The Financial Services Regulatory Committee of the House of Lords in the UK has warned that the risk-averse culture and functional expansion of financial regulatory agencies are undermining the competitiveness of the UK as a financial center. The report released on June 13th pointed out that the cumbersome requirements of the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have pushed up compliance costs, while the Financial Ombudsman Service’s ruling on auto finance claims has raised concerns among foreign investors about regulatory uncertainties. Michael Forsyth, the chairperson of the committee, emphasized that the regulatory culture needs to be reformed to improve efficiency, but not to relax regulation.
Regulatory authorities responded that they are taking measures to alleviate the burden on enterprises, including simplifying rules and promoting remedial reforms. However, the report particularly criticized financial ombudsmen for going beyond their original functions and evolving into “quasi-regulatory agencies”, and suggested that they be brought back under the control of the FCA. Furthermore, legislators have raised doubts about the regulatory authorities’ commitment to economic growth targets, arguing that the connection between financial regulation and economic growth lacks sufficient justification and that the government, regulatory authorities and industries need to work together to improve the financing environment.
Rachel Reeves, the Chancellor of the Exchequer of the United Kingdom, said he was willing to listen to the opinions of the banking industry and optimize the regulatory framework. This report highlights the challenges the UK faces in balancing financial stability and competitiveness. How regulatory authorities strike a balance between safeguarding consumer rights and enhancing business attractiveness has become a key issue.
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