UK Finance has backed calls that the Financial Ombudsman Service should be stopped from acting as a “quasi-regulator” and insists on a timetable of reform for the body.  

The move comes in the banking body’s submission to the government ahead of the Chancellor Rachel Reeves’ Mansion House speech later this month and the Treasury’s Financial Services Growth and Competitiveness Strategy paper.  

The Treasury is currently reviewing the remit of the body, which resolves disputes between financial firms and consumers, in a move that was first announced in the spring.  

However, UK Finance says: “We have greatly welcomed the attention from the government on reform of the Financial Ombudsman Service, and the need to address the fact that decisions that go beyond FCA rules create legal uncertainty and see the Ombudsman acting as a quasi-regulator. 

“Providing certainty and stability on this and other conduct-related reforms will better allow firms to innovate in the interest of consumers.” 

The trade body says that older disputes the regulator looks into should be time-limited and calls for a “reform timetable “of the service to be published. 

It adds that legislation to make further reforms to the body “should follow in the next King’s Speech” due in the autumn. 

Rosemount Financial Solutions chief executive Ahmed Bawa, also labelled the Financial Ombudsman Service as a “quasi-regulator” and a barrier to the government’s growth agenda in May. 

Bawa wrote to Economic Secretary to the Treasury Emma Reynolds, and said that the service supported a “growing complaints industry and culture within UK Financial services,” of claims management companies, “which won’t promote confidence or support growth in our industry.”   

In March, the Treasury said Reynolds would examine whether the Financial Ombudsman Service “is delivering its role as a simple, impartial dispute resolution service which quickly and effectively deals with complaints against financial services firms and which works in concert with our Financial Conduct Authority, which regulates the sector”.   

The Treasury says Reynolds will look at three key issues: 

• The framework in which the FOS operates, which has resulted in it acting, at times, as a quasi-regulator  

• Whether the FOS is applying today’s standards to actions that have taken place in the past  

• The practices that have grown up over time on compensation 

A Financial Ombudsman Service spokesperson says: “We are an independent dispute resolution service set up to provide an alternative to the courts with minimum formality – last year alone we provided quick and high-quality resolutions to thousands of consumers, small businesses and financial firms. 

“We agree that now, after 25 years of operation, marks a timely opportunity to review the system as a whole. 

“That is why we are working closely with the Financial Conduct Authority and the Treasury to ensure the system — including the vital role our service plays within it — is fit for the future.”