Considered in Grand Committee
My Lords, as this is the first in a series of SIs preparing the ground for a potential no-deal scenario, it may be helpful for me to set out in more detail in my opening remarks the context in which these SIs are being brought forward. I hope that it will help the Committee in considering future SIs.
Following the UK’s decision to leave the EU after the referendum of 2016, the Treasury has undertaken a significant amount of work with respect to the withdrawal negotiations themselves and in preparing for a range of potential negotiation outcomes. The best outcome is for the UK to leave with a deal, and we have put forward a serious and credible proposal for the future relationship. While we remain confident of agreement this autumn, in the meantime we must continue to work to prepare ourselves for the event of no deal. As the department responsible for financial services, the Treasury is working to ensure that there continues to be a functioning legislative and regulatory regime for financial services in a scenario where the UK leaves the EU without a deal or an implementation period. This includes using powers delegated to Ministers under the European Union (Withdrawal) Act 2018 to fix deficiencies in applicable EU law that will be transferred directly on to the UK statute book at the point of exit from the European Union.
The approach of the European Union (Withdrawal) Act is to maintain existing EU-derived legislation at the point of exit to provide continuity and certainty for businesses and consumers. While the fundamental elements of current financial services legislation will remain the same after exit, it will need to be amended to ensure that it works effectively once the UK has left the EU. The Treasury is therefore in the process of laying around 70 statutory instruments ahead of exit day to ensure that the UK’s financial services regime is prepared.
A key decision the Government had to make in approaching this work was how to allocate responsibility for the huge body of financial services regulation being brought on to the UK statute book by the EU withdrawal Act. The Government have decided to allocate responsibility in a way which respects democratic accountability and the UK’s existing regulatory framework, as set up by Parliament. Legislation which has been developed at the political level—proposed by the European Commission and negotiated through the Council of Ministers and the European Parliament—will become the responsibility of the UK Parliament, while rules developed at a technical level will become the responsibility of the UK regulators.
The EU’s directly applicable financial services legislation broadly falls into three categories. The most important category is regulations, which play an important part in setting the overall policy direction for areas of financial services activity; then there are the delegated regulations, which tend to be used for setting out more detailed requirements; and the lowest level of legislation is technical standards, which are used to flesh out the most detailed and technical aspects of regulations. It is only this last level, the technical standards, which the Government propose to delegate to the UK’s financial services regulators.
The responsibility for developing these technical standards currently lies with the European supervisory authorities, before they are adopted by the European Commission. As required by EU law, technical standards do not need policy decisions to be taken but lay out the granular level of the requirements that firms need to meet to implement policy set out in higher EU legislation. The existing stock of these technical standards runs to over 7,000 pages. Common examples of technical standards are those that set out the processes for providing supervisory information to regulators, including the specific form templates that firms should use.
The job of this SI is to set out the terms on which UK regulators will exercise the proposed new function for EU technical standards. It will also delegate the EU withdrawal Act’s deficiency-fixing power so that the UK regulators are able to ensure that these technical standards, as well as domestic regulator rules, work effectively from exit day. Part 1 of the SI, which will come into force the day after it is made, is necessary so that UK regulators will be able to use the EU withdrawal Act’s deficiency-fixing power in advance of exit to ensure that technical standards and UK regulator rules are amended to work effectively from day one of exit.
Part 2 of the SI delegates the EU withdrawal Act’s deficiency-fixing power to UK regulators and sets out the basis on which they are to exercise this power. The regulators specified are the Bank of England, the Prudential Regulation Authority, the Financial Conduct Authority and the Payment Systems Regulator. In delegating the deficiency-fixing power, Part 2 applies those requirements and constraints that would apply to a Minister’s exercise of that power. The regulators will be able to make changes only to the technical standards listed in the schedule to these regulations or to regulator rules in order to correct deficiencies that arise as a result of the UK’s withdrawal from the EU. The two-year time limit on using the power will also apply.
Part 2, along with the schedule to this SI, allocates each existing technical standard to the appropriate UK regulator. The schedule lists all EU technical standards currently in force and specifies the appropriate regulator for each standard. A limited number of technical standards will be relevant to the responsibilities of more than one regulator and Part 2 also sets out how the regulators will co-operate when amendments need to be made to those standards. The regulators will make their deficiency fixes for technical standards and regulator rules using EU exit instruments. The Treasury will need to approve these instruments before they are made and will ensure that the fixes proposed by the regulators are consistent with the fixes that Parliament will be asked to approve in higher onshored legislation.
The Government are not proposing that Parliament be required to approve these fixes. Parliament will be asked to scrutinise and approve around 70 SIs amending the legislation that sits above technical standards. The regulators will use an open and transparent process for making fixes to technical standards. There will be public consultation on all of their fixes—the FCA published its first consultation last week and the Bank of England will follow shortly. Should Members of this Committee or this House have concerns about any fixes proposed by the regulators, Ministers will, of course, look into them before approving the regulators’ EU exit instruments. Part 3 of these regulations sets out the procedure that will be used when the regulators are given power to make technical standards under the EU exit SIs.
The post-exit responsibility for each EU technical standard will be transferred to the appropriate UK regulator by the SI that deals with the relevant area of EU legislation. For example, technical standards that sit under the Solvency II directive will be transferred to the Prudential Regulation Authority using the Treasury SI that makes fixes to onshored Solvency II legislation. Wherever a Treasury SI transfers responsibility for a technical standard, Parliament will be asked to approve the SI using the affirmative procedure.
As I mentioned earlier, the Government propose to transfer responsibility for technical standards in a way that is consistent with the UK’s existing regulatory framework, as approved by Parliament in successive pieces of legislation. Specifically, the Financial Services and Markets Act 2000, or the FSMA, is a key piece of framework legislation for regulation of financial services in the UK. The FSMA already delegates to the PRA and the FCA the responsibility for making the detailed rules that apply to firms in order to operationalise the framework that Parliament has set in legislation.
Part 3 of the SI amends the FSMA and the Financial Services Banking Reform Act 2013 so that the regulators will be responsible for technical standards in the same way that Parliament has given the PRA and the FCA responsibility for rules made under the FSMA. Whenever the regulators propose changes to technical standards in future, they will be required to consult and carry out cost-benefit analysis of their proposals, just as they do now for rules made under the FSMA. The Treasury will need to approve post-exit changes to technical standards and will be able to veto them if it appears to the Treasury that a proposed change would have implications for public funds or would prejudice any negotiations for an international agreement. This would include any negotiations that may still be taking place for an agreement with the EU.
As well as being consistent with the FSMA framework set by Parliament, this approach recognises the fact that it is UK regulators which have the necessary expertise and resource to maintain technical standards after the UK’s exit from the EU. UK regulators have played an important role in the EU to develop these standards through their membership of the boards and working groups of the European supervisory authorities.
In advance of laying this SI, Her Majesty’s Treasury published the instrument in draft, along with an explanatory policy note, in April 2018, in order to maximise transparency to Parliament and industry ahead of laying the SI. We have engaged and will continue to engage stakeholders on these issues and are publishing advance drafts of our financial services onshoring SIs throughout the autumn.
As already mentioned, UK regulators are committed to a fully transparent process for fixing deficiencies in technical standards and their own FSMA rules. Starting with the FCA last week, the regulators will issue public consultations on all of their proposed deficiency fixes. This SI will play an essential part in ensuring that the UK has a fully functioning regulatory regime for financial services in the event that we leave the EU in March without a deal.
The UK regulators perform a vital role in our financial services regime and they will have an important job in ensuring that the UK is ready for exit. This SI proposes a clear and transparent statutory basis for the job that regulators are being asked to do, which I hope this Committee can support.
Following the approach set by Parliament in the FSMA, our regulators are best placed to ensure that EU technical standards are fit for purpose as we prepare to withdraw from the EU and in the period following exit. I hope that the Committee will join me in supporting these regulations and our regulators in this important preparation period which is now taking place. I commend the regulations to the Committee.
My Lords, I am grateful to the Minister for introducing the SI. I am sorry that my colleagues and noble friends Lady Bowles and Lady Kramer cannot be with us today, which is why I am here rather late in the day.
Returning to retail banking and other matters—it is a long time since I was last involved in it, both in the City and the north-east—when I saw the Explanatory Memorandum and the mention of some of the Acts, I realised that I am more familiar with the Acts that I remember were passed when I was in the House of Commons back in the 1980s than some of the legislation that has been coming through in recent times.
However, this is a very different situation from any we have ever faced. Therefore, before I go on to ask questions and seek assurances about the contents of this SI, I wish to say something about the political position that has led to this. I regard all this as a complete and utter waste of time and effort. It would never have been necessary if it had not been for the Conservative Government getting us into the predicament that we are in at the moment. The referendum and the decisions that have been taken since then have given rise to a massive distraction from the many problems facing this country. I frequently sit in the Chamber of this House and think we must have gone mad. Although this SI has big implications it is one small example of many thousands of other problems that are taking place because of the distraction of Brexit on the country, the Government and Parliament. These SIs today are symbolic of the terrible problem we face as a country. It is completely fatuous that we should be doing this but we have got to live with it and hope to get through to the other side. This is really the Treasury’s equivalent of preparing the M20 and M26 as car parks, and I assume other departments are doing similar things.
I give my broad acceptance to these regulations. We have questions to ask and assurances to seek. The Minister has already given some in his comments introducing the statutory instrument, but the first thing I would like to ask is: where is the impact assessment? It is mentioned in the Explanatory Memorandum but we still do not have it. It is vital that we know the impact that this is going to have on the important and complex financial services sector. I will be grateful if the Minister will tell us where it is, and when not just the Houses of Parliament but the industry can expect to see it.
I was pleased to hear what the Minister said about openness and the consultation that will be done by the bodies taking over the binding technical standards. That was one of my major queries about how this is going to operate. Can he say a little more? He mentioned some 7,000 pages of regulation, which gives an indication of the scale of the work that these organisations will be involved in, but it is vital that institutions in the City and the financial services sector are consulted properly on changes that might be made. In addition to publication in the way that the Minister described, I hope that active consultation will take place with City institutions and the different sectors that work in financial services to ensure their input in any changes in the regulations that will so profoundly affect them. I will be grateful if the Minister will give some indication of how the financial services sector will be consulted on any changes that take place.
Will the Minister also give us an assurance that if there is any amendment to the principal financial services legislation it will be done through a Bill rather than by statutory instrument? I take it that that will be the case and that if some of the financial services legislation is to be amended it will be done through the normal procedure of a Bill and that the Government will not try to make changes—even minor amendments —to primary legislation through statutory instruments. If the Minister can give assurances on the way in which this will operate, he will have our support for the statutory instrument coming into operation.
My Lords, we all know that there is no chance of anybody voting against this SI or any of the other SIs the Government bring forward, because we all know we are not going to start a constitutional crisis at this time. There are enough of them being generated by the Government as it is.
We now know that there are 70-plus SIs that we are going to have to consider, and I know that I am going to have do all 70 of them, so I have had a look at why we are here. What do we achieve? We do not have massive attendance in Grand Committee, and even if we had been on the Floor of the House we would not. This is what I think we should be doing. Of course, the great thing about SIs and the House of Lords is that you can get away with more or less anything. As a result, one can take an SI and lay a political point on it. I do not criticise the noble Lord for doing that; it is what we do. But with 69 SIs in front of me, I do not want to make 69 searing political points. What will be useful? I think what is useful is to give the Minister a hard time. That is not because I enjoy the spectator sport of Ministers squirming through lack of knowledge, but because the Minister is responsible for the machinery that generates the SI, the Explanatory Memorandum and the elusive impact assessment.
My experience of organisations is that they perform better when they know that their leader is going to come under scrutiny than when they do not. I believe that the process of scrutinising and questioning the SIs that come in front of us is constructive in its own right in encouraging quality both in drafting and right the way through the process. I also think the process of questioning SIs and Hansard reporting the conversation is useful to the industry that they impact on. It allows people who read the raw SI to look at the debate and on occasion get a better view of the nuances. I believe it is also useful to those people who will have to draft the advice, regulations and so on that flow out of the SIs. I am talking about the generality of it.
Lastly, although we may criticise the SIs, there is little chance of the Government ever withdrawing them. In fact, with the timetable in front of them it would probably be impossible. But from the SIs flows a lot of material, and if we can make turning points at least at the level of the nuance that will allow the Government to reflect on what has been said in Committee and, perhaps, nuance the regulations or the advisory material. On this and the other 69 SIs we will be trying to do those things. What I am not going to do is produce elegant speeches because I do not have the energy to do that 70 times. Rather, I am going to stick to questions that I hope will bring out points that are useful.
Starting with this particular SI, there is a fundamental point—I will call it a political point—that distresses me. I have a problem here because I do not actually have a remedy, but the substantial part of the SI depends on Section 8 of the European Union (Withdrawal) Act. The section is headed, “Dealing with deficiencies arising from withdrawal”, and Subsection (1) begins:
“A Minister of the Crown may by regulations make such provision”.
I know there were an awful lot of debates about that section because I sat through them, and I am absolutely convinced that Parliament took comfort from the words “Minister of the Crown”—that is, from the fact that there would be political involvement in the use of Section 8. But the whole essence of this SI is to take politicians out of it. There is no obvious requirement for them. The SI says that wherever you read “Minister of the Crown” in this section, in so much as it relates to the SI, you should substitute “appropriate regulator”. So there is a clear transference of responsibility from the Minister of the Crown to the regulator.
The Minister said that, in order to inspire confidence, the regulators will work in an environment that means their response will—and so on, and so on—and that they will work within the constraints of Section 8, which says that changes have to be small and must not create a new policy. My worry is that there is going to be an enormous volume created by the regulators out of this, and the problem when there is an enormous volume of anything is that systematic biases or errors can be built in. I would be happier if there were some more obvious form of supervision or scrutiny in the process. I do not actually have a solution, as I have said, but this transference of powers from a Minister of the Crown to the regulators is not what Parliament had in mind when it approved Section 8. I make that point to the Minister and invite him to try to convince me that there are necessary safeguards.
When you read this stuff—which is a pretty brave thing to do—from time to time you come across the words “the Treasury must approve”. So it looks as though the Treasury is playing a supervisory, checking and scrutiny role. But then you discover, as the Minister said in his speech, that the particular role of the Treasury is, first, to ensure that the SI is not a call on public funds, and, secondly, that the instrument or whatever being made does not interfere with the negotiation taking place at the time. That would imply that the Treasury has no other role. So I ask the Minister: is that true or does the Treasury—and hence, at least, accountability through Treasury Ministers—have a general role to supervise the activities of the regulators enabled by this statutory instrument?
My next question is about the regulations, rules and whatever produced by this system. Will they be put in the public domain? If so, how? What sort of documents? Will there be some way one can track the products of this SI and see what its impact is and where? Will there be a system, somewhere or other, of summary reports, if only on how many pages have been covered, how many areas fixed et cetera?
Another thing I could not get my mind around is that Section 8, which I referred to, has a two-year sunset clause. How will this work with this instrument? At one extreme you could argue that all the powers have to be reviewed after two years. Or you could take the view, at the other end of the spectrum, that all this work will have happened in the two years. Alongside the sunset clause is the commencement. This SI will commence the day after it is made, so it will be there all the way through. Does it in itself have a de facto sunset clause, or is that part of Section 8 somehow eroded?
Another area that I did not understand which is rather more mechanical is when the regulators will actually do this work and how it will relate to exit day. Will they create new regulations in draft so that they can come in on exit day? Basically, how will the work carry on? Will the work of these SIs be finished, in a sense, as soon as they are made by the fact that the authorities are being transferred, or will there be an ongoing look at what needs to be transferred to regulators that can be transferred under this SI?
I think the Minister made the point that this is for a no-deal situation, so what happens if there is a deal? If this SI is commenced, will it become uncommenced if there is a deal or will it carry on because it is a useful device to put responsibility on particular parts of government to carry on with the complexities for the financial sector of being outside the EU?
My next point was raised by my colleagues in the other House: it is the sheer resource problem. I think the Explanatory Memorandum admits to thousands of pages. A considerable resource is required just to read thousands of pages, never mind go through and carefully alter them as required by the new situation. It is difficult to believe that the regulators can execute this SI or its consequences without increased resources—and if they need increased resources, will the Treasury stand behind them and provide the additional resources that will be necessary, in our view, as a result of the transfer of responsibilities?
As I read it, the regulators may have an ongoing responsibility to relate to the EU, particularly in the interim period between March and 2021. How will the regulators co-ordinate that? It will be important to maintain a stable relationship between UK industry and European industry. Even if we crash out of the EU, I would have thought that that would be an objective. If we crash out and are in a no-deal situation, this SI will be alive and well and doing its work. The regulators will be doing their work of supervising the industry and it is very important that they establish a relationship that will be outside a treaty. It will have to be a bilateral, practical relationship. How are they going to work to keep the two sectors in step?
Finally, the noble Lord raised the point of whether it is reasonable to seek approval without an impact assessment. What is the point of an impact assessment produced after the commencement date? You might as well say we are not going to produce an impact assessment. I do not have the faintest idea what I will do with this document when it appears on my desk. I would like to claim that I have the energy to read it—but, knowing that there is absolutely nothing I can do with it, I suspect that that energy might drift away after the first two or three pages. I thank the Minister for introducing the instrument.
I thank the noble Lords, Lord Wrigglesworth and Lord Tunnicliffe, for their questions. I guess that the noble Lord, Lord Tunnicliffe, and I are going to be spending many happy hours in this Committee over the next year, and I know that the noble Lord is always assiduous in the way that he prepares for these matters and in the questions that he puts. He is also right to say that this is an opportunity to provide scrutiny for these regulations and what is being put forward.
Many questions have been raised and I will go into a bit of detail in responding to each of them. The first issue is in relation to impact assessments. This statutory instrument would have no cost to business as it deals with the transfer of responsibility from the Treasury to the regulators. As a whole, these SIs will significantly reduce costs to business in a no-deal scenario. Without them, the legislation would be defective and firms would be left to deal with an unworkable and inconsistent framework that would substantially disrupt their business.
In making these changes we have attempted to minimise the disruption to firms and their customers and to maintain continuity of service provision. However, it is inevitable that firms will need to prepare for changes made by these SIs and the Government have committed to providing the UK regulators with the power to phase in regulatory requirements that change as a result of exit. This will substantially mitigate the costs to firms and give them more time to implement the changes.
On the issue which, I suppose, is at the heart of this initial—
It seems to me that the Minister has just given a précis of the impact assessment, which is designed to satisfy us when we do not need one. I would have been much more comfortable if the document had said, “We do not intend to produce an impact assessment because the argument is simple,” and then printed his explanation, rather than receiving a document that says, “We do not have an impact assessment because we have not finished doing it yet and we will publish it later”.
We are in the process of preparing five impact assessments covering financial services and onshoring legislation. They will be considered by the Regulatory Policy Committee, the independent body that scrutinises impact assessments before they are released. As has been said many times, we are in extraordinary times in terms of what we are seeking to do with this work. I think we all recognise that the conventional form would be that the impact assessment would have been available at the same time. With that explanation about the context of the decision—
I wonder whether the Minister will mind if I emphasise the importance of this. We are dealing with thousands of businesses whose procedures are possibly going to be changed as a result of this. Not only are businesses going to be affected: millions of customers may possibly be affected. It is tremendously important that they and their customers know what impact this will have, so that if necessary they can change their forms and procedures, move their money and do whatever they want to do in the light of the impact of this. If changes are in the pipeline as a result of this, and they are going to affect businesses, it is vital that businesses know about them as soon as possible.
On the same point, I draw attention to page 33 of the statutory instrument:
“Explanatory Note (This note is not part of the Regulations)”.
The final paragraph states:
“An impact assessment of the effect that this instrument will have on the costs of business, the voluntary sector and the public sector will be available from HM Treasury, 1 Horse Guards Road, London SW1A 2HQ and published alongside this instrument”.
I apologise for this, but if we are going to get impact assessments, the Government have to realise the irritation it causes to the Opposition and our colleagues in the Liberal Democrats if we do not have them published on time.
I fully accept the point the noble Lord is making. There is no need to apologise, because the point is that there should be scrutiny. I am trying to explain that this SI would not be expected to have an impact on business for the reason that I have set out. Other SIs will have impact assessments published. This SI has been published in draft form and we have been engaging in consultation with the Financial Conduct Authority and the regulators. The Financial Conduct Authority and the regulators interact most with businesses and consumers and therefore they have already commenced work on that part of the process to ensure preparedness.
On that point, the noble Lord, Lord Wrigglesworth, asked how industry will be involved in the regulators’ role. The regulators will consult on their deficiencies fixes. The Financial Conduct Authority has published its first consultation and the Bank of England will follow.
On the key issue of where the powers in the SIs are derived from, it is Section 8 of the European Union (Withdrawal) Act. That Act was subject to considerable debate in Parliament, including debate on the nature and scope of the deficiency-fixing power delegated to Ministers. Part of that debate considered whether it would be appropriate for Ministers to subdelegate the power to non-ministerial bodies. Parliament decided to leave open the possibility of subdelegation. Subdelegation of the powers is provided for in this SI so that UK financial services regulators can fix deficiencies in EU technical standards and regulator rules in time for exit. Section 8(6) of the Act provides for the transfer of EU functions to an appropriate UK body.
On the amendments to principal financial services legislation, which the noble Lord, Lord Wrigglesworth, asked about, some deficiency fixes will be put into primary legislation through SIs. These will not change policy but will be technical in nature.
On how we have consulted industry in drafting these SIs, we have not carried out a formal consultation on these particular SIs. What they can do is strictly limited by the enabling power of the EU withdrawal Act to fixing deficiencies. Therefore, there are limited policy choices. We discuss EU exit preparations regularly with the industry. This engagement has been invaluable for understanding the impact of these SIs. We share draft legislation with the industry to allow stakeholders the opportunity to familiarise themselves with our approach and to test our understanding of the likely impact. We are also, where possible, publishing draft legislation in advance of laying it.
The noble Lord, Lord Tunnicliffe, asked how the regulatory changes will be put in the public domain. The regulators are committed to a fully transparent process for fixing deficiencies in EU technical standards. The FCA has already issued its first consultation on this. The regulators are required to publish all the instruments in which they will make regulatory changes to ensure that they are brought to the public’s attention. In practice, they will do so by publishing them on their website.
The noble Lord also asked whether there was any requirement for the regulators to report on how they are exercising these powers. All regulatory deficiency fixes will need to be approved by the Treasury. I accept the point he made about the circumstances and tests, and whether there was an impact on the Exchequer, but the EU withdrawal Act requires an annual report on the exercise of the powers under the Act. The regulators will provide this on their use of the deficiency-fixing power and on their post-exit responsibility for technical standards. Parliament will be able to scrutinise and question the regulators on the use of these powers through the Select Committee system, as it does now across a range of regulatory functions.
I have an answer to that and it will be ready in just a couple of minutes. It was on how the powers will be used.
The noble Lord also asked how regulators would co-ordinate with EU regulators after exit. This statutory instrument does not deal with the co-operation arrangements between the UK and EEA regulators. However, if the UK leaves the EU without a deal, the UK will fall outside the EU’s legislative framework for supervisory co-operation. The EU has confirmed that the UK will be treated as any other non-EEA country in this scenario. Common legislation will no longer be the basis for co-operation between UK and EEA regulators, but the UK’s firm intention is to maintain the current high level of co-operation that we have with EEA authorities. UK statutory powers have this under the FSMA. As some of the world’s most important regulators, the Bank of England and the FCA are well-established co-operation partners with non-EEA regulators.
The noble Lord asked what would happen to the statutory instrument in the event of a deal. These regulations will come into force on the day after they are made. This will allow regulators to prepare for exit day by making these changes. However, if we reach an agreement on the implementation period, for the duration of that period the UK will remain subject to EU law, including binding technical standards. It will also generally not be necessary to fix deficiencies in regulators’ rules until the end of the implementation period. The withdrawal agreement Bill will include provision to delay, amend or revoke SIs made under the powers of the EU withdrawal Act.
On the supervisory point the noble Lord asked about, the regulators may make an instrument to fix deficiencies using the powers delegated by this statutory instrument and an EU exit instrument only with the approval of the Treasury. In this case the Treasury can approve the EU exit instrument only if it is satisfied that the instrument makes appropriate provision to fix deficiencies arising from the UK’s withdrawal from the EU—in other words, that the EU exit instrument is not doing anything which could not appropriately be done by the Treasury using its own powers under Section 8 of the EU withdrawal Act. Similarly, the regulators may make an instrument to exercise any powers to make technical standards transferred to them by other SIs made under the 2018 Act only if the instrument is approved by the Treasury. For standards instruments, the Treasury may refuse to approve a standard instrument only if the regulators believe it would affect public funds or the instrument would prejudice international negotiations.
On the point which was made about resources—clearly we are placing a heavy responsibility on the regulators—the Treasury is confident that the financial services regulators are making adequate preparations ahead of 2019 and have an appropriate level of resources to manage their new responsibilities. We have worked extremely closely with the regulators in preparing this legislation. The current business plans of the FCA and PRA set out their priorities in preparing for EU exit and their plans for ensuring operational readiness. The regulators have considerable experience in this area. This means that the responsibilities of EU bodies can be reassigned effectively and efficiently, providing firms and their customers with confidence after exit. The FCA has published its first consultation on the changes it proposes to make using these powers.
The noble Lord asked about the sunset clause. Under Section 8 of the EU withdrawal Act, no government department would be able to make any regulations after 11 pm on 29 March 2021—that is, two years after exit day. Under regulation 3(3) of these regulations, Section 8(8) also applies to the regulators, so they will not be able to make any EU exit instruments to fix deficiencies after this date. This relates to a question which I dealt with in my previous remark. However, in supervisory situations—I have said this—regulators may make an instrument to fix deficiencies using the powers delegated by this SI only with the approval of the Treasury.
I hope my responses have gone some way to addressing the points and concerns raised by noble Lords in the course of this debate. As I said, this is the first of many debates on these issues, but this first statutory instrument is crucial and I commend it to the Committee.