There’s a huge amount in flux for UK financial services firms at the moment as the regulators grapple with the challenge set by HM Government’s call for them to support its central mission to drive growth in the economy.
Today saw the release of a number of reforms to regulators and the regulatory system announced by HM Treasury (HMT), designed ‘to tackle the complexity and burden of regulation’.
Taken in the context of other announcements from regulators recently – including the Financial Conduct Authority’s decision to pause work on D&I; and shelve ‘name and shame’ (though non-financial misconduct remains firmly in the regulator’s sights); as well as the Payment Systems Regulator being absorbed into the FCA, this is a clear signal that 2025 is going to be a year of major reform for UK FS.
On today’s announcement, some key points.
A new, minister-led review of the FOS
HM Government has announced a wider review of the Financial Ombudsman Service (FOS) to be led by the Economic Secretary to the Treasury. Whilst the Call for Input has been widely perceived to be a step in the right direction by industry, many felt it did not (and perhaps, could not) address certain fundamental questions around the calibration of the framework as a whole. This review will consider more fundamental aspects of the legislative framework – which HMT acknowledges has resulted in the FOS acting as a ‘quasi-regulator’; considering whether the FOS is applying ‘today’s standards’ to historic conduct, and the practices surrounding redress.
HMT has confirmed it ‘stands ready’ to legislate to ensure the dispute resolution system is fit for a modern economy – potentially opening the way to significant structural reform.
Many will be asking what this means in context of the FCA’s announcement on motor finance/DCA redress, and the fallout from the Supreme Court’s judgment in Hopcraft expected later this year.
Sector-specific commitments from the FCA
There is a slew of more ‘micro’ changes to be pursued by the FCA, including work around capital requirements for ‘specialised trading firms’ and work to simply ‘mortgage and advice rules to support greater home ownership’; as well as a review of contactless payment limits, including removing the £100 cap.
A new third way?
As use of the designated activities regime gathers pace, buried in the detail of today’s announcement is reference to a potential ‘third way’ for some activities in future, with HMT suggesting that a package of work will be undertaken to consider whether the framework can be updated to allow relevant firms to conduct ‘limited regulated activities with streamlined conditions’.