Investment Exchanges & Clearing Houses
November 28, 2006
Mark speaks in a debate about the Investment Exchanges and Clearing Houses Bill. The Bill seeks to confer on the FSA a specific power to prevent UK recognised investment exchanges and clearing houses from making regulatory changes which could damage London’s reputation as a magnet for international business.
Mr. Mark Field (Cities of London and Westminster) (Con): Like other speakers, I welcome this minor but important piece of legislation and support the powers that it proposes to give the Financial Services Authority.
Although I am unaccustomed to supporting aspects of Liberal Democrat speeches, it is particularly important to consider Bills that have overwhelming support with a slightly more sceptical eye, so I supported the hon. Member for Twickenham (Dr. Cable) in some of his concerns. He rightly pointed out that Sarbanes-Oxley had got through both Houses of Congress with precisely three opposition votes out of 550?someone will probably note that there are slightly fewer than 550 legislators in the United States, but I am sure that the hon. Gentleman recognises my point. When there is overwhelming agreement, there is often no proper debate, so it is right that we have had some discussion of this relatively small Bill.
The history lesson in the contribution made by the hon. Member for Bristol, East (Kerry McCarthy) was most welcome, as indeed was the contribution of the hon. Member for Edmonton (Mr. Love). The City of London has always been internationally minded; at least, it certainly was until 1914 and then from the early 1970s. The hon. Gentleman referred to what he regarded as the fiasco of the eurobond market, but in reality it was high tax in the USA that opened up the eurobond market to Europe. It was only the foresight of the Thatcher Government, with the big bang in 1986, that ensured the internationalisation in the City of London, from which, as has been pointed out, the whole country has prospered. Without a thriving financial services industry, the UK would be in deep economic difficulties.
Of course, a thriving financial services industry brings problems. London Members see many of the problems that have resulted from the great strength of the City of London. However, that strength is to be welcomed, as is the fact that so many Labour Members, who, 15 or 20 years ago, were somewhat less than ambivalent about the power of the City, now embrace what it brings.
Helen Goodman: I wonder whether one of the problems with the City of London is the exceptionally high level of bonuses this autumn. What is the hon. Gentleman’s attitude to that?
Mr. Field rose?
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I think that the hon. Member for Bishop Auckland (Helen Goodman) might take her earlier advice as to what is relevant to the debate.
Mr. Field: Saved not by the bell but by you, Mr. Deputy Speaker. Thank you very much indeed. Given my earlier intervention, I guess I was asking for that comment from the hon. Lady.
In a nutshell, the Bill ensures that the FSA will be able to prevent recognised investment exchanges and clearing houses from adopting regulatory changes that it regards as disproportionate to the regulatory objectives proposed. The underlying concern is that otherwise the internationally competitive position of the UK-based financial services industry in globally competitive markets may be damaged. The protection of the competitive position of London investment exchanges that may in future be acquired by overseas shareholders is the main purpose of the Bill.
Naturally, that brings into the equation two other issues to which several Members have referred. The first is the principle of overseas control. In fact, the City of London is already internationally owned, staffed and managed?a process that accelerated rapidly after the 1986 big bang. Legitimate concerns have been expressed on both sides of the House about how sustainable that would be in a massive economic downturn.
Clearly, there was a recession in the early 1990s, which hit the City of London as it hit many other parts of the British service industry. There was also grave concern that by not joining the euro at the beginning of this century, Britain could find its competitive advantage in London undermined. That has not come to pass. Equally, however, we should not be complacent about the longer term, while we should rejoice about the fact that the City remains very strong in spite of the fact?perhaps even because of it?that overseas ownership allows flair and innovation from all corners of the globe to play an important part in the London market.
Secondly, the issue of the limits of protection in the Bill has also been drawn to my attention. My reading?perhaps it also takes us back to the thoughts of the hon. Member for Twickenham (Dr. Cable)?is that in the event of NASDAQ’s bid for the stock exchange proving successful, we cannot provide protection against actions potentially in the US or in British courts by aggrieved US investors in LSE-quoted securities or, indeed, by high-profile district attorneys wishing to make a name for themselves. We have had a broad-ranging debate about the effect of Sarbanes-Oxley and it is now clear that, given the concerns evident in the US market, there has been a rowing back from it.
I hope that we can take the opportunity provided by the Bill to make the case once again for the pursuance of a minimum regulatory regime, especially in view of foreign membership as a fact of City life. We need to remember that innovation, flair and light-touch regulation have been the watchwords for many of the great successes in the overseas and outward-looking global financial markets in which London has played an important part over recent centuries. We should ensure that the UK authorities are able to regulate to the lightest possible degree and avoid the micro-management of the financial markets, to which other hon. Members have referred, irrespective of their ownership of the exchange in question.
I believe that that is the intention of this small but important piece of legislation. I welcome it as a positive step forward, which has certainly been welcomed by the City of London corporation in my constituency. It is wise to look carefully into all aspects of regulation and the way in which the FSA operates. We cannot be complacent. I detected from the Minister’s earlier comments that with the additional powers given to the FSA in 1997, we had somehow been able to ward off all the problems that had arisen from Enron, WorldCom or the litany of previous scandals in this country that were outlined earlier by the hon. Member for Bristol, East. We should always remember that there will be crooks in any market and we should not be overly complacent that, in putting a new regulatory framework into place, we have somehow made ourselves immune from any such nefarious behaviour.
I welcome the Bill and hope that after rapid progress on Report and Third Reading it will be on the statute book before too long.