Financial regulatory reform stock-take: more growth and less red tape?

Where to start? It's not quite clear where "the very beginning" actually is in terms of the avalanche of regulatory reform that's currently underway. Some of it long in the planning, some of it coming as something of a surprise, but generally all intended to achieve the tricky balance of encouraging growth and competitiveness in the UK financial marketplace while continuing to protect consumers. Insofar as there was an absolute start point, it was possibly the former Government's so called "Edinburgh reforms", announced in December 2022. But now we have also the current Government's "Leeds reforms" announced in July 2025. And all these supported by myriad announcements from various regulators, of which the FCA has been the most active. It's hard to keep track of what's already done and dusted, what's no longer scheduled to happen, and what's still in the pipeline.

In this article, we look at where we currently stand on a selection of the many initiatives. Where we've put an asterisk this means the Government or regulators published further information or a consultation alongside the Leeds reforms speech. But we’ve also included some initiatives that were already underway and which also had as their aim to improve and modernise regulation.

Brexit

Who remembers Brexit? Who thought all the legal changes needed as a result of it were surely all in place now? They aren't. A key reason for the Financial Services and Markets Act 2023 was to give regulators the power to revoke the EU laws that had been retained (and are now called "assimilated") post-Brexit and replace it with regulation designed specifically for the UK markets

Because almost all UK financial regulation stemmed from EU requirements it was naturally not the work of a minute to assess what worked and what didn't and decide what changes would benefit UK firms and markets. And where changes would be good, how they might affect any future reciprocity with the EU.

We're not even nearly there yet – only a few pieces of EU-based regulation have been fully reviewed. And of those that haven't certain reviews are now a priority to meet the Government's stated aims.

To put the task in context, there were 777 pieces of assimilated law within the scope of HM Treasury's remit to build a smarter regulatory framework, and it has gradually set about removing unnecessary or redundant ones and repealed provisions that restricted the UK regulators' ability to make changes that would modify the effect of the assimilated laws. It then prioritised tranches of assimilated legislation that could not just be repealed, but was not ideal for the UK marketplace, and set about creating replacement regimes. Top of its list were reforms to insurance solvency and prudential requirements, prospectus requirements, the securitisation regime, data reporting services and the Payment Services Regulations. Once these were largely completed (or partially, in the case of the PSRs), it moved on to other measures, primarily those for insurance distribution, short selling and the unpopular Packaged Retail and Insurance Based Investment Products Regulation (replacing this last with a new UK concept of a Consumer Composite Investment). Next up, and currently underway and in some cases also mentioned below, are initiatives including the alternative investment fund management and UCITS regimes, more work on the payment services and e-money regimes, and investment firm organisation and transaction reporting.

Financial services growth and competitiveness strategy

The flagship strategy for the Government sets out a 10-year plan to make the UK the global location of choice for financial services firms, for investment, growth, innovation and provision of services. That's an ambitious plan, but with the announcement of the Leeds Reforms on 15 July, the Government published a raft of policy and consultation papers to support quick movement on many of its proposals. We reported on some of them here.

Reducing regulatory burdens

The Government says that the UK has become very good at regulating for risk, but sometimes at the expense of growth, and wants to redress the balance so that UK businesses do not suffer unnecessarily high regulatory burdens that puts them at a disadvantage to international firms. So it wants to:

• Get applications approved more quickly, whether for new firm authorisations or senior manager approvals*
• Allow more agile regulatory decision making*
• See the regulators setting long-term strategies, in line with the remit the Government has set them
• Overhaul the Financial Ombudsman Service (FOS), which over time has turned into a quasi-regulator, and revert it to its original purpose of being a simple, impartial, dispute resolution service*
• Make radical changes to the Senior Managers and Certification Regime (SMCR) with a view to reducing the regulatory burden it imposes by half*
• Have the FCA assess how the Consumer Duty applies to wholesale firms and whether it has extended consumer protection in areas where it isn't needed
• Introduce a new process for new firm authorisations for innovative firms, effectively letting them start their business under conditions.

Cutting regulatory red tape

The FCA has already taken quite a few of its own initiatives, and outlined its plans in its strategy for 2025-2030. We've highlighted some of those most relevant to the growth and competitiveness agenda in this article, but you can read more here. It's already:

• Amended its conduct of business rules for mortgages so that customers wanting to make changes such as reducing their mortgage term or remortgaging can get information from their provider without it having to be full-blown advice
• Removed several regulatory returns that it felt were not really useful or duplicative, and continues to work on reducing the number and frequency of returns;
• Archived old "Dear CEO" and strategy letters and pledged to move to market studies, or which there will be fewer, in future
• Started an initiative which could result in several prescriptive conduct rules leaving the rulebook on the basis that the Consumer Duty requires firms to act in a way that would be consistent with them anyway.

Necessary change?

Some of the changes so far proposed look like change for change's sake – making cosmetic and sometimes unwanted change to meet a stated aim. In this category we can currently put:

• Changing the application deadlines to cut the deadlines within which regulators need to determine applications by sometimes one, month, sometimes two – when, as a matter of fact, the regulators are always striving to beat the deadlines by at least that anyway
• Removing the statutory limit on contactless payments to allow firms to decide for themselves whether they should impose limits, saying that this will make shopping easier and shouldn't increase the risks of fraud losses to consumers – when in fact a majority of firms and a large majority of consumers said they didn't want the limit removed
• Possibly (although quite how this will pan out we don't yet know), removing the Certification Regime from statute to save a lot of bureaucracy but with the possibility of it still just being transferred to PRA and FCA rules.

What's on the cards?

For banks

• The UK needs to implement Basel 3.1, and the Government has decided to go ahead with implementing the requirements for lending and trading activities on 1 January 2027 but delay the implementation of the modelling requirements for market risk until 1 January 2028 which should help banks to plan with minimal operational uncertainty*
• Changing the minimum requirements for own funds and eligible liabilities (MREL) thresholds, and updating them regularly
• Delivering a report on meaningful reform of the ring-fencing regime by early 2026
• Lowering the capital requirements for domestic banks.

For fund managers

• Reviewing the assimilated Alternative Investment Fund Managers regime is a priority – this one for early 2026 and all part of the drive already under consultation to reform thresholds and create a bespoke regime for venture capital fund managers. Draft legislation is due in spring 2026 with an FCA consultation. We summarised the high level initial proposals, published in April, here
• Reviewing all areas where regulation puts the UK at a competitive disadvantage and work with international regulators to make sure offshore delegation practices work well
• Delivering a future-proofed regulatory regime that will enable innovative technology and encourage consumer engagement – including the FCA consulting on the "direct-to-fund" model.

For insurers

• Streamlining product governance and fair value requirements
• Creating more appropriate conduct rules for commercial and bespoke insurance business – due to be finalised by the end of the year
• Streamlining authorisations for Lloyds managing agents
• Creating a more flexible rsk transformation regime
• Creating a new captive insurance framework*. Following the initial policy paper, the regulators will consult on new rules in Summer 2026, with the new framework targeted to go live in mid-2027.

For investment firms

• Abolishing the unbundling rules to improve investment research
• Progressing the Advice Guidance Boundary Review – with the aim of encouraging consumers to put their money in investments and the capital markets rather than in low interest savings. A key part of this initiative is the introduction of the new regulated activity of providing targeted support – due to go live in Spring 2026
• Reforming the assimilated MiFID Organisational Regulation (legislation published in July)
• The FCA is due to consult on potential reforms to the market risk framework for small and medium sized investment firms by the end of the year.

For sustainable finance

• Moving forwards on sustainability reporting – final versions of voluntary reporting standards are due by the end of the year
• Ensuring prudential standards support the transition to net-zero
• Supporting growth of the transition finance market and voluntary carbon and nature markets. Read our thoughts on carbon credits here
• Regulating ESG ratings providers – with legislation due later in 2025 and then the FCA regime to follow
• Not proceeding with the original suggestion to create a UK Green Taxonomy but focusing more on supporting transition.

Internationally

• Deepening ties with established and emerging markets to encourage economic growth and innovation – notably the EU, US, Switzerland, China and India – with recently published legislation and FCA rule proposals for implementing the Berne Financial Services Agreement on 1 Janaury 2026
• Encouraging overseas firms to the UK with a new concierge service – formally launching in October 2025 - to support new market entrants and new approach to recognition of overseas jurisdictions.

For innovation

• Creating a new scale-up unit within the FCA and PRA to enhance engagement with fast-growing, innovative firms, working with the existing new bank and insurer start up units and innovation pathways. This will include the "provisional" authorisation to conduct limited regulated activities
• The FCA launching a Smart Data Accelerator
• Modernising and future proofing the legislative framework for payment services and e-money, which is still largely assimilated law
• Enabling widespread use of digital ID not least for AML checks
• Appointing an AI champion for financial services.

For payments

• Consolidating the Payment Systems Regulator with in the FCA. HM Treasury is currently consulting on its plans for this
• Delivering the next generation retail payments infrastructure
• Continuing work on the digital pound, stablecoins and advancing work on DLT settlement and tokenised settlement instruments

For capital markets

• Modernising the Listing Rules and overhauding the prospectus regime*, with new rules and regulations going live on 19 January 2026
• The introduction of a new exchange for private company shares (PISCES), which opened for operator applications in June and the first operator being approved in August. You can read more about PISCES here
• FCA support for wholesale markets
• Cutting bureaucracy for secondary fundraisings.

For pensions

• An ambitious Pensions Schemes Bill to enable greater productive investment for workplace defined contribution pension schemes, including requirements for Local Government Pension Scheme assets to be consolidated into pools.

For everyone

• Measures to attract and encourage talent in the financial services marketplace
• Further encouragement for workplace diversity
• Supporting financial services "clusters" all over the country – with 11 identified target areas.

Other initiatives

The regulators are also busy on other initiatives, prioritised under previous Government announcements. We can't mention them all here, but high up on the list are reform of the Consumer Credit Act and regulation of certain deferred payment credit products (buy-now-pay-later), taking effect in mid-2026, alongside further reform to mortgage rules to give lenders greater flexibility in how much they can lend, and removing some of the barriers that lead to consumers being refused a mortgage. And there are other initiatives to improve the quality of regulation and to increase compliance requirements on firms where needed, such as the Consumer Duty review, regulation of certain crypto-firms and the changes to safeguarding requirements for payment and e-money firms.

What next?

With many consultations recently closed or still ongoing, it's clear that the rest of 2025 and early 2026 could bring a swathe of policy decisions leading to significant change in many aspects of financial regulation. And that there are some initiatives that aren't yet started that are likely to get underway in the next year. And while many of these are intended to make things better for firms – whether by adapting regulatory requirements better to UK markets or by allowing firms more flexibility, or simply by removing bureaucracy, they will also require firms to have available the resource to make sure they implement the changes on time. And the Government and regulators know they are walking a tightrope between growth and flexibility and consumer harm. Again, while many of the changes will be welcome to consumers, the Consumer Duty will be doing a lot of heavy lifting to shoulder responsibility for them not coming to harm.