 April, and will be published on the Sub-Committee website in due course.

Baldwin, H. (28 March 2023), Holding the regulators to account: How is the Treasury Committee scrutinising financial services regulations after Brexit? (Hansard Society blog)