Commons Sense

House of Commons · Bill Debate

Financial Services Bill - Clause 1

18 November 2021 · 5 other contributors

Opened by John Glen Con Salisbury

Business & Trade

Summarised by AI from the official record, so it can contain mistakes.

Read the full transcript on Parliament.uk

At a glance

John Glen raised concerns about financial services bill - clause 1 in the House of Commons. Other MPs contributed to the debate.

Key points

  • Mr John Glen proposes the Financial Services Bill to address the winding down of LIBOR and establish synthetic LIBOR for tough legacy contracts.
  • The bill ensures legal clarity for users of synthetic LIBOR and provides immunity for the administrator of critical benchmarks as required by the FCA.
  • Synthetic LIBOR is intended as a temporary safety net, not a long-term replacement for LIBOR.

How the debate unfolded

MPs spoke in turn to share their views and ask questions. Here's what each person said.

Opened the debate

John Glen Con Salisbury

Mr. John Glen, a Conservative MP from Salisbury, proposes the Financial Services Bill to address the winding down of LIBOR and establish synthetic LIBOR as a temporary safety net for tough legacy contracts that cannot transition away from LIBOR by year-end. He emphasises that despite extensive progress in transitioning away from LIBOR, a small proportion of contracts remain due to contractual barriers. The bill ensures legal clarity for users of synthetic LIBOR and provides immunity for the administrator of critical benchmarks as required by the FCA. Glen highlights that synthetic LIBOR is not intended to replace LIBOR long-term but serves as a continuity measure for legacy contracts.

Other contributors (5)
  • Peter Grant SNP Glenrothes

    Asks for details on the number and value of contracts that will still need to be covered by the Bill. Raises concerns about the potential impact even if a small percentage of £300 trillion in LIBOR referencing contracts do not transition, emphasising the significance of such a scenario.

  • Bob Stewart Con Beckenham

    Expresses concern over whether moving away from LIBOR could result in greater borrowing costs for individuals. Inquires about potential implications on the cost of borrowing money as a consequence of transitioning away from LIBOR.

  • Pat McFadden Lab Wolverhampton South East

    Mr. McFadden supports the need for continuity of contracts but expresses concerns about the costs and legal implications of synthetic LIBOR, particularly for mortgage holders. He asks why mortgages have not moved away from LIBOR despite regulator encouragement and highlights potential payment increases due to the 12 basis point difference between actual LIBOR and synthetic LIBOR. Mr. McFadden also inquires into the reasons behind this legislative action and whether it could lead to legal actions against the FCA or mortgage holders.

  • Peter Grant

    Supports the Bill but raises concerns about its wording, particularly regarding legal immunity for administrators of critical benchmarks. Highlights the importance of addressing concerns in the Lords about whether the level of immunity is sufficient and questions if safe harbour has additional risks compared to the Bill's approach. Emphasises the significant impact of £450 billion-worth of contracts potentially not transitioning smoothly despite LIBOR being used globally. Stresses that any issues could disproportionately affect those with mortgages, especially buy-to-let owners whose homes are affected by financial difficulties. Suggests keeping the door open for compensation schemes in future and queries potential risks in overseas legal jurisdictions due to the global nature of LIBOR. Also raises concerns about the FCA's accountability to Parliament through existing regulatory frameworks.

  • John Glen Con Salisbury

    The Government are ensuring that contracts referencing LIBOR can continue to function until the end of the year. This is necessary for the smooth wind-down of LIBOR, which affects £472 billion worth of tough legacy contracts. The synthetic methodology will approximate the economic outcomes of the previous panel bank methodology while reducing volatility and avoiding manipulation. The Bill addresses legal uncertainty by ensuring that references in contracts to a critical benchmark include its synthetic form, thus preventing potential disputes over material changes or frustration of contract purposes.

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