MPs and members of the House of Lords have today called for a Royal Commission into UK financial conduct regulation and for Parliament to reclaim its role at the heart of the regulation.
The All-Party Parliamentary Group (APPG) on Investment Fraud and Fairer Financial Services has urged Parliament to undertake a full, root-and-branch review of the UK's financial conduct regulatory architecture.
In a comprehensive 250 page report the group warned that the Government's current “deregulate for growth” agenda risked exacerbating systemic problems by weakening consumer protections when the evidence shows the protections are already insufficient.
The report drew on a major public survey, a decade of Parliamentary debates, independent expert reviews on the performance of the Financial Conduct Authority, testimony from victims and whistleblowers, and analysis of financial scandals.
The APPG concluded that the recurring pattern of financial scandals in the UK is not accidental or isolated, but reflects deeper structural problems in the way financial regulation operates.
It said that over the past two decades, scandal after scandal has followed a strikingly similar pattern with early warning signs ignored, whistleblowers marginalised, regulatory intervention delayed, consumers suffering catastrophic losses, limited scandal-specific reforms introduced and the cycle repeating again
According to the APPG, the repeated failures point not to isolated regulatory mistakes but to systemic flaws in the regulatory architecture itself.
Its report argues that Parliament has delegated too much power to arms-length regulators operating under vague statutory mandates, creating a democratic deficit.
The APPG has called for the establishment of a Royal Commission into UK financial conduct regulation. It said that "only a Royal Commission has the scope and authority necessary to address the full scale of the structural problems identified." It added that a similar Royal Commission in Australia has led to positive reforms in that country.
Former shadow Chancellor John McDonnell MP, chair of the APPG, said: "The report brings together one of the most comprehensive bodies of evidence ever assembled on the failures of financial conduct regulation in the UK.
“The evidence presented makes the case for a Royal Commission, or something similar, that can undertake a genuine root-and-branch review of financial regulation. Parliament must reclaim its role in defining what fairness means in financial services and ensure that the institutions responsible for protecting consumers are not just capable of delivering it, but are also motivated to do so in an unconflicted manner.”