Mark Hoban – 2012 Speech to the Insurance Institute


Below is the text of the speech made by Mark Hoban, the then Financial Secretary to the Treasury, to the Insurance Institute on 10 January 2012.

Good afternoon, and thank you for inviting me to speak here today. It’s a pleasure to be speaking at this event, with so many leading figures in the Insurance sector… CEOs, Managers, and young executives who are forging their careers at places such as here at Lloyds.

The Institute provides the ideal forum to analyse and debate the future of the Insurance sector. Not just over the coming year as we confront continued economic uncertainty, but also the coming decades as the industry rises to long term challenges.

We all know how easy it is to become absorbed by short term challenges…and we know insurers had some tough circumstances to contend with in the last year…

Rising levels of insurance fraud, especially in relation to personal injury claims…

Large catastrophe and man-made losses exceeding $100bn…

And of course the uncertainty across the Eurozone remains top of everyone’s list of concerns.

The ongoing sovereign debt crisis continues to undermine confidence across all our economies, the UK included.

But at the same time, it is equally important that we discuss the longer term vision…the challenges and the opportunities that face the UK Insurance industry over the next decade and beyond…

To capitalise on a long and sustained period of growth in the emerging economies;

The prospect of years of regulatory reform to correct the failures of the last decade;

And changing consumer behaviour, as consumers reduce demand for insurance products in difficult times, or look for new ways to access those products.

These are tough challenges for insurance companies, but they also represent opportunities for the UK insurance sector to build on its world leading strengths.

The UK industry is already the largest in the EU, and third largest in the world after the US and Japan

Within the UK economy the industry has a vital role as an investment intermediary, managing 26% of the UK’s total net worth and 13% of investments on the London Stock Market.

It is also a major investor overseas…with around 30% of premium income coming from overseas business, from both life and general insurance business.

And whilst the sector has withstood the recent crisis well, this is no time to be complacent. Consumers need to have confidence in financial services if they are to buy products and take advice, whether it is motor insurance or a sophisticated investment product. The banking crisis has affected consumer confidence and whilst insurers might take reassurance from the fact that it was a banking crisis, the reality is that for consumers it was a financial sector crisis and they don’t discriminate between them.

Domestic regulation

So regulatory reform is equally vital to restore the trust of consumers and taxpayers that had been so severely let down by financial institutions, politicians and regulators. As EIOPA President, Gabriel Bernardino, said in December last year, we need a “paradigm shift” to restore confidence in Europe’s financial services.

Consumers and taxpayers have to be confident that financial services do not jeopardise the stability of the rest of the economy. But at the same time, regulation has to be proportionate, evidenced based, and has to reflect the unique risks and characteristics of the Insurance market.

This is the approach we have taken in our reforms to abandon the failed tripartite regime of supervision in the UK.

We are establishing a permanent Financial Policy Committee inside the Bank of England to monitor overall risks in the financial system, spot dangerous inter-connections and stop excessive levels of leverage before it’s too late.

The interim FPC is also considering potential macro-prudential tools that the permanent body should have available for use in the banking sector. The FPC will note the particular characteristics of the insurance industry when they consider which, if any, macro-prudential tools should be applicable to the insurance industry.

We are also abolishing the Financial Services Authority in its current form, and creating a new Prudential Regulation Authority with a focus on micro-prudential regulation. It will bring judgement to the vital task of regulating the soundness of individual firms that manage risk on their balance sheet, particularly banks and insurance companies.

But we recognise, of course, that the business model of an insurance company is different to that of a bank. This is why we are proposing to provide the PRA with a specific statutory objective for its insurance responsibilities.

Insurance regulation will not take a back seat to deposit-taker regulation in the PRA.

Confidence is about more than financial soundness of firms, people need confidence when they buy products too.

A new Financial Conduct Authority will oversee the conduct of financial services firms, the operation of markets and the protection of consumers. It will have new powers, including the power to ban or restrict the sale of toxic products, and the ability to make public the fact that disciplinary action is being taken against a firm. The FCA will also have a strong mandate to act on competition, a first for a UK financial services regulator.

These are fundamental but necessary changes to how we regulate UK financial services, and the insurance industry. All these changes will be sat out in the Financial Services Bill, which will be introduced in to Parliament shortly, and I am grateful for the contributions from many firms represented here today to our consultation on reform.

Action which includes abolishing “no win no fee” agreements to ensure that defendants, including insurers, are no longer liable for these additional costs. The ABI has already said that as a result motorists can look forward to cheaper insurance.

We have also banned referral fees which should help towards curbing the “compensation culture”.

And we are working with industry to ensure flood insurance remains widely available in the future, and that consumers are clear about what they can expect from their insurer, and from Government.

As you know well, creating confidence is not the sole prerogative of regulation or governments. Industry has a role too.

Common to these regulatory changes is the drive to improve the standards that underpin firms across the industry. This is particularly relevant to you at the Insurance Institute of London, and in your efforts to promote professionalism among practitioners. We are encouraged by how we are already starting to see evidence of industry-led initiatives to improve standards As you know, initiatives to improve standards are not the sole preserve of the insurance sector as there is a renewed interest in professionalism across financial services as a whole.

Such work is consistent with just the sort of change discussed in the recent Parliamentary Joint Committee report on financial regulation reform. It also sends a clear message that firms that make up the insurance industry are taking an initiative to improve market trust and confidence in the public interest.

Solvency II

Whilst prudential supervision of insurance will be the responsibility of the PRA, it will be working within a framework created at a European level.

The UK has been a strong supporter of Solvency II. I firmly believe that it will help support financial stability in the sector and across the financial system through better risk-based capital requirements and its focus on strong risk management in firms.

And by providing a harmonised regime across Europe, Solvency II should increase cross border competition and create new opportunities for UK firms within the Single Market. This will in turn deliver increased efficiencies and reduced compliance costs to the benefit of both firms and consumers across Europe.

As you are aware, the Commission recently issued a consolidated level 2 text, the contents of which reflect a huge amount of negotiation and work by the Treasury, the FSA and the industry on a very wide range of issues.

Collectively, I believe that we have gone a long way to deliver on the key priorities that we agreed with the UK insurance industry at the outset of the level 2 negotiations. A key priority was to reach an acceptable agreement on the treatment of annuities, and I am confident the current long term guarantees package will work for the UK industry.

The UK has also ensured that Solvency 2 protects insurers’ role as a stable, long term provider for infrastructure through the “matching premium”. Indeed, as the Chancellor announced at the end of last year, an Insurers’ Infrastructure Investment Forum has been set up to explore ways of attracting debt finance from the insurance sector in our country’s infrastructure needs.

We have also achieved significant improvements in other priority areas, such as the treatment of capital and the calibration of the standard formula, in particular the inclusion of geographical diversification in non-life catastrophe risk.

We believe the level 2 agreement is now largely stable for these issues. As well as heading off any amendments that could affect or alter the implementation of the level 2 agreement, our priority is to secure an acceptable agreement on transitional arrangements for third country equivalence.

We have to take proper account of those third countries working towards equivalence so that UK or European firms are not put at a competitive disadvantage.

That brings opportunities for UK firms to expand to new markets, to innovate and provide new products, and help lead a UK recover by exporting our insurance expertise and services.

International competition and opportunities

Many UK firms already have a global footprint, and importantly have a strong presence in some of the fastest growing world economies.

With break neck growth in the likes of India, China and Brazil, it is absolutely right that we support our firms to capitalise on opportunities in emerging economies.

At the same time, we also have to ensure that regulation is proportionate, and that European Insurers are not unfairly discriminated against compared to international competitors.

The work of the International Association of Insurance Supervisors, and the contribution made by bodies such as the Geneva Association to questions of systemic risk, are vitally important in that respect.

The conclusions of that analysis will have a profound impact on the regulatory landscape for Insurers in the years to come, as we already see with debates on recovery and resolution arrangements.

Consistent implementation

These are substantial challenges on the European regulatory front, and a substantial challenge for EIOPA as it grows into its role and builds its reputation.

We are keen to work with EIOPA in that ambition, and critical to its success is ensuring that it delivers high and consistent standards of supervision across the EU.

That means implementing Solvency 2 consistently across Europe to ensure a level playing field across Europe.

By doing so, EIOPA can take a major step in completing a single market in insurance, creating new international opportunities for the UK sector.


Of course, in similar spirit, we have been working hard to level the playing field for UK firms when it comes to insurance tax, and in particular, our reforms to the taxation of foreign profits.

In particular, we have listened to the industry’s concerns over the compliance burden and the tax barriers to restructuring for optimal capital efficiency under Solvency II.

In December we announced details of major changes in our approach to the taxation of foreign profits which reduce those burdens, and provide flexibility to UK headquartered groups making Solvency II related cross-border restructuring easier.

We are committed to creating the most competitive tax system in the G20 for our businesses and for our insurance companies.

Together with branch exemption introduced in the Finance Act 2011, our reductions in the corporation tax rate, and our work to rewrite the life tax regime, we are ensuring that we continue to attract the most innovative, successful and ambitious businesses and insurers to the UK.

New markets

Because I firmly believe that there are great opportunities to seize on new markets, promote technological innovation, and capitalise on changing consumer behaviour to drive the industry forward here in the UK.

For one, we know that increasing sophisticated technologies will increase the capacity of insurers to collect more granular data on risk, and help insurers improve risk modelling. It has the potential to allow better risk pricing and customer differentiation, leading to a better deal for low risk customers.

That said, we are also right to be wary. There is a risk that it could cause more segmentation in the market, reduce the tolerance for risk sharing, and potentially cause a shift with some consumers being priced out of the market altogether, leaving them completely uninsured.

Separately we are all familiar with how the internet is changing how consumers interact with the market place…and how Individuals are already more likely to buy general insurance products themselves, rather than with the advice and guidance of an intermediary.

This presents a major challenge to how the insurance industry interacts with and promotes its products to consumers.

It’s simply one part of a sweeping trend of consumer empowerment…. one that puts the consumer at the very centre of the financial system.

And a trend that the Government is fully supportive of as demonstrated by the new Financial Conduct Authority, and by the action we have already taken to support consumers in the Insurance sector.


These are all long term challenges that require long term engagement with the Insurance industry.

Of course, in the near term managing the risks from global economic uncertainty, and responding to regulatory reform will pre-occupy and consume much of all our time.

But we must also keep an eye on the long term vision.

It means ensuring that UK firms have the opportunity and build the ambition to engage and expand in the UK market, but also develop growth opportunities abroad.

And it means catalysing the kind of innovation, service delivery and product development to restore consumer trust and deal with society wider challenges such as savings and social care.

Industry engagement will be critical to delivering that vision, and I am sure the Institute here will play a vital role in encouraging the industry to think about the more strategic issues I have mentioned today.

I look forward to working with you all in the years to come to work towards that vision.

Thank you.

Mark Hoban – 2012 Speech to the London Stock Exchange


Below is the text of the speech made by Mark Hoban, the then Financial Secretary to the Treasury, at MiFID on 18 January 2012.

Good morning and thank you for inviting me to speak at the here today. It’s a pleasure to speak to many leading figures from across the financial system, and from across Europe, and do so here at one of the world’s oldest stock exchanges.

From the earliest coffee houses surrounding the Royal Exchange to its formation over two hundred years ago, and through to the global powerhouse that it is today, the London Stock Exchange has always been the beating heart of the city.

The LSE has been critical to the growth of financial markets in the UK that have enabled UK companies to raise £445bn in funds since 2005.

With financial and professional services firms that employ almost 2 million people across the UK, with more than two thirds employed outside of London.

As home to 230 foreign banks, channelling more FDI to the UK than any other sector, but also facilitating a huge amount of foreign investment right across the EU.

And as the Chancellor said on Monday we are committed to working with the Hong Kong Monetary Authority to promote the development of a strong RMB market here in London.

Of course as well as growth, over the last 300 years the stock exchange has also borne witness to a fair few crises, most recently, the financial crisis of 2008.

We still live under the shadow of those events just over four years ago, as what was once a crisis of private and banking debt has transformed into one of sovereign debt.

As everyone here knows, the instability in the Eurozone continues to undermine confidence and growth across all our economies. Not just across Europe, but across the world.

Resolving the Eurozone sovereign debt storm is the immediate crisis that we all have to deal with, and we are as eager as our Euro area counterparts to see a comprehensive resolution to the crisis.

European regulatory reform – challenge

But over the longer term, we have the equally substantial task of financial sector reform correcting the regulatory failures of the last decade, and ensuring that regulation keeps pace with evolving markets.

In driving forward regulatory reform, we need to learn the lesson of yesterday, but also recognise that today’s markets could trigger tomorrow’s financial crisis.

So in the UK, we are reforming the structure and approach of our regulation, looking ahead as well as behind.

There are those who argue that regulatory reform is the enemy of growth – that we should postpone reform.

But we reject that argument – ineffective regulation and supervision of banking led to a massive contraction in our economy.

A stable and resilient financial system provides sustainable economic growth. But we must understand the impact that reform can have on growth – disproportionate regulation can restrict investment, lead to higher costs for investors and lower returns for business.

Growth is aided by open and competitive markets and we must be aware of those who will use reform to fragment markets – reform must be consistent and non-discriminatory. Reform should not erect barriers either within or around Europe.

To allow that to happen would be to diminish the opportunities available to businesses and investors of all types.

That is why we are vigorously guarding against that retreat. A free and open Single Market has brought huge benefits to the whole of the EU and is the most powerful tool that we have to foster renewed growth as we recover from the financial crisis.

European regulatory reform – principles

We will support the Commission wholeheartedly in its duty to protect and promote the Single Market in financial services even as we embark on vast regulatory reform.

Now more than ever, it is critical that Member States are able to have confidence and trust in EU institutions to see through regulatory reform in full and to stand up for the Single Market.

That means ensuring full and consistent implementation of high minimum regulation standards across the EU, whilst allowing member states to impose higher requirements where needed to ensure financial stability.

It means protecting the integrity of the single market, ensuring that regulation does not fragment the Single Market by currency, geography or firm.

And it means applying one of Europe’s core principles – the free movement of capital – to countries outside Europe’s boundaries and as much as to those within it.

London and Europe thrives because of our freedoms – erecting barriers around Europe impoverishes everyone by denying opportunities for European firms to grow using capital from outside Europe and restricts out opportunity to support growth in Africa and Asia.

It was because of the value we attach to the Single Market, the maintaining and Open Europe and protecting taxpayers and consumers alike by backing tougher regulation and supervision that the Prime Ministers sought safeguards at last month’s European Council.

That approach characterises our robust approach to regulation reform at home and abroad.

In the same way, we cannot afford to impose a Financial Transaction Tax if it is not going to be applied globally.

Without global consistency, those transactions covered by the tax would merely relocate to countries not applying the tax.

As the Commission’s own impact assessment shows, a unilateral European tax could reduce EU GDP by as much as 3.4%, or €422bn.

European regulatory reform – UK leadership

Even as we embark on a period of unprecedented regulatory reform, we rightly have to have to protect European competitiveness globally, and promote the Single Market within.

On the Capital Requirements Directive, we continue to press for full and consistent implementation of Basel III as a minimum not a maximum basis.

High, common and consistently applied minimum standards for capital, liquidity and leverage are vital for stability, reducing fiscal risk and protecting a Single, un-fragmented market.

On EMIR we have worked hard to ensure a clear recognition of the principle of non-discrimination in the Council and it’s why we are challenging the ECB’s location policy in the ECJ.

We have also secured a commitment to close loopholes with respect to the clearing obligation, and to ensure fair and open access in future legislation.

And it’s exactly the same commitment that we are taking on negotiations on MiFID.


The MIFID Review offers a huge opportunity to promote competition and the Single Market in financial services.

We have already seen the beneficial impact that MiFID has had in lowering costs and spurring growth in equities markets, and it is right that we seek to update the directive for the significant changes in the market since its original implementation.

But any reform of MiFID has to be driven by evidence not political whim.

It is vital that the Commission undertakes the necessary analysis and deliberation to understand the impact of reform, and considers any unintended consequences.

For instance, whilst it is clear that greater transparency has had a positive effect in equity markets, it is not necessarily the case that that precisely the same measures are directly transferrable to other market classes.

Both bond and derivative markets are considerably less liquid than equity markets, and extreme care is needed to ensure that transparency requirements are carefully designed to work for each asset class.

For example, the component bonds that make up Markit’s iBoxx bond indices are some of the most actively traded bonds in Europe. But looking at over 9000 of these bonds, only 52% actually traded at least once in a six month sample period in 2010.

It is because of this complexity that the Commission must undertake rigorous impact assessments to fully understand the costs and benefits of increased transparency.

Likewise, the Commission must undertake the same analysis when it comes to updating MiFID to reflect changes in the commodities market.

The Commission cannot succumb to knee jerk reactions which may only serve to increase costs for European citizens.

It is vital to remember that the commodities derivatives market serves a critical economic function in allowing end users to mitigate commercial risk.

That is why we are sceptical about blanket position limits across all markets – they have a role to play in defined circumstances.

But more often than not active position management by exchanges and authorities will be much more effective in tackling market abuse and indeed provide a more rigorous approach.

It is incorrect to think that blanket limits will enable governments to control prices as some would seem to suggest.

Furthermore the Commission must resist pressure to use MiFID to raise barriers against third countries seeking to trade with the EU.

Across EU dossiers there has been an increasing and worrying tendency to try to implement strict equivalence or reciprocity provisions through EU legislation. It’s an approach that could serve to effectively close EU financial markets to third country firms.

For instance, it seems that no third country would meet the standards as set out under the current MiFID proposal.

From the moment that MiFID is passed and until equivalence decisions are taken, it would close the EU market entirely to any new third country firm.

And barriers would be placed in the way of outward investment flows too, for example restricting access to emerging markets.

At a time when we have to do everything we can to attract ever more investment within but also beyond the EU’s borders, it’s an approach that merely undermines our growth ambitions.

Emerging economies are already taking steps to meet global standards of regulation, but change will take time.

We gain nothing by browbeating emerging economies and their most successful firms and sovereign wealth funds with additional and unnecessary burdens.

These are all complex debates and underline just how important it is to get the evidence base right to ensure that reform is effective and doesn’t undermine free, competitive and open markets.

In a post-crisis market where we have seen extensive consolidation across the board, we cannot afford to sit back and sacrifice competition and customer welfare.

DG Competition in particular has a fierce reputation for objective and rigorous economic and competition analysis, and a record of upholding their Single Market obligations in the European Treaty.

It is vital that DG Competition lives up to those duties in the weeks and months to come, without political interference.

To protect and promote the Single Market as we implement a vast agenda of reform.

Across the European financial services agenda, the Commission must not let political expediency trump economic evidence.

Responsibility of the European Commission

I fully understand nonetheless that the Commission faces a huge challenge to resist pressure to delay, obfuscate and pander to vested interests in the EU.

We see the Commission as parties in our commitment to protect and promote the Single Market in financial services…to meet its responsibility to secure regulation in the interest of all 27 members of the EU.

Regulatory reform that is ambitious, effective and based on rigorous economic analysis.

Domestic regulation – supervision

It’s exactly the same approach that we have taken in our domestic reforms.

It’s no exaggeration to say that the UK has been leading the way on regulatory and banking reform, taking tough and far reaching decisions to remedy the failures that preceded the crisis.

We are fundamentally reforming our system of financial supervision, remedying the failures of the Tripartite system.

Putting the Bank of England back in charge of prudential regulation;

Creating the Financial Policy Committee to monitor risks across the financial system, whilst also requiring the FPC to take economic growth considerations into account when pursuing financial stability;

And we are creating a Financial Conduct Authority to oversee the conduct and operation of firms and markets, putting the consumer protection at the heart of the financial system.

We have also introduced a permanent bank levy on wholesale funding that is higher in relative terms than any other major European jurisdiction, targeting short term funding in particular.

And we have introduced the toughest and most transparent pay regime of any major financial centre in the world.

Domestic regulation – ICB

But even with such ambitious reforms, there is no room for complacency.

We are also learning the lessons of the crisis to implement radical reform to the structure of the banking system itself on the basis of recommendations from the Independent Commission on Banking.

Recommendations which seek to answer how to create successful but stable financial services sector.

Recommendations that seek to preserve the innovation that fuels the sector’s success without putting the wider economy at risk.

As the Chancellor set out last year, we will separate retail and investment banking through a ring fence, ensuring that services that are vital to families, businesses and the whole economy can continue without resort to taxpayer money.

We will also ensure that banks have bigger cushions to absorb losses without recourse to the taxpayer.

That means requiring ring fenced retail banks hold equity capital of at least 10%, more than required under the Basel III agreement, with minimum loss absorbing capacity for the bigger banks of at least 17%.

Through these proposals on loss absorbency, and through our initiative on Recovery and Resolution Plans, we are tackling the perceived implicit taxpayer guarantee for UK banks.

That perceived guarantee for banks not just in the UK, but across the UK, is one of the greatest distortions to the Single Market.

We are tackling that distortion at home, and we will continue to work with the Commission to reconcile that distortion at the international level through the Crisis Management Framework.


It is the UK that has been at the vanguard of regulatory reform.

Our domestic reforms strengthen regulation of the banking sector, promote competition and protect the interests of the taxpayer.

Our willingness to act on capital and liquidity in delivering the international consensus has strengthened and protected our banking sector at a time of stress in European markets.

It is the UK that has been leading the way to ensure that we implement tough, consistent and non-discriminatory reforms that safeguard the stability, openness and competitiveness of the European financial system.

But on all these fronts, we need the support and the evidence base of the industry. We need to hear your voices not just here in London, not only in Brussels, but right across the EU.

It’s no easy task in the current environment, but we remain committed to working tirelessly to protect the Single Market, and we will continue to press the European Commission to resist vested interests that would seek to undermine it.

It is only by working with the likes of yourselves here today that we can embed reform that is credible, effective, and protects the open competition which has allowed financial services to support growth across all 27 members of the EU.

I look forward to working with you in that task in the months and years to come

Thank you.

Mark Hoban – 2012 Speech at St. Stevens Club


Below is the speech made by Mark Hoban, the then Financial Secretary to the Treasury, at St. Stevens Club on 4 July 2012.

Since this Government came to power, we have been clear that the banking system and the regulation of it needs to change – to empower consumers and prevent the greed and dishonesty that has sadly become associated with elements of the sector.

The impact of the financial crisis, and the shocking revelations we have seen since – the mis-selling financial products, the attempted manipulation of the LIBOR Rate – have vindicated that view if ever it were in question.

I want to set out today the steps we are taking to restore honesty, integrity and stability to the sector.

To ensure that consumers are empowered – whether they are individuals or small firms – to participate in the sector on an equal footing, both through improved regulation and greater competition.

To restore trust and confidence in the functioning of financial markets.

And to strengthen regulation so that a small group of firms cannot put the entire economy at risk – as we saw in 2008.

Historically, the relationship between financial services and the state was a commercial one. The first bankers from Lombardy financed the King and his military adventures.

The relationship between financial services and its customers were essentially private, meeting the emerging needs in a growing economy – insurance for cargos; friendly societies providing protection against illness, unemployment and death; building societies meeting the aspiration for people to own their own home; local banks and stock exchanges providing capital for business.

But as markets have grown in complexity, as businesses have grown larger and become run increasingly remotely from their customers, as financial products have become sophisticated beyond the comprehension of most, the need for transparency and market integrity has only increased.

And the role of the State in that relationship between the financial services sector and its customers has grown.

And so there has been a demand that the sector, and the regulation of it, evolve to protect consumers, whether they are buying a pension or trading complex debt instruments.

That is a demand that this Government is meeting.

Consumers can be vulnerable because providers of financial services know so much more about those services than their consumers.

If my iPhone is faulty it’s obvious straight away. I know that I can quickly and clearly assert my consumer rights.

If my pension is faulty, it may be far less easy.

If I’m mis-sold a pension, it may take years to realise the extent of the damage.

And it may take sophisticated knowledge of finance – well beyond what it’s reasonable to expect of the average consumer – to understand what has happened and how best to set it right.

And under the regime that we inherited, conduct of business regulation did not always get the focus or the attention it deserved. Too little was done too late to identify consumer detriment and tackle it effectively.

The high profile recent coverage of widespread interest rate swap mis-selling we have seen is a case in point. I am pleased to see the FSA is evolving its approach to improve the way it deals with these issues. In handling this, the FSA has shown a determination that these customers get appropriate redress and get it quickly.

This stands in stark contrast to its approach to the mis-selling of PPI, where it took years – not months – to reach the same conclusion.

Placing the interests of consumers at the heart of the regulatory system and restoring trust and confidence in financial services is one of the reasons why we have introduced the Financial Services Bill.

The creation of the Financial Conduct Authority as a dedicated conduct of business regulator marks a major further evolution in consumer protection.

Securing better outcomes for consumers by creating the FCA, as we committed to as soon as we came into office, is at the heart of the new regime.

The FCA’s operational objectives demonstrate what we are trying to achieve.

First, promoting effective competition that is in the interests of consumers in the financial services sector, recognising that competition in well functioning markets provides the foundations for those markets to deliver the right outcomes for consumers.

But further, consumers may need additional help. So the FCA will have an objective of securing an appropriate degree of protection for consumers – so that they are treated fairly, are provided with the right information at the right time, and are empowered to make the choices that benefit them.

They will have a more proactive, interventionist approach to regulating the conduct of business.

They will have new powers to intervene, to ban or impose requirements on financial products.

They will be able to publish details of warning notices regarding proposals of disciplinary action and misleading promotion.

And they will enshrine principles of transparency and openness in the new regulatory framework.

We are leading a radical change in approach – empowering regulators to intervene earlier using their judgement, rather than relying on a tick box approach to regulation that has enabled elements of the sector to fall well short of the conduct that is expected of them.

We saw a clear demonstration of a new, more robust approach by the FSA last week – in the findings relating to Barclays and attempted manipulation of the LIBOR market in the years running up to and during the crisis – a scandal that has caused a huge blow to the reputation of the banking industry.

The LIBOR issues are not just contained to Barclays or the UK – In addition to the FSA, competition authorities and Regulators in North America, Europe, Switzerland and Japan, are all investigating LIBOR, EURIBOR and other leading benchmark rates for alleged manipulation.

And not just at UK banks but other non-UK financial institutions. The very fact that in the case of Barclays the LIBOR rate under investigation was dollar – not sterling – Libor underlines that these are global markets and that this is a global problem.

On Monday, the Prime Minister and the Chancellor set out the steps we are taking in response to this issue.

And it will be the incoming CEO of the FCA – Martin Wheatley – who will lead a rapid and full review into what reforms are required to the current framework for setting and governing LIBOR, and provide hard hitting, practical recommendations to stamp out similar practice in future.

The Government is also recommending to Parliament that it consider undertaking an urgent inquiry into the culture and professional standards of the banking industry, in order to help shape the urgent reform needed of this sector.

But at the same time we must not forget the need to learn the wider lessons of the financial crisis, whose impact continues to be felt across the world.

In particular, it is essential that we strengthen prudential regulation to ensure that bank failure cannot destabilise the entire financial sector or the wider economy.

The crisis shows that banks – particularly large, systemically important banks – need significantly tougher minimum capital, liquidity and leverage standards.

And so I welcome the G20-endorsed Basel agreement, which reflects a global consensus that tougher standards of prudential regulation are crucial to reducing the likelihood of a repeat of the credit crisis.

Alongside these reforms to international standards, the Government is introducing major reforms to address the lessons of the financial crisis.

The new Prudential Regulatory Authority, and the new Financial Policy Committee, both introduced by our Financial Services Bill, will ensure that at every level, the sector receives the independent scrutiny that it needs – spotting the risks present in an interconnected banking system before it is too late.

Together, these bodies will bring the judgement and foresight to the task of supervision that the sector needs.

And we are going further still – reforming the structure of the market itself as well as the institutions that govern it – driving the change required for financial services once again to be placed on a sustainable footing.

As the state necessarily becomes more involved in regulation and oversight of the financial sector, there is one area where it is critical for us to reverse an unacceptable element of that interdependence- the state standing behind the banking system.

The two hundred year old role of the Bank of England to support a failing bank as the lender of last resort was and remains an important part of the resolution of banking crises.

Bank balance sheets grew rapidly in the last decade, and the risks banks took on become more complex, but the regulatory system and bank governance did not keep pace; nor did resolution arrangements. In effect, the state has been guaranteeing the banking sector.

So, in 2008-09, it was the taxpayer that bailed out RBS and Lloyds, and taxpayers across Europe provided almost 300 billion Euros in capital to stave off catastrophic collapse.

This Government is determined to ensure that never happens again.

Banks and their investors cannot be allowed to privatise gain and socialise loss. To take for themselves the benefits when things go well, but accept no responsibility for losses when things go badly.

Nor can we allow banks to believe taxpayers will always take the pain in the bad times, so that banks are free to take on risks safe in the belief that they will be rescued if their bets don’t pay off.

In summary, banks must be able to fail. But they must be able to fail safely.

That principle is a key thread which runs through this Government’s financial services reforms.

Ring-fencing will separate retail deposit-taking entities from complex investment banking; making them easier to resolve without interrupting continuity.

Bail-in will allow losses to fall on creditors, rather than taxpayers.

And recovery and resolution planning will ensure banks and authorities are prepared in advance to tackle failure. Alongside ring-fencing, they will ensure that critical economic functions can be hived off and maintained through a future crisis.

So we have a responsibility to reform regulation to tackle the lessons from the financial crisis.

In doing this, we must of course avoid the ‘stability of the graveyard’ that results from over-regulation – compromising the sector’s ability to provide wider social and economic benefits, by constricting lending or stifling innovation.

So we will ensure reforms are proportionate and balance the costs to industry against benefits of greater stability.

The financial services sector is a vital part of the functioning of our society. And an important contributor to the growth and strength of our economy.

But its very importance leaves us vulnerable, and it is crucial that we act on the lessons of the past.

Not only do we understand more about the risks posed by banks and the wider financial services sector; the weaknesses of the regulatory regime in place in the run up to the financial crisis are manifest and need to be tackled.

We are committed to reform that secures a stable and successful financial sector with a global outlook… a sector that provides sustainable lending, supports stable growth, and meets the aspirations of families and firms, but one that doesn’t put the savings of households, the wider economy, or the public finances in jeopardy.

Thank you.

Mark Hoban – 2013 Speech on Social Justice and Welfare Reform


The below speech was made by the Minister for Employment, Mark Hoban, at the LGA Conference on Troubled Families in London on 23rd January 2013.

Under the previous government, billions of pounds were moved around the tax and benefits system in an attempt to reduce poverty. But the complexity of the previous system had the perverse effect of trapping thousands of people on benefits. Through tax credits in particular, even quite wealthy people became entangled in a labyrinthine benefits system. The benefits bill spiralled out of control, and despite this, child poverty targets were missed.

This is something the coalition government is determined to tackle. True social justice will only really be achieved when families are able to provide for themselves.

Now this is no simple task, and of course there will always be people who need our help. But this help should be in the form of a safety net, and a leg up. Not a way of life which traps people with little hope of escape.

The only real, sustainable way this can be achieved is by giving people the help and support they need to move into work. By working, people can earn the money they need to look after themselves and their families.

But money isn’t the only reason. Having a job means much, much more.

Having a job gives you pride, self-worth and dignity. Having a job gives you more control over your own life. Having a job shows your children that a life on benefits isn’t the only option.

Now of course none of this can be achieved without there being jobs available. I am not complacent – I know there are people up and down the country who are struggling to find work.

But despite tough economic times, recent employment figures have been encouraging, with more people working than ever before. Indeed figures which were published only this morning show that once again employment is up and unemployment is down.

But I am well aware this isn’t the only answer. We need a benefits system which helps people move into jobs. And that is why we have embarked on the most radical reform of the welfare state ever.

The benefits system had become so bloated that, for many people, moving into a job didn’t seem like an option.

So under Universal Credit, which starts to be rolled-out in a few months, people will always be better off in work. People will no longer be trapped in a confusing web of entitlements and add-ons. And people will always be able to increase their hours without losing out financially

And whether it’s giving lone parents the help they need to move off income support and into work, or reassessing people on incapacity benefit to see if they are capable of work, I am determined that we never again write people off. Never again will there be so much wasted potential. Never again will people be consigned to a lifetime on benefits when they could be helped into work.

But getting the structure of the benefit system right, whilst necessary, isn’t enough in itself. We need to remove the barriers to work, particularly for the hardest to help – those who are furthest away from the labour market.

For people in a family where there are multiple problems, having the jobs available is only part of the solution. They might need help to tackle unsatisfactory housing, help to manage a violent domestic life, help to learn personal skills and increase their confidence. These can all be vital in helping people make the change from a life on benefits to a life in work.

And that is where we need to work together. As people on the front line, you more than most will see how complex the lives of people in troubled families are. And you will see the need for extra help.

That is why, in December 2011, we set up the programme to provide support for people in families with multiple problems – to help them tackle some of their difficulties and move towards a job.

Funded through the European Social Fund (ESF) programme, the DWP made two hundred million pounds available to help tackle entrenched worklessness amongst troubled families. This help is there to support families identified by Local Authorities as having the sort of problems that typically overwhelm people. Families who feel there are just too many barriers to see work as a realistic prospect. Families struggling with problems like debt, difficult living conditions, involvement with drugs or crime, and a lack of skills or work experience.

This programme is intended to work across the family, across the generations and across the range of problems they may face.

Now working to tackle such challenging problems across local and national government is inevitably going to have teething problems. But I have to say that collaborative working is nothing new, and I’ve seen for myself how it can work very well.

Only last week I went to Wood Green Jobcentre Plus where their Community Engagement Adviser works closely with Haringey council and their locally-led jobs fund.

Or in Grimsby where a local fish-filleting factory is able to take on trainees using a combination of Youth Contract measures and a wage incentive offered by the local authority. Or in Gloucester where Jobcentre Plus advisers work with schools and the Local Authority to pool resources and provide a single point of contact for young jobseekers.

We want to replicate such successes with the ESF programme. By combining your expertise at working with these families with the tailored support that our providers are offering, together we can make a big difference to people’s lives.

Because where this has happened, the scheme is working well.

Take Rochdale Council, for example, where there is very strong support for the families agenda from the Chief Executive down, and they play a leading role in the Trouble Families Programme for Greater Manchester. Rochdale’s ESF families support and their Troubled Families programme are very closely integrated, helping them to identify pockets of deprivation to target resources.

Or in Liverpool where the council works closely with the prime contractor, Reed. Together they ensure that the ESF Families programme complements their existing ‘Liverpool in Work’ scheme, without duplication or competition. Now the provisions are able to refer people between them depending on individual need.

So while there are a number of shining examples, I think everyone here would agree that it could be working better.

I know that you have not been asked to make direct referrals on this scale before, and I know that some of you have frustrations with the way things have worked.

But let me reassure you – we are completely committed to turning around the lives of some of the most troubled families in this country, and we are looking at ways in which the process can be fine-tuned. And in return we hope that you, the Local Authorities, to play a stronger role too.

Perhaps the most fundamental issue is the lack of a sufficient flow of people and families into the provision; meaning expert knowledge isn’t being used to its full potential. I recognise that some of the providers have faced initial difficulties, which is why we have made some changes to things such as funding. And I completely understand that a number of local authorities have been reorganising their services in order to deliver programmes like these.

But the funding and the expert provision is there to be taken advantage of. And the provision is often innovative and flexible, such as Skills Training UK who have re-branded the ESF Families provision as ‘Progress! The Go Further programme’ in the South East. In one local authority, Progress arranges courses on anger management and confidence-building. But rather than having to wait for a new course to start, they are run on a ‘roll-on, roll-off’ basis so people can join whenever they are ready.

So now is the time to take action – it is really important that you encourage your frontline staff to make use of the provision available. And my commitment to you is that I will ensure my Department’s extensive employment expertise is able to be more directly supportive of outcomes for these families.

I believe that helping people move closer to a job is the best way to fundamentally change people’s lives. Of course, this won’t be easy for some people, but that doesn’t mean we shouldn’t do all we can to tackle it. Because between us we have the expertise and skills that have the potential to make a real difference to people’s lives. But we can only do this by working together.

Mark Hoban – 2012 Speech on Youth Unemployment


Below is the text of the speech made by Mark Hoban, the then Minister for Employment, in London on 19th September 2012.

I would like to begin by thanking Channel 4 for asking me to open this debate today.

Although I am reasonably new to the post of Minister for Employment, that does not mean I am not acutely aware of the problems some young people experience when looking for that first job.

Let me be plain. For any young person who is able to work to be out of a job is a tragedy.

It is a tragedy for the individual, who finds themselves unable to get on in life…

It is a tragedy for their family, who have to motivate and support them…

And it is a tragedy for the country, which is missing out on a huge amount of untapped talent.

And I know that our young people are talented. The vast majority of young people are hard working…

…They are ambitious…

…And, above all, they have great potential.

You will be asking in your first session today if we are heading towards a lost generation of unemployed young people.

Let me say categorically: no, we are not.

As a government we are working tirelessly to make sure this does not happen. Indeed most 18-24 year olds leave JSA quickly. Around 60% of new claims last less than 3 months and 80% less than 6 months.

But it is true that the number of young people currently out of work is too high, and we are being honest about the scale of the challenge we face.

Previous governments have conveniently hidden the true scale of youth unemployment. They moved young people off JSA, called it something different, then put them back on again.

They were still unemployed, but it made the figures look better. They weren’t so much ‘lost’ – they were purposefully hidden.

We do not do this.

But getting the figures right is no substitute for sorting out the problem. So I am going to spend a few minutes telling you what we are doing.

For any young person looking for a job, often the biggest stumbling block is a lack of experience.

Sometimes it’s that they have a lack of understanding of what the world of work is really like. But more often it’s that a young person simply hasn’t had the chance to prove themselves. You need to be able to show an employer what you are capable of.

That is why, as part of the Government’s one billion pound Youth Contract, we are creating a quarter of a million extra work experience places over the next three years.

This gives 18-24 year olds the chance to do up to eight weeks of work experience while keeping their benefits. This provides a vital opportunity for young people to get their first foot on the career ladder.

But, of course, giving young people work experience is only one side of the coin. It will only be worth doing if we can help turn that experience into a real job.

And that is exactly what we are doing.

From January 2011 to May this year there have been nearly 65,000 young people starting a work experience placement. And our assessments show that nearly half of people who go on work experience are off benefits 21 weeks later. This is good for them and good for the country.

Let me give you one example of how we are helping people find jobs – much of the amazing work carried out during the Olympics was done by the army of volunteers, many of whom were young people looking to gain experience to help them find work.

Their enthusiasm, their work ethic, and their commitment was, I think you’ll all agree, second to none. Any sane employer should snap them up in an instant. Which why we are holding an event in Stratford today where 2,000 of those involved in the Olympics will meet employers with vacancies to offer now.

This will be the first in a series of such events. Events which are specifically targeted at those who were Games Makers or worked at Olympic venues. We want to help the people who helped to make the Olympic and Paralympic Games such a success, by moving them into long-term employment.

What a great lasting legacy that would be.

Whilst we will work with you to get you in work, we also need to work with business to make sure the jobs are there.

As our Olympics event shows, only by engaging with businesses can you create the jobs people need. Companies such as Whitbread, Debenhams, Ocado and Stagecoach will all be at the park this week, along with a number of smaller local businesses, all there to give people jobs.

So working with business is, in my view, vital. As a Government we need to show employers that taking on young people will be good for their business.

Indeed, later on today I will be with the CBI for the launch of the CIPD’s business case for investing in young people, which does just that. It will highlight the business imperatives that make young people such a vital component in an employers’ workforce.

We need to show employers that through things like our work experience and apprenticeship schemes we are creating a generation which is eager. A generation which is skilled. And a generation which is better prepared for the world of work.

And because we know times are tough for businesses, we want to make it easier to employ and train young people.

That is why, through our Youth Contract, the Government is offering up to 20,000 new Apprenticeship Grants to encourage new employers to take on young apprentices.

And that is why we are offering 160,000 cash payments of up to £2, 275 for employers to recruit young people from the Work Programme, or from Jobcentre Plus in 20 youth unemployment ‘hotspot’ areas.

So in opening today’s debate, I would like to conclude by saying to young people across the country that ensuring you are given every chance to get a job is my number one priority.

I don’t underestimate the challenges we face in an uncertain economy, but only by making sure you have the training, work experience and opportunities you need will we ensure our future.

And I would like to finish by appealing to businesses across the country:

Whether you are big or small, multinational or a local start-up: make use of the schemes we have in place. Work with us to help give a young person a chance.

Give them a chance to get their foot on the ladder…

…give them a chance to help your business grow…

…give them a chance to prove to you what they can do.

Mark Hoban – 2011 Speech at the Markit Conference


Below is the text of the speech by the Financial Secretary to the Treasury, Mark Hoban MP at the Markit Conference, The Grange City Hotel, London, held on 12th May 2011.

Thank you. It’s a pleasure to be here this morning and to talk to you about the regulatory reform of markets.

As the Minister responsible for financial services, I spend a huge amount of time on the vast array of European markets’ initiatives.

London is Europe’s only global financial centre with- for example- 40% of the global OTC derivatives market.

And so regulatory reform offers the UK both great opportunities and great challenges.

In my discussions with industry, I know that you understand the need for reform.

Want to see stronger and more resilient markets.

And understand that we simply can’t afford another financial crisis.

But I recognise also that fundamental reform is incredibly challenging.

It requires thought.


Careful deliberation.

Where most people can generally agree on the direction of travel, the final destination remains a point of contention.

So today, I’d like to set out the UK’s priorities when it comes to the regulatory reform of markets;

First of all, the need to create more resilient and more stable financial markets. To learn and put into practice lessons from the financial crisis;

And secondly, to improve competition: to complete – and not fragment – the Single Market- and so promote, rather than stifle, growth.

In order to achieve these aims, we need to focus on what really matters.

Which is why, underpinning these aims, we continue to argue in Europe that every proposal – and every reform – needs to be backed up by clear and compelling evidence.

With detailed consideration of the relative costs and benefits.

Because it’s far more important to be doing things right, than to be seen to being doing a lot.

So let me take these priorities in turn.

Europe’s Financial Sector

Starting first with the issue of stability.

Now it goes without saying that the events of recent years have tested the underlying strength of the global financial sector.

They’ve called into question the very nature of how financial markets operate.

And across the world, people have been asking questions about the sustainability of different investments, institutions and financial products.

With general consensus that reducing systemic risk and improving transparency is essential in improving stability.


Derivative trading is one of the many areas that have come under the spotlight.

Indeed, derivatives continue to divide opinion.

Some people would argue that derivatives were as much a part of the crisis as the sub-prime mortgage debacle, light-touch regulation, or low levels of liquidity and capital reserves.

Others, including myself, would take the view that the problems concerning credit derivatives were more of a symptom of the crisis as opposed to an actual cause.

Nevertheless, there is agreement that action can be taken to improve the infrastructure surrounding derivatives.

If we look at EMIR, for example, the idea that central counterparties should be used to clear certain classes of derivatives is a welcome one.

This, if implemented proportionately, will reduce the systemic risk presented by the derivatives market.

But it’s important that this proposal is properly formulated and avoids creating unnecessary burdens.

Not all derivatives deemed eligible for central clearing will necessarily be suitable for platform trading.

We must look at the facts, rather than make broad assumptions.

But equally, it is important that the scope of the regulation is sufficiently broad.

When it comes to deciding which derivatives should be covered by EMIR, there are two different roads we could go down.

The first would see all trades covered by this regulation, regardless of their venue of execution.

The second would see only those derivatives executed outside of an exchange being subject to this legislation.

All the arguments clearly favour the first approach


The first one being that the purpose of clearing derivatives is to reduce systemic risk – it’s not obvious to me why a derivative would need to be cleared if traded off-exchange, but not if traded on an exchange.

And the second is market distortion- restricting the scope would create a rather sizeable regulatory loophole- which, if exploited, would lead to damaging asymmetry in the market.

The arguments against a broad scope are hard to fathom, and seem to be about preventing competition in clearing – a subject I will come on to later.

High frequency trading (HFT)

Another stability issue where opinion is divided is high frequency trading.

Concerns that HFT contributes to instability in markets- with the US Flash Crash often held up as an example- have prompted calls for action.

But I feel that evidence is lacking- and that, for example, proposals around minimum order resting times and restrictive order to execution ratios in MiFID should be based on robust research.

That’s why the Government has established a Foresight project looking at the Future of Computer Trading Financial Markets.

This will examine the impact of technological developments in HFT to ensure that any regulatory intervention is both sustainable and effective.


Because, at a time when Europe has record financing needs, liquid markets are absolutely crucial.

But they are also vulnerable.

As I outlined at the beginning of my speech, any measures to improve stability must look at the wider impact- particularly the impact on competition and on the effective functioning of these markets.

Market regulation in Europe needs to recognise that member states don’t work in isolation to each other- and Europe doesn’t work in isolation to the rest of the world.

We should bear in mind that protectionist attempts to close down our borders or Balkanize markets by currency or geography will do huge damage to European growth.

As will seeking to impose so-called ‘strict equivalence’ to detailed European standards before anyone can do business in the EU.

Based on recent IMF data, last year, non-EU investors provided 27% of the total investment in EU cross-border securities.

This means $5.2 trillion of all cross-border investment in the EU came from outside of the Union.

It’s clear, therefore, that Fortress Europe is not the answer to strengthening our competitiveness.

We face fierce competition from overseas… not just from traditional financial centres in the US… but increasingly from Asia.

And at the same time, these emerging economies present us with huge opportunities to serve new and expanding markets.

But if – in our goal of making markets stronger and more resilient – we get our regulation wrong, these are opportunities that will fall by the wayside.


We can look to MiFID for an example of the competition benefits that regulation can achieve.

Ten years ago, Europe was an underdog, relative to the strength of the US capital markets.

Member States worked in relative financial isolation.

Were hampered by high costs and low liquidity.

And the Single Market had hardly got off the ground.

But MIFID became instrumental in breaking down some of the barriers that were holding us back.

Today, as a result of the competitive pressure of MIFID, Europe has exchanges that are capable of competing globally;

Deutsche Boerse;

the London Stock Exchange;

Euronext-Liffe – just to name a few.

Europe has become the destination of choice for many global companies seeking to access deep pools of capital.

Competition has brought down trading costs, improved liquidity, and resulted in better protection for investors. In fact, I’ve read some estimates that suggest the single markets benefits of MIFID could have contributed as much as 0.8% to EU GDP.

And if we get the MiFID Review right, we have the potential to build on this progress.

But if we get it wrong we could set ourselves back a decade.

So what is our impression of the MiFID review so far?

Well, there are some clear positives to some of the measures on which the Commission has consulted : for example;

the SME market proposals;

the underlying theme of investor protection;

and the potential to support G20 commitments on the regulation, functioning and transparency of markets.

I also recognise that impressive progress has been made by the Commission in developing proposals for derivative markets.

At the outset, I think it’s fair to say that they didn’t quite grasp all of the issues, but have worked hard to understand them through a genuinely consultative process.

This should be commended.

But the Commission have much more to do to convince me – and the industry- that they’ve genuinely grasped all the issues at stake.

And any changes will have profound implications for tens of thousands of firms.

We must learn from the AIFM Directive and other proposals which – in their original form – were fundamentally flawed and lacked an understanding of how our markets operate.

So with MiFID, areas such as;

the governance of trading platforms and venues;

pre- and post-trade transparency requirements and;

transaction or position reporting.

we must implement proportionate regulation.

A crucial part of this is understanding our markets. What works for regulation of equities – a homogenised trading instrument – should not be arbitrarily copied to bonds, sovereign debt, derivatives, or commodities markets.

Also, within each asset class, the markets have their own dynamics and features, which only properly informed regulation will understand.

Indeed, each commodity market is unique – where electricity trades in a different way to gold, metals, or agricultural commodities.

If regulation fails to recognise this, firms will start to look elsewhere when it comes to matters of finance.

And this will feed through to our companies, our businesses and our citizens.


In EMIR, there are opportunities to promote competition market structure- competition which is healthy and should be encouraged.

We all agree that CCPs must be made safe – that is why so much of EMIR is focussed on new robust prudential standards for CCPs

But we must not allow new standards for CCPs, combined with a legal obligation to clear derivative products, to embed monopolies in clearing that will result in costs passing back to the wider economy.

To prevent this, our view is that, while linked structures – so called vertical silos – can be effective, they must be subject to fair and open access requirements.

Market participants should be offered a meaningful choice of using all or part of a vertical structure.


In securing the aims that I have discussed today, engagement is absolutely crucial.

The Commission should continue to work with all interested parties on markets legislation;

engaging with businesses across Europe with expert groups on specific areas;

allowing particular care over legal drafting, to prevent unintended consequences;

and, again, ensuring that all impact assessments are of the highest quality.

And I can assure you, the Government will be a positive and constructive partner in this process.

But when it comes to finding the best solutions for Europe, we’re at our most effective when we work with you and engage openly on our priorities.

Where we both share analysis to back-up our proposals.

Which is why the industry has just as, important role to play as Government. EU regulation will have a direct impact on the business you transact.

As we need more hard-headed analysis.

To strengthen our argument.

Make clear our concerns.

And deliver outcomes to suit everybody’s needs.

We’ll need your engagement.

Your evidence.

And your positive ideas for reform.

So that any amendments to the current rules are;

proportionate – not overbearing;

grounded in fact – not political whim;

and look to support stability, growth, and competitiveness.

That is what we need to achieve.

Thank you.