The Government has
today introduced the Financial Services Bill to Parliament. The
Bill delivers significant reforms that will provide greater rights
and information for consumers, in addition to stronger financial
regulation to make banks safer and more robust in the future.
Chancellor of the Exchequer Alistair Darling said:"From
the outset of the global financial crisis two years ago, the
Government has taken decisive, innovative steps to protect the
savings of British families and stabilise the
economy."Along with governments around the world, we have
learned important lessons about the weaknesses of global banking.
In the past too many banks failed to fully understand the risks
they took. When the crisis hit, far too many firms found
themselves short of capital and without any plan for managing
through turbulent times."The Bill we are introducing
today is central to the Government’s reform agenda that seeks to
empower consumers and make sure that, in the future, taxpayers
will not be called on to protect banks from the consequences of
their actions."
The Bill includes:
· New powers for consumers to collectively challenge banks in
court in addition to a new consumer financial education body and a
free nationwide money guidance service· A requirement for firms to
develop ‘living wills’ to help them better understand the risks
involved in their businesses and deal with periods of stress, and
to ensure they can be wound down in future crises without
excessive taxpayer support· Tougher rules on pay and bonuses that
will ensure remuneration policies do not contribute to excessive
risk taking· Strengthening of the regulatory framework, including
the creation of the Council for Financial Stability and enhanced
powers for the Financial Services Authority. KEY FEATURES OF
THE BILL Stronger financial regulation and corporate governance
· A new Council for Financial Stability, chaired by the
Chancellor and including the Chair of the Financial Services
Authority (FSA) and the Governor of the Bank of England, to focus
on managing systemic risk and protecting financial stability, both
in the UK and internationally.· A new, explicit financial
stability objective for the FSA, enabling it to place greater
emphasis on monitoring, assessing and mitigating macroprudential
risks in its supervisory and regulatory approach. · Enhanced
powers for the FSA:- Rule-making powers may be used by the FSA for
any of its objectives (not just consumer protection as at
present);- Information-gathering powers extended to non-regulated
firms (including hedge funds), where information is relevant to
financial stability;- Strengthened powers to take action where
firms and individuals are guilty of misconduct;- Ability to place
restrictions on short selling and to require disclosure of short
selling. · Legislative provisions on pay that follow Sir David
Walker’s review of corporate governance (to be published 26
November 2009) and the G20 agreement on remuneration, including:-
A duty for the FSA to make binding rules which implement the G20
pay agreement following further detail from the FSB in Spring next
year;- FSA powers to void any individual contract that contravenes
specified rules, and to make provision for the recovery of
payments made under that contract contrary to those rules;- An end
to multi-year guaranteed bonuses, or large bonuses paid out as a
cash lump sum at year-end, and all bonuses subject to clawback;· A
new FSA duty to require firms to produce Recovery and Resolution
Plans (RRPs) or living wills. RRPs will ensure institutions have
robust recovery plans to deal with periods of stress without
recourse to support from taxpayers. By removing barriers to
effective resolution of failed firms, RRPs will help protect
against system-wide risks and reduce the need to draw on
taxpayers’ funds to ensure financial stability in the future.
Greater protection and support for consumers · New
measures to enable consumers to collectively seek redress and
compensation where there has been widespread detriment,
including:- Allowing a representative to bring an action through
the courts on behalf of a group of consumers;- Streamlining the
FSA’s powers to order a review of past business and to secure
compensation if there have been legal or regulatory breaches.· A
ban on unsolicited credit card cheques, preventing financial
institutions from encouraging customers to borrow more than they
can afford. · A new independent consumer financial education body
will be established by the FSA, to increase financial education
and awareness among consumers. The new body will roll out a
national Money Guidance service from 2010 (currently being
joint-piloted by the FSA and the Treasury) that will deliver
accessible, impartial financial guidance. · New authority for the
Financial Services Compensation Scheme (FSCS) to act as an agent
to deliver compensation to UK customers of financial firms based
overseas, improving depositor protection.
The Financial Services Bill will enact proposals set out in the
‘Reforming Financial Markets’ paper published by the
Government in July. The following documents have also been
published today alongside the Bill:
- Public responses to the ‘Reforming Financial Markets’
consultation paper - HM Treasury response to the consultation- HM
Treasury response to the Treasury Select Committee Report ‘Banking
Crisis: Regulation and Supervision’- Impact Assessment for the
Financial Services Bill.
Contacts:
HM Treasury Press Office
Phone: 020 7270 5238
NDS.HMT@coi.gsi.gov.uk