The Financial Services Compensation Scheme and Financial Ombudsman Scheme should be a formal subsidiary of the Financial Conduct Authority to increase accountability and improve how they operate, according to the Association of Financial Mutuals.
AFM chief executive Martin Shaw says the bodies should share a common board member and lines of reporting.
He says: “The FSCS should remain operationally independent but these measures would mean it would be easier for the FCA to identify and intervene when there is a misalignment with what the FCA wants to achieve.”
Shaw says the same should apply to the Financial Ombudsman Service.
Under current Treasury proposals for the new regulatory structure, both the FSCS and the FOS will remain independent. The Prudential Regulation Authority and the Financial Conduct Authority will set their remits.
Coordination will be achieved through a memoranda of understanding, with accountability being delivered through an annual plan explaining how their resources will be spent.
Shaw says: “We are concerned that the ombudsman and the compensation scheme do not have effective linkages bet-ween themselves or the regulator and this leads to all sorts of complications.”
Shaw says the ability of the FSA’s advisory panels, such as the Financial Services Practitioner Panel, to influence policy is currently limited and their role should be strengthened so regulators must act on a panel’s recommendation or explain why it disagrees.
He says: “The panels play a vital and useful role but their ability to deliver is limited because they do not have a formal ability to influence policy.”