Financial reforms announced
On 14 November 2024, in her speech at Mansion House, Chancellor Rachel Reeves announced significant reforms to the financial services industry in a quest to boost growth in the economy. The Government’s approach to regulation was said to be a critical part of this and we can expect to see a shift in focus to stimulate innovation and increased growth, investment and competition.
The proposed reforms include improvements to the Financial Ombudsman Service (FOS) and the Financial Conduct Authority (FCA) in a bid to modernise the current regulatory framework and ensure there is a more transparent and effective system for consumer redress.
Key features of the proposals are outlined below:
Modernising the FOS Framework
In modernising the FOS Framework the hope is that financial institutions will benefit from having a better understanding of their compliance requirements which should lead to a reduction in regulatory breaches and associated penalties. This will also mean that businesses can free up resources dedicated to dealing with regulatory requirements.
Changes will also be made to the FOS Framework to strengthen its role in providing consumer redress and ensure that its decision-making processes are transparent and fair. The goal is to build greater trust and confidence among consumers in the financial services sector and enable consumers to have more trust in, and engagement with, financial institutions.
The hope is that Consumers can therefore expect to see faster and more transparent resolutions of their complaints about financial services businesses as the whole process has slowed down by a considerable degree in recent times. This means if consumers have an issue with a financial product or service, the process to get it resolved should be clearer and more efficient going forward.
New FCA Consultation on Financial Education
The FCA will launch a new consultation focused on improving financial literacy and decision-making among households. As an example, consumers might have access to better resources and tools to understand complex financial products, helping them make more informed decisions about loans, investments, and savings.
This initiative is part of a broader regulatory review intended to equip consumers with the requisite knowledge and skills they need to make informed financial decisions.
By enhancing financial literacy, the FCA hopes to foster a more financially savvy population.
With enhanced financial education and better complaint resolution mechanisms, the intention is for financial institutions to build stronger relationships with their customers.
Collaborative Efforts for Sector Improvement
These reforms are the result of a joint review initiated in 2023, highlighting the collaborative efforts between the government and financial regulators. The aim is to create a more proactive financial environment that balances consumer protection with industry growth. This includes setting clear and actionable expectations for the FOS and raising the standards of financial advice.
By promoting sustainable growth and robust consumer protection, the government and regulators are working together to ensure that the financial services sector remains resilient and responsive to the needs of consumers.
Comment
Garon Anthony, Financial Services Partner, Comments:
“The initiatives set out by the Chancellor in this speech are intended to bring clarity to reforms the financial sector have been anticipating and feeding into over recent months.
“The reforms seek to provide a clear landscape for consumers, with better understanding of the financial sector as a whole, as well as a clearer route to redress.
However, the proof of this particular regulatory pudding will be very much in the eating and time will tell as to the effectiveness of these well intentioned reforms”
