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Chancellor Rachel Reeves faces calls to beef up Britain's financial regulator following a string of scandals in the sector.

It comes ahead of a key speech by the Chancellor to industry figures at the City of London's opulent Mansion House this Thursday.

An open letter from finance sector figures and campaigners, led by the non-profit Transparency Task Force UK to Chancellor Reeves, identifies a significant "trust gap" in financial services that they argue is hampering the sector's growth potential.

According to the Financial Conduct Authority's (FCA) research, only 11% of adults strongly trust the financial services sector, with trust levels remaining stagnant even as memories of the 2008 global financial crisis fade.

Particularly concerning, the authors write, is the fact that young people show more distrust than older generations, while vulnerable and marginalised groups demonstrate the lowest levels of confidence in the industry.

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This lack of trust has serious economic implications, they argue, noting that consumers are hesitant to try new financial products or providers, which creates an "obvious barrier to innovation and growth."

And the impact extends beyond individual consumers to affect pensions, investments, and small business lending, with many business owners reportedly reluctant to seek bank financing due to fear of mistreatment.

String of Scandals

The letter points to numerous regulatory failures and financial scandals that have contributed to the collapse in trust.

These include the "exploitation of vulnerable, low-income workers by payday lenders", the ongoing plight of so-called mortgage prisoners trapped in hugely costly mortgage deals, and the Woodford Equity Income Fund scandal - which "saw a 'superstar' fund manager "jeopardise prudent savers' pensions" with the victims then being denied access to statutory protections and compensation.

The 'peer to peer' lending sector has also been subject to 'light touch' regulation, which TT UK says came as the result of Treasury lobbying and which "allowed rogue platform operators to fleece consumers".

The campaigners also point to a raft of complaints of alleged mistreatment of small and medium-sized enterprises by banks. Many of these cases remain unresolved, some for over a decade.

UK financial regulators are viewed by some in the sector as soft-touch compared to traditionally tough US watchdogs. Since 2000, finance firms have been fined just over £6bn by regulators in the UK, according to the monitoring tool Violation Tracker. In the US, a single crypto firm - Binance Holdings - was fined over half that amount (£3.4bn) last year alone.

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A recent Spotlight on Corruption report revealed a "serious accountability gap" when it comes to senior executives. "Those at the helm of large firms that engage in economic crime, financial wrongdoing or regulatory breaches rarely face any consequence at all…The organisations' leaders seem to treat [sanctions] as just 'the cost of doing business'."

That's despite a "remarkably potent and well-conceived" set of powers to tackle wrongdoing, in a certification regime set up for senior managers by Parliament in the wake of the 2008 financial crash.

Bad Actors

Andy Agathangelou FRSA, Founder of Transparency Task Force and Chair of the Secretariat Committee for the All Party Parliamentary Group on Investment Fraud and Fairer Fin...