King Charles's King's Speech today has outlined widely expected reform of the Financial Ombudsman Service and a drive to cut regulatory red tape.
A new 'Enhancing Financial Services Bill, will pave the way for reform and hopefully spur growth in financial services, the government believes.
The bill was one of 35 bills and draft bills announced today.
The reforms to financial services regulation are aimed at driving growth and innovation, as well as giving businesses more confidence to invest and grow.
The City reforms focus on cutting regulation to help stimulate growth with the King saying British business will be supported with bills, "to reduce the burden of unnecessary regulation through innovation".
The speech included expected reforms to the Financial Ombudsman Service. The FOS is currently working with the FCA and Treasury to deliver a series of reforms to the redress system to make it simpler and avoid the FOS and FCA reaching different conclusions on some cases. The Ombudsman has said it expects the majority of these changes to take place over the next two financial years.
The government says the financial services sector plays a vital role in the UK’s economy and is one of the most successful export sectors, a key enabler of growth in other sectors and a provider of payments, credit, insurance and investment services to households and businesses.
The government says the Enhancing Financial Services Bill will deliver key parts of the Leeds Reforms set out by the Chancellor in 2025. It will "modernise" how the sector is regulated, enable it to grow and to lend more to businesses and make consumer protections "fit for the digital age."
The Bill will includes measures to:
• Modernise consumer protections and redress arrangements to reflect today’s markets and maintain confidence. It will ensure consumers are, "appropriately protected, "when something goes wrong, making sure protections are fit for the digital age.
• Reform the Financial Ombudsman Service to increase consistency and clarity of decision-making, helping people resolve disputes more quickly and with greater certainty.
• Consolidate the regulatory framework to enable stronger coordination and clearer responsibilities, reduce fragmentation of the regulators and support innovation. By streamlining the regulatory architecture and consolidating the Payment Systems Regulator within the Financial Conduct Authority (FCA), firms will deal with fewer overlapping regulators, providing clearer accountability and faster decision-making.
• Ensure that the administrative burden on firms is proportionate without compromising on core consumer, prudential and market protections. This includes reducing the overall burden of the Senior Managers and Certification Regime by 50 per cent with a focus on accountability of the most senior figures in financial services, freeing up firms to focus on serving customers and invest in growth, rather than dealing with overly burdensome compliance processes.
• Enable credit unions to expand by improving the rules on who can become a member. This will allow credit unions to serve more people and communities, widening access to affordable finance and supporting the Government’s aim to double the size of the mutual and co-operative sector.
• Support lending and investment including by updating the statutory framework underpinning the ring-fencing regime, which requires major banks to separate their UK retail banking services from investment banking activities. The reforms will "unlock" more finance for UK businesses.
• Improved competition in Small and Medium-Sized enterprises’ (SME) lending to help small businesses access finance.
The government points out that the financial services sector accounts for around 8 per cent of UK output and employs more than 1.1 million people across the country. The sector also makes a very significant tax contribution. However despite its strengths, the sector has not grown in real terms since 2010, in contrast to several international financial centres that have recovered more strongly since the Global Financial Crisis.
Responses to the Government’s ‘Financial Services Growth and Competitiveness Strategy: Call for Evidence’ indicated that the complexity of the UK regulatory environment is detracting from the UK’s overall attractiveness, with many respondents indicating that it was more complex and burdensome to be regulated as a financial services firm in the UK than in other countries.
The FCA has already begun to make changes to streamline some of its rules in a drive to cut red tape. Last month its confirmed changes to the Senior Manager Certification Regime (SMCR), streamlining rules ahead of plans for wider changes which the FCA and PRA claim will halve the SMCR’s regulatory burden on firms.
Several advice firms have welcomed the consultation paper, saying that it provides much needed clarification of the rules around ongoing advice.
The speech also addressed the introduction of laws to tackle cyber attacks.
The King's Speech is written by the current Government and lays out its legislative agenda for the upcoming year. The Government has made no secret of its desire for a more competitive financial services regime to be a key driver for UK economic growth.
Following the speech, the Commons will debate its contents for around six days before voting. Governments do not often lose this vote when they hold a majority, as the current Labour government still holds.
Beyond financial services regulation, today's speech also focused on measures to control the cost of living and general economic security. Measures included a bill to help with tackling late payments, investment in apprenticeships, a bill to strengthen ties with the EU, and measures addressing energy security and defence.