The Financial Ombudsman Service (FOS) should have more accountability under the new regulatory structure, said the Association of British Insurers (ABI) and accused the FSA of being negligent in overseeing the FOS.
ABI Interim Assistant Director for Retail Market Regulation James King, while speaking on a panel discussion on the Financial Conduct Authority – organized by Lansons Communications and Financial Services Forum last week, said the FOS should be subjected to closer scrutiny than the present level.
“The ABI has always supported the idea of having an independent, cost-effective dispute resolution service but what has grown within the industry is the sense that increasingly the FOS is becoming another regulator with quite limited scrutiny and accountability for the decisions it makes”, Mr. Kinf said.
Pointing out the lacunae in supervisory requirements, King said while the Financial Services and Markets Act holds the FSA accountable for its actions through the application of consultation processes and cost-benefit analyses, no such checks and balances are in place for the FOS.
“The degree to which the FOS has ever been accountable to the FSA is very limited. I would go so far as saying the FSA has been negligent in setting out rules under which the FOS has to operate under but never actually scrutinising whether or not it operates under those rules”, Mr. King lamented.
“There needs to be a definition in the legislation that makes the respective roles of the FCA and the FOS clear”, Mr. King opined.
However, an FOS spokeswoman refuted the charges saying: “The ombudsman is fully accountable in the way we are run and how we spend our money through formal consultations with the industry”.
An FSA spokeswoman, when contacted, said the FSA has been assigned with the responsibility of overseeing the FOS’ activities, but refused to comment on how far the organisation has succeeded in its role.