My Lords, this group of amendments, and similar amendments in the previous group, respond to concerns expressed in Committee that the scope of the reform of the senior managers and banking standards regime should be extended beyond ordinary banks to cover what are known, in common parlance, as investment banks. A number of noble Lords were concerned about this point and I undertook to relay the feelings of the House to ministerial colleagues. These amendments are the result.
The definition that we propose is that of the UK investment firms that are regulated by the PRA as well as by the FCA. This captures all those investment firms the activities of which—above all, substantial wholesale market dealing in securities as proprietary traders—are systemically important. These are the most important City firms, and consequently would be treated by the senior managers and standards regime in the same way that banks are. It therefore excludes all investment firms that are regulated solely by the FCA.
The noble Lord, Lord Turnbull, tabled an amendment to a different part of the legislation that would have used the existing definition of “investment firm” in FiSMA. This would have encompassed investment firms solely regulated by the FCA. As explained in Committee, that would cover a wide range of ordinary investment firms—several thousand, in fact. This would include firms far outside what most people would think of as investment banks. The Government have shared this definition with the members of the PCBS and are hopeful that the scope now captures those firms that the PCBS had in mind.
Noble Lords who have had the opportunity to read the paper placed in the Library yesterday know, as the noble Lord, Lord Eatwell, has pointed out, that it covers only nine further firms. They also know also that it covers the investment banks that everybody has heard of and would expect to see covered. The small number may be surprising, but the reason for that is simple. Many firms that would be thought of as investment banks will already have a deposit-taking permission, so they will already be covered by the
definition in Clause 24. That definition is already broad enough to catch all retail and wholesale banks, whether ring-fenced or not. It covers any UK institution which has the permission to take deposits. It does not cover big City institutions which are not deposit-taking businesses. These amendments will bring them into the scope of the senior managers and banking standards regime. I beg to move.