My Lords, we agree with the spirit behind the special measures proposal, as the noble Lord expected, but we do not believe it is necessary to give the regulators new powers in this area. They already have the powers to do everything the PCBS has asked. We have therefore been working with them on how they could respond to the recommendation using their existing powers.
The regulators published their responses earlier this month. These responses explain that both the FCA and PRA can, and in fact do, use the powers that they already have to do many of the things that the PCBS recommended and that are included in the amendment. The regulators have a significant range of powers to identify and tackle serious failings, either to rectify existing problems or prevent further consumer loss or reputational damage to markets. In fact, the regulators are able to replicate all the steps outlined in the amendment using their existing powers.
For example, the regulators already have the ability to give notice to a firm through an appropriate mechanism, be it a letter or an e-mail, as a matter of course if they have any concerns or think there may be a problem. The regulators will look to engage with the firm to address the concerns they raise. Whenever it is appropriate, the regulators may request information from the firm under Section 165 of FiSMA. If, following an investigation, the regulators believe further action is needed, the PRA and FCA can use their powers under Sections 55M and 55L of FiSMA to impose requirements on firms to undertake or cease a particular action. These powers can certainly be used to require a bank to adopt additional safeguards or to strengthen its existing safeguards.
Similarly, the regulators can appoint an independent person to undertake investigations using their power under Section 166 of FiSMA to commission a skilled persons report, or under Section 167 to conduct an investigation into the business of an authorised person. Both the PRA and FCA are committed to doing so in instances that they believe add substantially to their understanding of an issue. However, we do not think it is appropriate that the use of an independent person should be a requirement in all cases. There are some instances where the necessary information will be available from other supervisory sources making any such requirement unnecessarily costly and counterproductive.
Finally, there are already duties in regulations made by the regulators that require firms to deal with their regulator in an open and co-operative way. It may be that the noble Lord has not had a chance to look at the responses from the regulators and that, having done so, he will be satisfied, or, equally, that he would like further clarification. I suggest to him and any other noble Lords who have a particular interest in this matter that, if they have any further concerns having looked at those documents, we would willingly arrange a meeting with the Treasury to discuss any further elaboration that the noble Lord feels would help clarify how the system is going to work. Given that the powers exist, we really believe that the special measures powers envisaged in the amendment are unnecessary, and I therefore ask the noble Lord to withdraw it.
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