City minister opens door to weakening banks ombudsman
City minister Emma Reynolds has suggested the government could remove powers from the banks ombudsman as part of efforts to ease regulatory burdens faces by financial services.
Reynolds told an audience of bankers and investors that the end of a review on the Financial Ombudsman Service (FOS), which acts to settle complaints made by consumers against financial services, could see some of its powers being stripped.
Her comments came after ministers were reportedly drawing up plans to hand over final decisions on consumer compensations to the Financial Conduct Authority (FCA) through a new “referral” system that would allow financial services to appeal judgements passed by the FOS.
“The FOS, of course, plays an important role in providing consumers and firms with straightforward, independent dispute resolution, which is critical,” Reynolds said at an event organised by industry group TheCityUK.
“It should not act as a quasi regulator. Changes are needed to provide greater stability and clearer expectations on redress of all parties.”
Government changes to FOS and complaints systems could come as soon as Chancellor Reeves’ next Mansion House speech on July 15, Politico reported.
Banks ombudsman key to deregulation drive
The government will unveil a Financial Services Growth and Competitiveness Strategy alongside the speech, which is likely to detail incentives to boost the UK’s retail investing culture and support for banks in the City.
City firms awaiting a ruling on the motor finance scandal have argued that FOS has had too much power over handling complaints.
Judicial reviews, which can cost millions of pounds, are the only way firms can currently appeal decisions.
FOS could also see its six-year time limit for complaints against banks reduced while legislative obligations may also be modified, according to Politico.
Earlier in the conference hosted by TheCityUK, FCA chief executive Nikhil Rathi said the regulator had to move forward with stripping red tape to allow for more risk-taking rather than talking down UK business prospects, which could in turn become a “self-fulfilling prophecy”.
“I believe this is the moment to reset our psychology, put aside British modesty and celebrate all our strengths,” Rathi said.
Rathi floated a number of changes to mortgage market rules for banking and data provision as he said hedge funds could be made to be more transparent while enforcement rules could be strengthened instead of “writing new rules”.
“Our regulatory framework needs to support innovation with guardrails. So we’re being bold to support change, innovation, and growth, but let’s not confuse that shift in risk appetite with compromising integrity.”