If the most recent independent review recommending reform at the Ombudsman for Banking Services and Investments (OBSI) doesn’t jolt regulators into action, probably nothing will.
This review’s report paints an ugly picture, having found that OBSI is merely a dispute-resolution service rather than a true ombudsman, and that the playing field is tilted in favour of the financial services sector.
At the heart of these findings is OBSI’s lack of power to enforce decisions. Absent that, OBSI is unable to fulfil the basic role of an ombudsman, the report says. The result is that many clients who have been harmed receive less compensation than they deserve, and some wronged clients get nothing at all.
The ombudservice also is inherently inefficient, the report says, as OBSI must devote all of its time and energy to pursuing settlements when it should be rendering decisions. This situation also prevents OBSI from doing much else – such as working to prevent future complaints or helping improve practices in the sector.
The enforcement power that OBSI does have under its current mandate – naming and shaming firms that refuse OBSI’s recommendations – is actually proving counterproductive, the report says. This practice has revealed OBSI’s impotence and undermined investor confidence.
None of these conclusions are an indictment of OBSI itself – it is doing a good job with the hand that it has been dealt. The report makes that clear. Rather, the failure lies with the regulators that have neglected OBSI.
Indeed, the independent review of OBSI that was carried out in 2011 reached many of the same conclusions. That report also called on regulators to introduce binding decision-making power to shore up OBSI. Instead, regulators boosted the service’s workload and tinkered with its oversight, but did not address OBSI’s feeble enforcement structure.
Such neglect clearly has eroded OBSI’s utility, to the point at which OBSI is not functioning as an ombudsman. That’s a dispiriting conclusion, and a shameful one for regulators that have squandered the past five years – leaving harmed investors at a further disadvantage.
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