📚 Delegated Legislation Committee

General Committees

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The UK Parliament’s Financial Services Committee debated updates to banking and short selling regulations. Key changes include raising the ring-fencing threshold for banks from £25 billion to £35 billion, aiming to boost competition and support smaller banks. New rules also streamline the regulation of short selling, enhancing market transparency while empowering the Financial Conduct Authority with greater oversight capabilities. These reforms are designed to ensure financial stability and adapt to evolving market conditions.

Summary

  • Ring-fencing Regime Reforms: The government is updating rules that separate core banking services from investment banking activities. Only the largest and most complex banks will now need to follow these rules. The threshold for banks to be included in this regime has been raised from £25 billion to £35 billion in deposits. This change aims to support competition and economic growth by reducing costs for smaller banks.

  • Short Selling Regulations: New rules are being introduced to monitor and regulate short selling, which involves selling borrowed securities to buy them back at a lower price. The focus will be on equities, and the Financial Conduct Authority (FCA) will have more power to oversee and adapt these rules to market changes. This is to balance the benefits of short selling, like market liquidity, with the need to manage potential risks.

  • Designated Activities Supervision: New regulations will allow the FCA to supervise and enforce rules on activities designated by the Treasury without requiring these entities to be fully authorized. This affects activities like consumer composite investments and short selling, aiming for more effective and proportionate regulation.

  • Public and Industry Feedback: The government has considered feedback from an independent review and industry consultations in drafting these reforms. Concerns about the FCA’s approach to publicly naming firms under investigation were discussed, with an emphasis on ensuring the FCA remains accountable and considerate of industry impacts.

  • Government and Opposition Support: Both the government and opposition support these changes, viewing them as necessary steps to ensure the financial services sector in the UK is appropriately regulated, competitive, and conducive to economic growth.

Divisiveness

The session displays very low levels of disagreement. Both the Economic Secretary to the Treasury, Tulip Siddiq, and the Opposition spokesperson, Gareth Davies, express support for the statutory instruments on the ring-fencing regime, short selling regulations, and designated activities supervision and enforcement. Davies raises questions for clarification but does not oppose the measures. Siddiq addresses these questions positively, indicating cooperation rather than conflict. The session ends with all measures being agreed upon without opposition, indicating a consensus among the members.