My Lords, I chair the EU Financial Affairs Sub-Committee of this House. We have been having a lot of conversations with regulators about appropriateness, as the noble Lord, Lord Bridges, has rightly pointed out. But words matter. The distinction in legal terms between “appropriate” and “necessary” is quite profound if you are a regulator—both EU and UK regulators—that has a duty to put in place a workable legal framework. While I completely agree with most of what the noble Lord, Lord Lisvane, said, and I understand that he rightly wishes to bring power back to Parliament, there are instances where regulators need to adapt and to have legal certainty to adapt.
I will give the House one small example. I should say that I am speaking for myself as the chair of the committee because the committee has not come to a settled view on this, having had discussions very recently. But we are told that the amendment would lead to increased litigation and therefore legal uncertainty in relation to the meaning of “necessary”. This would impact a large number of different areas of financial services regulation. It may be hard to argue that it is strictly “necessary” to extend protections but if, for example, you take securities collateral held within the EU, absent an FTA—if we have to revert to WTO rules—we would need to treat collateral held by UK firms in EU systems in the same way as collateral held by UK firms in systems outside the EU. If you took away discretion from the Minister and you had to define this as “necessary”, you may have to restrict the protection to collateral held in UK systems only. That would put UK firms at a disadvantage.
Finally—this is slightly technical—redenominating values and thresholds from euros to sterling may be appropriate in a UK regime because most UK firms’ balance sheets are denominated in sterling. However, it could be argued that it is not “necessary” to do so ahead of the UK’s exit from the EU. Litigation would take time while the courts determined whether the Minister had acted under “necessary” or “appropriate”, but in financial crises time is not something regulators have at their disposal. I just ask noble Lords to bear that in mind. I have not come to a definitive view myself but it is important to put that on the record.