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Investment Exchanges and Clearing Houses Bill

I am grateful to the hon. Gentleman for that intervention. This Bill amends the Financial Services and Markets Act 2000. It enshrines a principle-based and risk-based approach to regulation. It gives the FSA considerable discretion and independence, within an overall framework set in legislation and agreed by the House, for which Ministers of the Treasury are responsible to the House. All the protections and safeguards put into the Financial Services and Markets Bill, when it was debated extensively in Committee and in the House some years ago, apply equally to this set of what are essentially additions to the Financial Services and Markets Act 2000. To the extent that there was a concern, that would be about the wider financial services and markets approach. The principles-based approach pursued by the FSA has been not only successful but judged to be open and transparent. In terms of proper scrutiny of its decisions, we got the balance right in the original Financial Services and Markets Bill. One view of the City of London’s success is, I believe, rather pessimistic. According to that pessimistic view, London is succeeding because of others’ failures, and because some of our European partners have taken too restrictive an approach to financial services in their markets. Similarly, it is argued that London’s recent success is not because of our strengths but because of errors made in the US in particular in relation to corporate governance standards and Sarbanes-Oxley. That pessimistic view moves on to the conclusion that, if the European single market gets completed because we win the argument for reform in Europe, London’s standing will somehow be undermined, or that if the US acts to reform the Sarbanes-Oxley or wider regime, that will take away our competitive edge. That view is far too pessimistic. The City of London’s reputation has been built not over two decades but over 300 years. The tradition and integrity of our markets, and of our accountancy and legal professions, underpin the City of London. We have established a reputation for talent and expertise as well as a depth to our markets that is respected all around the world—again, a reputation that has been built over decades. The reforms of the big bang, which led to the explosion of foreign firms and new talent coming to London, were introduced well before any changes in the US corporate governance regime. In my judgment, we should be confident about London’s success—our skills, the cluster of London markets, our integrity and our reputation. We should see reform in Europe as an opportunity for us to expand into new markets in France, Germany and other European countries. Similarly, if the United States does decide to reform the Sarbanes-Oxley regime—in terms of its implementation or more generally—we should see that as an opportunity. As we know, a number of United Kingdom firms and auditors are currently burdened by the regime to some extent, and it would be in the interests of not just the United States but the global economy for some of the reforms to be enacted. We should welcome the speeches being made by Hank Paulson and by Securities and Exchange Commission chairman Christopher Cox. We should be confident that a successful global New York market and a successful global London market can succeed and prosper in the future, side by side. The rise of new financial centres in Shanghai, Hong Kong and Dubai, and also in the rest of Europe, gives London an opportunity to build new partnerships and win new business. I am not pessimistic about the City of London. I think it is right for us to act to protect our regulatory regime, but we must do so with the right kind of risk-based, proportionate regulation and a continued focus on investing in skills. We must bring the best talent from around the world to London and to our other financial services in the United Kingdom, and encourage others in Europe and the world to move in our direction—the direction of a more risk-based, proportionate approach to regulation. I do not believe that London will be set back; I believe that it will continue to prosper. We can win more jobs and more investment, and make London the global financial centre of a globally integrating world. It is with that intention and that commitment that I hope the House will support the Bill tonight.