A cross-party parliamentary group has called for a Royal Commission into the UK’s financial conduct regulatory system, warning that repeated scandals point to structural weaknesses in oversight and cautioning against a wider push toward deregulation.
Calls for a far-reaching inquiry into the UK’s financial regulatory framework have intensified after a cross-party parliamentary group warned the country’s conduct oversight regime may be failing consumers.
The All-Party Parliamentary Group (APPG) on Investment Fraud and Fairer Financial Services has published a report urging the government to establish a Royal Commission into financial conduct regulation, arguing repeated financial scandals suggest deeper structural weaknesses within the system.
The report claims that regulatory failures have followed a familiar pattern over the past two decades. According to the APPG, warning signs are frequently missed, whistleblowers ignored and regulatory interventions delayed until after significant consumer harm has occurred.
“The pattern is now undeniable,” the report states, describing a cycle in which early warnings are overlooked, and investors ultimately bear the consequences when firms collapse.
In response, the group argues that incremental reforms are no longer sufficient and that the UK should launch a comprehensive public inquiry capable of examining how financial conduct regulation operates across government, regulators and oversight bodies.
“A Royal Commission is now necessary to examine whether the UK’s financial conduct regulatory framework is fit for purpose,” the report says.
Pressure on the regulatory model
The APPG’s proposal arrives at a moment when the role and mandate of financial regulators are under increasing scrutiny both in the UK and internationally.
In the UK, policymakers have placed greater emphasis on ensuring that financial regulators support economic growth and competitiveness, particularly following the country’s departure from the European Union. This has prompted debates over how regulators such as the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) should balance market innovation with consumer protection.
The APPG report warns that shifting regulatory priorities toward deregulation could risk repeating past mistakes.
“Weakening consumer protections will not deliver growth. It will deliver more scandals, more victims, and deeper distrust,” said APPG chair John McDonnell in the report’s accompanying statement.
While the report focuses primarily on financial conduct oversight, its conclusions intersect with a broad range of financial services sectors, including fintech, payments, and digital asset firms that operate under the FCA’s supervisory framework.
A call for structural reform
Royal Commissions are among the most significant forms of public inquiry in the UK and other Commonwealth jurisdictions, with the power to compel evidence and examine systemic issues across institutions.
The APPG argues that such an inquiry is necessary to address what it describes as a “democratic deficit” in financial regulation, claiming Parliament has gradually delegated extensive authority to regulators without sufficient accountability mechanisms.
The report proposes that a Royal Commission should review the roles and responsibilities of key bodies involved in financial conduct oversight, including regulators, the Financial Ombudsman Service and Parliament itself.
Among the questions the inquiry would seek to address are how consumer protection should be defined in modern financial markets and whether existing accountability structures allow regulators to be properly scrutinised.
According to the report, these questions have become increasingly urgent as financial markets grow more complex and digital services expand across the sector.
Evidence cited in the report
The APPG said its findings draw on evidence gathered from consumer surveys, parliamentary debates and previous investigations into regulatory failures.
The report references a survey of more than 1,100 individuals with experience of financial misconduct cases, alongside an analysis of more than 21,000 responses assessing regulatory performance.
Across 21,625 individual ratings of regulatory performance, the results were stark: 83.3% of responses gave the maximum score of 5 (“Strongly Agree”) to statements that were critical of the Financial Conduct Authority’s performance.
It also points to earlier reviews of the FCA’s supervisory practices, including investigations into high-profile financial collapses that led to criticism of regulatory oversight.
Those reviews concluded that regulators had failed to act quickly enough in some cases, raising questions about how risks are identified and addressed within the system.
The APPG argues that while those investigations highlighted shortcomings, they did not lead to wider structural reforms.
Political and regulatory implications
The report has been supported by MPs and peers from across political parties, reflecting broader parliamentary concern about financial misconduct and investor protection.
Contributors to the report include figures from both the House of Commons and the House of Lords, with the APPG positioning the initiative as an effort to represent the interests of consumers affected by financial misconduct.
The proposal now places the question of regulatory accountability back on the political agenda, particularly as governments in several jurisdictions review financial regulatory frameworks to accommodate technological innovation and new market entrants.
For regulators overseeing payments, fintech and other digital financial services, the debate highlights a recurring challenge: how to encourage innovation and competition while ensuring that consumer protections remain robust.
Whether the UK government ultimately agrees to launch a Royal Commission remains uncertain. However, the report adds to a growing discussion about how financial regulation should evolve in an increasingly complex and global financial system.
