Question to the HM Treasury:

To ask His Majesty's Government what assessment they have made of (1) the estimated annual volume of cases referred from the Financial Ombudsman Service to the Financial Conduct Authority under the referral mechanism contained in the Financial Services and Markets Bill currently before the House, (2) the Financial Conduct Authority's operational capacity to handle these referrals efficiently, and (3) the overall effect of this process on the timeliness of dispute resolution for consumers.

The referral mechanism in the Financial Services and Markets Bill is designed to ensure consistent application of the standards set by the Financial Conduct Authority (FCA) in Financial Ombudsman Service (FOS) determinations. It will support the efficient resolution of complex complaints where the FOS considers there is ambiguity in a relevant FCA rule and that is relevant to its determination of a complaint, while preserving the FOS’s ability to resolve the vast majority of complaints without making a referral.

The exact number of referrals will depend on the issues which arise in FOS casework and the extent to which it considers these raise ambiguity or wider implications for financial services firms and consumers. The Government expects that there may be relatively more referrals initially, which will then reduce as clarifications are provided by the FCA – with only a very small proportion of cases being referred even in the early stages.

To prepare for the changes, the FCA and the FOS are operating a trial version of the referral mechanism, which is limited to issues with wider implications. Since July 2025, when they updated their Memorandum of Understanding to agree the trial version, the FOS has made three referrals to the FCA. While the Government would expect more referrals once the new framework covering ambiguity is in place, this supports an assessment that overall volumes will be manageable.

The Bill allows HM Treasury to specify further conditions that must be met for the FOS to make a referral through a statutory instrument. This will allow the Government to address any potential issues that arise during implementation, including making sure that the volume of referrals remains reasonable and supports efficient resolution of cases.

The Bill provides for HM Treasury to set in regulations a timeframe for the FCA to respond to a referral to avoid unnecessary delays. The Government’s consultation response, published on 16 March 2026, confirms its intention is to set this timeframe at 30 days in most cases.