Finance

The financial Ombudsman service – the need for reform

The Financial Ombusman Service (FOS) was set up to provide a very valuable service – to resolve individual, fact-specific complaints between financial institutions and their customers quickly and with limited formality. Recent statistics demonstrate that the FOS certainly continues to be a popular choice for consumers.

And that excludes the infamous PPI complaints. Annual Complaints data from the FOS shows a 58% increase in the volume of complaints, that is received by the FOS compared to the previous year. This sharp increase has been driven by a 66% increase in complaints about banking and credit products. And that is with the current accounts being the most complained about product. While demonstrably a popular choice for dispute resolution, its popularity risks cementing the widely held view that, as it stands, the FOS, may no longer be fit for purpose. Unless steps are taken to improve this complaint handling process, this trend will only get worse following recent redundancies at the service.

Compared to twenty years ago, the FOS finds itself looking at more complex cases. While such cases may make up a smaller proportion of the FOS’ caseload, they typically require an additional level of analysis. And so it takes more time to reach a conclusion. This, teamed with an increasing caseload and diminishing workforce, leaves an inefficient process. Firstly, in an ever-increasing principles-based regulatory system, the FOS often has to interpret perceived gaps in regulation. Secondly, due to the current complaint handling rules placed on firms by the FCA, FOS decisions are precedent setting, in circumstances where it is not strictly required to apply the law.

Thirdly, there is no robust or effective mechanism consumers and firms can use to challenge a FOS decision. While a decision can be subject to judicial review, these proceedings are notoriously difficult. These three issues often leave the FOS, customers, and the financial services industry in an uncomfortable position. In light of Brexit, the financial services industry, including the FOS, is currently under the spotlight as HM Treasury considers the future of regulation in its Future Regulatory Framework Review. With this, the FOS’ new Chief Executive Officer, Nausicaa Delfas, has an opportunity to work with industry and government to establish a complaint handling system that works for both firms and customers.

There should be more visible collaboration between the FOS and the FCA in cases that require a policy determination. It may also be sensible to implement a twin-track decision-making process. And so that cases with wider market implications are processed in a different way. Lastly, the FOS should be subject to a robust appeals process. And that is in respect of those cases that have wider implication. Given the potential impact on the services market, it is appropriate that such cases should be subject to a greater level of scrutiny.

Finance

Euro zone ministers expect inflation to slow in 2022

The acceleration of euro zone inflation, driven energy prices, is mostly temporary. Then the price growth will slow down again. The euro zone finance ministers agreed that, that too the next year as forecasted by the European Central Bank and the European Commission.

Paschal Donohoe, chaired the talks of the ministers in Luxembourg. In a news conference he said that there was also agreement that the inflation spike was not an argument against the transition to renewable sources of energy. This is under the EU’s ambitious plan of reducing CO2 emissions to zero by the year 2050.

Finance

Under new rules, borrowing for investment sensible

British finance minister Rishi Sunak said that the government borrowing to fund investment was a sensible thing. This is to allow under new fiscal rules that he is likely to announce, unlike borrowing for day-to-day spending. He said that borrowing for capital investment that is going to drive up their growth is probably a sensible thing for them. And that too particularly in an environment of slightly lower interest rate. Sunak stated this in an event on the sidelines of the annual conference of Britain’s ruling Conservative Party. This event was organized by the Taxpayers’ Alliance advocacy group. Sunak stated in that event, that borrowing for more day-to-day spending is probably less something that you would want to have as part of your framework.

Finance

IMF board to interview Georgieva-sources

The International Monetary Fund’s executive board is going to interview Managing Director Kristalina Georgieva. This is regarding that; its reviews claims that she pressured World Bank staff to alter data to favor China in her previous role. Board members were initially expected to meet with Georgieva. But spent their time working on other regular business matters.

The board members spent hours for questioning lawyers from the WilmerHale firm. This is about their World Bank investigation report which alleged that Georgieva, as the bank‘s CEO applied undue pressure on staff, to alter data in the flagship “Doing Business” report to benefit China. Then, an IMF spokesperson said that the IMF board remains committed to a thorough, objective, and timely review of the matter. Georgieva has strongly denied the accusations.

The upcoming interviews could prove pivotal in either increasing support for Georgieva. This is with many IMF shareholders are keen to wrap up the board’s deliberations on the matter. The fund’s most influential member governments, including the top shareholder the United States, have withheld public judgment. The World Bank tasked WilmerHale with investigating the “Doing Business” data irregularities identified in 2020. The law firm’s report contends Georgieva. The former World Bank President Jim Yong Kim’s office pressured staff to manipulate data so that the China’s global ranking in the “Doing Business 2018” study of investment climates rose to 78th from 85th.