The House of Lords select committee on regulators is calling for a review of the Financial Ombudsman Service by the National Audit Office.
The first report from the committee, published this week, says the Government should commission a review of “the economy, efficiency and effectiveness of the FOS”.
It says the review should consider the extent to which the FOS acts as a pseudo-regulator and the effectiveness of the working relationships between the FOS and other bodies such as the FSA and the Office of Fair Trading.
The committee praises the FSA for its approach to principle-based regulation and its Arrow programme, which it says represents a carefully thought out approach to assessing risk.
It says: “We would encourage other regulators to consider risk-based regulation more explicitly, particularly as a means of using regulatory resources more efficiently.”
But the committee says while most regulated industries are content that their views are heard by their regulators, the exceptions are the FSA and the water industry regulator Ofwat.
The report says the committee received evidence from IFAs that was very critical of the FSA, with the IFA Defence Union claiming the FSA was high-handed and insufficiently accountable. However, Aifa said the IFA profession valued the current regime.