Its Plan for Growth includes requests to regulators and the government, which it said would help the financial services sector “make an even stronger contribution to the government’s growth agenda, while also delivering real benefits for consumers, businesses and society”.
UK Finance said it wanted to create a “pro-growth operating environment”, ensure the financial system is fit for the future and unlock financial services for consumers, businesses and society.
Boosting growth and mortgage access
The organisation said there were still “too many barriers” preventing consumers and businesses from fully benefitting from the financial system.
It said “regulatory constraints” on mortgage lending excluded prospective homebuyers and progress on sustainable finance was hindered by “insufficiently clear net zero transition plans”.
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It said the Bank of England’s Financial Policy Committee should relax the LTI flow limit for new residential mortgage lending, while the Prudential Regulation Authority (PRA) should make the most of the government’s planned Freedom to Buy mortgage guarantee scheme by ensuring the mortgages provided through the scheme have a reduced or zero capital weighting.
UK Finance also suggested launching a comprehensive campaign and free advisory service to encourage homeowners to make their homes more sustainable and allow lenders to fill the funding gap.
It recommended the government work with the sector to improve support for first- and last-time buyers, as well as make financial education compulsory in all schools.
UK Finance suggested prioritising the growth of core banking services as part of the Financial Services Growth and Competitiveness Strategy. It also proposed avoiding widening the regulatory perimeter to SME lending or restricting the ability of lenders to take personal guarantees, saying this would “constrain the flow of SME finance”.
To regulators, UK Finance said the Financial Conduct Authority (FCA) should conclude the Advice Guidance Boundary Review it was undertaking with the Treasury and bring forward rule changes this year.
It also asked the FCA to proceed with proposals to simplify the responsible lending and advice rules, consult on removing its maturing interest-only and other “outdated” guidance, and remove overlapping standards such as the Mortgage Charter.
Streamlined regulations
UK Finance asked that the government recalibrate its capital requirements for banks of all sizes to support more lending. The state was also asked to deliver the quick reform of the Financial Ombudsman Service (FOS) this year to end its behaviour as a “de facto regulator”, requiring it to apply relevant law and regulations as well as FCA rules and guidance.
Additionally, the government should use its existing powers in the Financial Services and Markets Act 2023 to deliver more effective oversight and accountability of financial services regulators.
UK Finance also suggested replacing the current Certification Regime with a more proportionate approach to reduce regulatory burdens and said wholesale firms that did not directly engage with retail clients should be exempt from Consumer Duty.
It said the government should clarify the long-term regulatory framework for open banking as soon as the Data (Use and Access) Bill has received royal assent. It said this should be market-driven and not reliant on regulation.
The trade body asked the FCA to set up a joint industry working group to implement Consumer Duty in a way that complements the regulator’s competitiveness and growth objective.
It also said the FCA should help the sector with Consumer Duty by combining regulatory guidance into a centralised place.
