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UK financial regulation suffers from “systemic flaws” that leave consumers exposed to fraud and misconduct, MPs and peers have warned, as they called for a royal commission to examine sweeping reforms.
But the report risks falling on deaf ears in view of ministers’ push to ease regulation to revive the economy, while consumer groups dismissed its findings as “a rehash” of skewed research published 18 months ago.
Presenting the results of a public survey, analysis of recent scandals and interviews with victims of fraud and whistleblowers, Monday’s report warned that the government’s “deregulation agenda” risked exacerbating the failings in the system by weakening consumer protections.
“The recurring pattern of financial scandals in the UK is not accidental or isolated, but reflects deeper structural problems in the way financial regulation operates,” said the All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services.
The group, formed of 54 MPs and 13 members of the House of Lords, called for parliament to launch a royal commission to review how the UK regulates financial conduct, similar to one in Australia that triggered a major overhaul of its banking sector.
“Scandal after scandal has been treated as an isolated event, yet the same warning signs are ignored, the same regulatory failures occur and the same devastating consequences are suffered by ordinary people,” said John McDonnell, Labour chair of the group and former shadow chancellor.
The report is unlikely to be welcomed by the government, which has cut the number of financial regulators and is easing many curbs imposed on the sector after the 2008 banking crisis in a push to boost the economy.
The Financial Conduct Authority, the main financial regulator, has been found wanting by several public inquiries launched after recent scandals. It has also been under fire from finance bosses and the government for curtailing risk-taking and restricting growth.
The all-party parliamentary group’s report echoes a review it published in 2024 that branded the FCA “incompetent at best, dishonest at worst” and called for the watchdog to be reformed.
James Daley, head of consumer group Fairer Finance, said the latest report was “a rehash of” the APPG’s previous research and “lack[ed] balance”.
“While the FCA can certainly do better, I don’t believe this report brings enough evidence to support the claims that it has been captured by industry,” he added.
In a survey by the APPG of 1,167 people, including many victims of financial misconduct, 83 per cent said they “strongly agree” with statements that were critical of the FCA.
The FCA said: “We’ve learned from the past and transformed how we deliver for consumers, markets and the wider economy.”
The watchdog added that it had “strengthened our supervision” and was “delivering more criminal prosecutions than ever” after securing five convictions, imposing £186mn of fines and bringing charges against 19 individuals in the year to March 2025.
Easing regulation was unlikely to boost growth and instead threatened to increase fraud and mis-selling, damage public trust in financial services and reduce public participation in markets, the report said.
“The evidence gathered by the APPG raises important questions about whether the current regulatory framework is achieving its objectives,” said Sarah Bool, a Conservative MP and vice-chair of the group. “A serious and system-wide review of financial regulation is therefore both timely and necessary.”
The Treasury said in an emailed statement: “The FCA has already carried out thorough reviews of many of the historic cases cited and has introduced significant reforms to strengthen consumer protections.
“We will continue working closely with the FCA to ensure regulation remains robust and proportionate, protecting consumers while supporting sustainable growth.”
