Mansion House speech July 2025: Points of interest for the banking sector

The Chancellor, Rachel Reeves, delivered her second Mansion House speech on 15 July. The focus was, again, on the competitiveness and growth of the UK financial services sector and how the government might reduce the regulatory burden on firms and make the UK a more attractive place to do business.

The Chancellor’s speech was accompanied by a raft of publications from HM Treasury, FCA, PRA and FCA. We have sought to draw together the issues that will be of particular interest to the banking sector, including:

1. Financial Services Growth and Competitiveness Strategy and Cross-Cutting Reforms.
2. HM Treasury policy paper on applying the FSMA model of regulation to UK CRR.
3. Bank of England policy statement on amendments to approach to setting MREL.
4. PRA consults on amending MREL reporting and disclosure requirements and resolution assessment threshold.
5. PRA consultation on implementation of Basel 3.1 and adjustments to market risk framework.
6. Capital Markets and Wholesale Market Reforms
7. HM Treasury revised special resolution regime code of practice.
8. Changes to the Senior Managers and Certification Regime.
9. Fundamental reform of the Financial Ombudsman Service
10. Faster authorisations and senior manager approvals.
11. Targeted support.

 1. Financial Services Growth and Competitiveness Strategy and Cross-Cutting Reforms

On 15 July, HM Treasury published its Financial Services Growth and Competitiveness Strategy alongside a consultation on cross-cutting reforms to the regulatory environment.  The government’s strategy sets out a bold new vision for kickstarting growth in the financial services sector over the next ten years. The ambition is that, by 2035, the UK will once again be the global location of choice for financial services firms to invest, innovate, grow and sell their services throughout the UK and to the world. The government’s consultation on cross-cutting reforms closes to comments on 9 September.

One of government’s objectives is to get the balance right to enable UK banks to compete internationally and provide the lending and investment needed to drive growth in the real economy.  The Government, Bank of England and the PRA are taking steps to tailor the capital framework to focus on growth by:  

• Ensuring that minimum requirements for own funds and eligible liabilities (MREL) are proportionate to remove barriers to expansion. The Bank of England will raise the assets threshold for MREL requirements to £25 - 40 billion, provide greater clarity and flexibility on when a transfer or bail-in resolution strategy is required, set MREL requirements no higher than minimum capital requirements for firms with a transfer resolution strategy, and from 2028 update the threshold every three years to take account of economic growth. The government has laid legislation to enable these changes. See section 3 below for more detail.
• Implementing Basel 3.1 in a way which gives certainty and reduces complexity. The UK will introduce Basel 3.1’s new requirements for lending and trading activities on 1 January 2027 with the exception of modelling requirements for market risk which will be implemented on 1 January 2028. The government says that this will give banks the certainty they need to plan and invest in the UK while minimising operational complexity for internationally active banks. This builds on existing PRA action to introduce lower capital requirements for high-quality infrastructure lending and support for SMEs’ access to finance. See section 5 below for more detail.
• Taking forward meaningful reform of the ring-fencing regime. The government is committed to upholding the ring-fencing regime to protect financial stability and safeguard depositors. However, the government also intends to take forward meaningful reforms to the regime to support its growth agenda. HM Treasury will undertake a short review of the ring-fencing regime, working with the Bank of England and reporting into the Economic Secretary to the Treasury. The review will report by early 2026. This review will look at both the legislation and PRA rules, including how they interact, and assess options for: (1) Allowing ring-fenced banks to provide more products and services to UK businesses. (2) Addressing inefficiencies in how ring-fencing is applied to banking groups. (3) Examining the case for allowing banks to share resources and services more flexibly across the ring-fence.
• Developing a more responsive and agile approach to banks using internal models for credit risk. For firms with existing models, the PRA will enhance its pre-application engagement with firms to help ensure firms’ readiness and identify difficult issues before formal submission of applications, give firms dedicated submission slots, complete documentation quality checks in four weeks, and review complete applications within six months (where no further information is required). For first-time applicants, the PRA will provide dedicated support including named account managers. The PRA also commits to a target of taking final decisions in eighteen months. And the PRA intends to publish a discussion paper later this month to explore ways to address the barriers to model approval that mid-size firms may face, without compromising safety and soundness.
• Ensuring that the UK’s post-financial crisis reforms and the level of capital in the banking system support sustainable economic growth. To promote this, the Chancellor issued growth-focused remit letters to the financial authorities, including the Financial Policy Committee (FPC), at Mansion House 2024. The government has said that it welcomes the FPC’s recent announcement that it will review its assessment of the levels of capital needed to support UK financial stability. The FPC intends to provide an update on this in its Q4 Financial Stability Report. The FPC’s review will inform the government’s and the Bank of England’s ongoing work to ensure the different parts of the prudential framework, and their interactions, strike the optimal balance to deliver resilience, growth and competitiveness.
• Confirming that the government no longer intends to develop a UK Green Taxonomy.  We have covered this development in a separate article which you can access here. Other sustainability related changes, such as consulting on how listed companies will adopt UK Sustainability Reporting Standards (SRS) and finalising legislation regulating ESG ratings providers are being taken forward.
• Introducing a new, permanent Mortgage Guarantee Scheme. The scheme will be available to lenders from July 2025, helping to support homebuyers with a deposit as small as 5%. The scheme rules have been published containing the terms and conditions and relevant information for lenders who wish to join the scheme.
• Facilitating greater market access, through negotiating legally binding Free Trade Agreements, with tailored financial services provisions, and more innovative, bespoke treaties like the Berne Financial Services Agreement. The government will also use tools like Overseas Recognition Regimes to support the openness of the UK’s financial services sector and facilitate cross-border financial services. The government will continue to work with industry to identify further opportunities to enhance market access and optimise mutual benefits with other jurisdictions.
• Implementation of Overseas Recognition Regimes (ORRs). The government has published a guidance document alongside the Strategy setting out the detail on a new, harmonised approach to the UK’s regulatory recognition of overseas jurisdictions. The government will continue to explore future opportunities to support the openness of the UK’s financial services sector and facilitate cross-border services through the implementation of ORRs.
• Setting a vision for digitalising UK wholesale markets. The government has published a Wholesale Financial Markets Digital Strategy (WFMDS) which sets a vision for digitalising UK wholesale markets. Through the WFMDS, the government, working with industry, will use technology to optimise and transform markets.  The WFMDS sets out how the UK intends to make progressive improvements to drive efficiency and remove frictions in wholesale markets, such as by removing paper, automating processes and using data better. It outlines how the UK will apply technologies to fundamentally reimagine and transform wholesale markets, in particular by adopting blockchain/distributed ledger technology and other technologies such as AI. Finally, the government will appoint a Digital Markets Champion to deliver digitalisation, and to work with industry leads from other jurisdictions to develop a global approach. 
• Continuing to tailor the UK’s regulatory approach in areas that will have the greatest impact on UK market competitiveness, including the Benchmarks Regulation, the Markets in Financial Instruments Directive and the European Market Infrastructure Regulation.
• The FCA and PRA launching a Scale-Up Unit to enhance engagement with fast-growing, innovative regulated firms. This will build on the FCA’s and PRA’s work to support early-stage innovative firms, including through the joint FCA and PRA New Bank Start-up Unit, as well as the FCA’s Innovation Pathways and Early & High Growth Oversight function. The regulators will also support firms to build their understanding of regulatory requirements as they scale and ensure clear points of contact to facilitate timely responses to queries and access to relevant technical or specialist support, including as firms apply for new regulatory approvals, such as internal models for credit risk.
• Modernising payments assimilated law. The government will take forward work to modernise and future-proof the legislative framework for the regulation of payment services and e-money, delivering a more agile and responsive regulatory environment that promotes innovation in the UK payments sector. This includes responding to developments like tokenised payments instruments (such as stablecoin).
• Enabling the widespread adoption of digital identity to reduce the costs of fraud and compliance. Trusted and secure digital verification services for individuals (personal digital ID) is expected to boost the economy by £4.3 billion by 2034, with the financial sector likely to be one of the biggest beneficiaries. The government, led by the Office for Digital Identities and Attributes (OfDIA), will continue to work closely with regulators to help industry realise these benefits. For example, the Data (Use and Access) Act established a statutory footing for personal digital ID, and the forthcoming response to HM Treasury’s consultation on improving the effectiveness of the Money Laundering Regulations (MLRs) will seek to inform and reassure financial institutions seeking to use personal digital ID for Anti-Money Laundering (AML) checks.
• Accelerating progress on Open Finance and Smart Data. The FCA will launch a Smart Data Accelerator by the end of 2025, which will facilitate the testing of use cases, encourage the development of solutions, and help shape regulatory policy for Open Finance. The accelerator will drive progress on the Smart Data initiative, which the Centre for Finance, Innovation and Technology (CFIT) has shown to have significant potential in improving access to finance for SMEs. The government will work closely with the FCA to set out the Open Finance roadmap by March 2026. This will complement measures to support access to finance set out in the forthcoming Small Business Strategy, being delivered by the Department for Business and Trade.
• Placing portfolio management at the heart of policymaking, in recognition of the critical role this activity plays in driving the UK’s success as an asset management and wider financial services centre. The government will continue to proactively review areas where regulation puts the UK at a competitive disadvantage compared to other jurisdictions. The government will also pursue strong cross border relationships to ensure existing offshore delegation models continue to work effectively.
• Making the UK a world leader for managing private markets assets, leveraging the UK’s position as a leading global venture capital, private equity and private debt centre, as well as the distinctive advantages of the UK’s homegrown investment companies sector. This will include work to streamline the Alternative Investment Fund Managers Regulations, bringing forward the next phase of this work in early 2026, and pursuing an ambitious package of reforms for venture capital fund managers to ensure the rules are properly calibrated to the activity these firms undertake.
• Delivering a future-proofed regulatory regime for asset management and champion innovation to stay ahead of the rapid changes impacting the sector, including the development of tokenisation, artificial intelligence (AI), changing demographics and shifting consumer demands. This includes through the FCA’s consultation on the direct-to-fund model, and by maximising consistency between the relevant areas of regulation applying to this sector.
• Moving Long-Term Asset Funds from the Innovative Finance Individual Savings Account (ISA) to the Stocks & Shares ISA from April 2026. The government expects this to enable more people to access longer-term investment options, and provide another avenue for private firms to raise the capital they need to grow, thereby increasing demand for products offered by UK-based asset managers.

The government has set out a large number of general financial services strategies and reforms. The ones relevant to banking include:

• Radically streamlining the SM&CR, with an ambition to reduce the overall burden on firms by 50% and allow significant reductions for banks of around 40% in the number of roles that are subject to regulator pre-approval. See section 8 below for more detail.
• Delivering the most significant reform of the FOS since its inception, ending its present quasi-regulator role. See section 9 below for more detail.
• Setting new, shorter deadlines for determining regulatory applications, to make it quicker and easier to do business in the UK. See section 10 below for more detail. 
• Addressing concerns about the application of the Consumer Duty to provide more certainty on its scope and application to wholesale firms. The government has asked the FCA to report back on this by 30 September. The FCA will set out in its report how it plans to deal with concerns about the way the Consumer Duty is working for wholesale firms engaged in distribution chains which impact retail consumers and provide certainty on the categorisation of professional clients.
• Establishing the office for Investment: Financial Services: a new dedicated concierge service to guide and support international investors looking to establish or grow a presence in the UK’s financial services sector. Formally launching by October, the service will proactively promote all UK nations and regions as investment destinations and target the world’s most innovative, fast-growing and highest quality financial institutions.
• Announcing the implementation of the Overseas Recognition Regimes (ORRs). The government has published a guidance document alongside its strategy setting out the detail on a new, harmonised approach to the UK’s regulatory recognition of overseas jurisdictions.
• Supporting faster and more efficient authorisation for new firms by working with the regulators to support a new streamlined authorisation regime for innovative start-ups (for example, giving provisional licences or “L-Plates”). This will allow relevant firms to conduct limited regulated activities with streamlined conditions. The government intends to consult on this proposal in the Autumn.
• Making the UK the best place in the world to invest in AI. To help position the UK as a global leader in AI adoption and innovation in financial services, the government will work to identify the best opportunities to increase AI R&D funding into financial services and appoint an AI Champion in financial services - one of the Champion’s focus areas will be asset management and wholesale services and capital markets including retail investment. The Champion will be focussed on how AI can drive growth in financial services, including by improving consumer outcomes. The Regulatory Innovation Office will help firms better navigate digital regulation by developing a new one-stop shop to access all the guidance they need in one place. The government will commission the Financial Services Skills Council (FSSC) to produce a report on AI skills needs, training and innovation in financial services.
• Enabling financial services firms to innovate in the UK. The government will take a proactive approach to removing the barriers to investment that financial services firms face in the UK by launching a Scale-Up Unit to support early-stage innovative firms.
• Support the development of a sector skills compact for financial services. The FSSC will develop a sector-led compact that will accelerate progress and ensure the financial services sector will have the skills to thrive in the future.
• Breaking down barriers to growth in the financial services clusters in the UK.  The new Office for Investment: Financial Services (a concierge service to help international investors looking to establish or grow a presence in the UK financial services sector) will promote all UK nations and regions as locations for financial services business, building on existing regional strengths and skills. The service will support international firms in establishing and growing their financial services presence across the UK.

2. HM Treasury updates policy paper on applying the FSMA model of regulation to UK CRR

On 15 July 2025, HM Treasury published an updated policy paper on its approach to applying the Financial Services and Markets Act 2000 (FSMA) model of regulation to the UK Capital Requirements Regulation (575/2013) (UK CRR). The 2025 policy update explains the steps HM Treasury will now be taking to further progress this work. In particular, it provides an update on HM Treasury's plans to commence the revocation of certain provisions of the UK CRR, as well as making the necessary restatements of the UK CRR in UK legislation where required by the FSMA model.

 The policy update covers HM Treasury's proposed approach in three areas:

• Basel 3.1.
• Overseas Recognition Regimes.
• Key definitions in the UK CRR.

Alongside the policy update, HM Treasury has published two pieces of related draft legislation. It advises that its proposals and the draft legislation should be read alongside the PRA's consultation on its proposed implementation of Basel 3.1.

HM Treasury welcomes comments on the aspects of the policy update relating to the Overseas Recognition Regimes and the key CRR definitions until 5 September 2025. It also invites comments until 5 September 2025 on whether the provisions in the draft legislation will operate as intended to deliver the benefits associated with the FSMA model and ensure a smooth transition for the UK's prudential regime to that model.

3. BoE Policy statement on amendments to approach to setting MREL

On 15 July 2025, the BoE published a policy statement on amendments to its statement of policy (SoP) on setting the minimum requirement for own funds and eligible liabilities (MREL).  The policy statement provides feedback to responses received to the BoE's October 2024 consultation on setting MREL.  The BoE has made some changes to its final policy approach, which are outlined in section 2 of the policy statement. Among other things, the BoE's revised policy means:

• The framework will be simplified by the revocation of the UK Capital Requirements Regulation (575/2013) (UK CRR) relating to total loss absorbing capacity (TLAC) and consolidation of some of these provisions in the MREL SoP.
• The approach to contractual triggers in internal non-CET1 own funds instruments will only apply to newly issued instruments, while the scope of the policy as it applies to both internal non-CET1 own funds instruments and ELIs will be generally confined to UK material subsidiaries.
• The approach to indexing the indicative total assets thresholds has been amended, resulting in a revised indicative threshold range of £25 to £40 billion from January 2026. This will be updated for the impact of nominal economic growth every three years.
• The accounting value of an eligible liability instrument (ELI) should be used as the basis for measuring the value that can be used to meet a firm's MREL. However, there will be additional flexibility for firms on the requirement to obtain an independent eligibility legal opinion where the material issuance terms relevant to MREL eligibility of an issuance of ELIs are substantially the same as for a recent previous issuance.

The BoE has made available the version of the BoE's MREL SoP, which takes effect from 1 January 2026.

A related press release explains that HM Treasury intends to make several statutory instruments related to resolution, which have been considered when finalising MREL policy. A statement on maintaining a fit for purpose resolution regime has also been published, which summarises the updates the BoE and the PRA are making or are proposing to the resolution regime.

 Alongside the policy statement, a number of consultations on MREL reporting have been published.

4. PRA consults on amending MREL reporting and disclosure requirements and resolution assessment threshold

On 15 July 2025, the PRA published the following three consultation papers on the minimum requirement for own funds and eligible liabilities (MREL) and the resolution assessment threshold:

• CP14/25: Amendments to resolution assessment threshold and recovery plans review frequency. This sets out proposals to raise the threshold at which firms come into scope of the Resolution Assessment Part of the PRA Rulebook on reporting and disclosure from £50 billion to £100 billion in retail deposits.
• CP15/25: Resolution planning: amendments to MREL reporting. This sets out proposals to make changes to the reporting expected from relevant firms on their MREL.
• CP16/25: Disclosure: resolvability resources, capital distribution constraints and the basis for firm Pillar 3 disclosure. This sets out proposals to enhance Pillar 3 disclosures by firms.

The consultations all close to comments on 31 October 2025.

5. PRA consults on implementation of Basel 3.1 and adjustments to market risk framework

On 15 July 2025, the PRA published a consultation paper (CP17/25) on Basel 3.1 and adjustments to the market risk framework, known as the Fundamental Review of the Trading Book (FRTB).

The consultation sets out proposed adjustments to the near-final market risk rules published in the PRA's December 2023 policy statement on Basel 3.1 (PS17/23) and its September 2024 policy statement (PS9/24). These include:

• Delaying implementation of the FRTB internal model approach (IMA) by one year to 1 January 2028. In the interim period from 1 January 2027, firms will retain existing IMA model permissions.
• Implementing operational simplifications for the treatment of collective investment undertakings (CIUs) in the trading book boundary and the advanced standardised approach (ASA).
• Introducing a permissions regime to support the proportionate capitalisation of residual risks in the ASA.
• Updating reporting and disclosure obligations.

Appendix 1 to CP17/25 sets out the draft PRA Rulebook: CRR Firms: (CRR) (No 2) Instrument 2025. The PRA will also introduce an interim supervisory statement (SS13/13) on market risk before the near-final version of SS13/13 published in PS17/23 takes effect.

The consultation closes to comments on 5 September 2025. The PRA indicates that the implementation date for the changes resulting from the consultation will be 1 January 2027.

A related press release explains the proposals allow the PRA to deliver its commitment to implement the majority of Basel 3.1 on 1 January 2027, while allowing time for greater clarity to emerge in other jurisdictions on their own implementation of the aspects most relevant for cross-border activities. A discussion paper on internal ratings based models will be published by the PRA in mid-summer 2025.

6. Capital Markets and Wholesale Market Reforms

The government confirmed the finalisation of rules around public offers and admission to trading, and that they would continue to tailor the UK’s regulatory regime for wholesale markets to encourage UK competitiveness.

Capital Markets

On 15 July 2025, the FCA published its final rules on the new Public Offers and Admissions to Trading Regulations (POATRs) in policy statement PS25/9, and the new Public Offer Platform (POP) regime in policy statement PS25/10. These follow on from its proposals in CP24/12, CP24/13, CP25/2 and CP25/3.

The new regime significantly changes the way that the FCA regulates how firms issue securities, in particular separating the rules for issuing securities for “off market” public offers compared to securities which are admitted to trading on regulated markets.  

The POATRs rules in PS25/9 make a large number of changes as part of wider reforms to UK capital markets. At a high level, key changes include:

increasing the threshold for when a prospectus is required for further capital raising from 20% to 75% of issues share capital;

• a reduction in the period of time (from 6 working days to 3) that an IPO prospectus must be available to the public;
• streamlining disclosures for non-equity issuances;
• changing the liability standard for certain forward-looking information contained in a prospectus to a recklessness standard (from a negligence standard); and
• introducing a climate disclosure rule and associated annex requirements for prospectuses (wider sustainability-related risks and opportunities beyond climate will be addressed by the FCA consulting on changes to Technical Note Guidance).

The POP regime and rules in PS25/10 set out the rules for off market public offers, and the new regulated activity of operating an electronic system for public offers of relevant securities. They are broadly similar to the rules that were originally consulted on by the FCA, but with more tailored requirements for POP operators on the due diligence and disclosure of information the FCA expects where they facilitate public offers.

Both the POATRs and POP rules will come into application on 19 January 2026. We have covered the POATRs changes in more detail in this article.

Wholesale Markets

Whilst there are few immediate publications impacting wholesale markets, several upcoming changes are noted.

The government flagged that they will continue reviewing and reforming assimilated law, including MiFID, EMIR and the Benchmarks Regulation. As mentioned in Section 1, the government has also asked the FCA to report back on how it plans to address concerns about how the Consumer Duty applies to wholesale firms.

The FCA also published a statement on market reforms and what is to come. The statement contains details about reforms being made to UK capital markets to maintain the UK's position as one of the most competitive and compelling places to raise capital and invest. It also contains information about future dates of interest, including how the FCA will:

• Award the contract for a bond consolidated tape provider in 2025 and will consult on a consolidated tape for equities in Q4 2025.
• Review who can be treated as a professional investor for investment firms and how retail consumers access investments.  An update on client categorisation issues will be published in Q4 2025.
• Set out proposals to improve the quality of transaction reporting data in Q4 2025, with final rules being introduced in 2026.
• Review securitisation rules in Q4 2025 to identify areas that can be simplified. Finalised rules will be published in H2 2026.

 7. HM Treasury revised special resolution regime code of practice

On 15 July 2025, HM Treasury published a revised version of the Banking Act 2009 Special Resolution Regime Code of Practice.  The Code has been updated to reflect:

• Changes to the relevant legislation that removed FCA solo-regulated investment firms from the UK resolution regime. Therefore, the Code now only applies to PRA-regulated investment firms.
• Removal of sections that related to the resolution regime for central counterparties following the enactment of the Financial Services and Markets Act 2023 and the Bank Resolution (Recapitalisation) Act 2025.

The purpose of the Code is to provide guidance on how and in what circumstances the authorities will use the special resolution tools available under the SRR. HM Treasury consults the Bank of England, the FCA and PRA, and the Financial Services Compensation Scheme on changes to the Code.

8. Senior Managers & Certification Regime

The Senior Managers & Certification Regime (SM&CR) was introduced in 2016 to increase individual accountability following the financial crisis in 2008. The regime has been expanded over time and now covers almost all firms regulated by the FCA and the PRA. In March 2023, the government published a Call for Evidence into the effectiveness of the regime. This was accompanied by a Discussion Paper by the PRA and FCA. Feedback received was positive towards the accountability framework introduced by the SM&CR, but negative towards the burden it imposed on firms. The FCA and PRA have now separately published consultations that seek to address comments made in response to their Discussion Paper. However, the regulators’ proposals are limited by their need to comply with the existing legislative framework (which can only be changed by the government).  Therefore HM Treasury has also published a Consultation Paper setting out future changes could be made to the legislative framework to enable more fundamental and far-reaching changes to the SM&CR to be made by the regulators in the future.

The SM&CR changes are expected to occur in two phases. Phase 1 will involve changes the regulators can make to their rules without legislative change and these proposals are set out in the consultation papers published on 15 July. Phase 2 will include future FCA and PRA consultations on proposals which will take advantage of any additional flexibility arising from HM Treasury’s legislative changes and may include a redesigned certification regime which minimises burden and complexity while ensuring fitness and propriety of individuals.

HM Treasury’s consultation

Removal of Certification Regime from FSMA and possible new regime to be established by the regulators

In her November 2024 Mansion House speech, the Chancellor committed to consult on removing the current Certification Regime and replacing it with more proportionate arrangements.

The Certification Regime is established in the Financial Services & Markets Act 2000 (FSMA). This primary legislation can only be amended by government (and not by the regulators). The government is proposing to remove the certification regime from FSMA which will allow the FCA and PRA to use their rule-making powers to develop a more flexible and proportionate regime that can better reflects the risk posed by different roles and by different firms and can more easily adapt to changes over time.

Reforming the approach to regulator pre-approval under the Senior Managers Regime

HM Treasury is proposing a package of measures to enable the Senior Managers Regime to be radically streamlined. These include:

1. Reducing the overall number of senior managers in the regime by providing greater flexibility for the regulators in specifying the list of Senior Management Functions of which regulatory pre-approval is required.
2. Allowing firms to appoint certain senior managers without pre-approval by the regulators.  This would enable the regulators, via rules, to develop different mechanisms to manage senior manager appointments. 

Statement of Responsibilities

The government proposes to remove prescriptive legislative requirements relating to the provision, maintenance and updating of Statement of Responsibilities with the aim of allowing regulators to adopt a more proportionate approach.

Conduct Rules

FSMA enables the regulators to make Conduct Rules which set out minimum standards of conduct for individuals. FSMA also includes prescriptive requirements which cover, for example, training about the Conduct Rules, and where breaches of the rules must be reported to the regulators. The government wants to know which legislative requirements firms consider create a disproportionate burden.

HM Treasury’s consultation closes to comments on 7 October 2025.

FCA and PRA consultations

The FCA and PRA consultations, which have been informed by responses to the regulators’ 2023 Discussion Paper, include proposals in Phase 1 to:

• Give firms more time and flexibility to submit applications for approving new senior managers when there has been an unexpected or temporary change.
• Strip out duplication where the same individuals are certified for separate functions, which would reduce the number of certification roles by 15%.
• Provide guidance on how to streamline the annual checks firms need to undertake to certify individuals are ‘fit and proper’ to do their role.
• Allow more time for firms to report updates to senior manager responsibilities.
• Increase how long criminal record checks for senior manager applications are valid for, prior to application submission.
• Help firms to better understand the definition of certain SMF roles.
• Give firms more time to update the directory, which lists certified staff. 

In Phase 2, the regulators intend to explore further reform making use of the additional flexibilities that any legislative amendments provide. In particular, they will explore what should replace the certification regime, which senior managers should be subject to approval, whether some SMF roles might be removed from the requirement to seek regulator pre-approval prior to appointment and expanding the 12-week rule for interim SMFs.

FCA and PRA consultations close to comments on 7 October 2025. Policy statements are expected by mid-2026.

We have covered the SM&CR consultations in more detail in this article.

9. Reform of the Financial Ombudsman Service

The Financial Ombudsman Service (FOS) was established 25 years ago as an impartial service for resolving financial services complaints. Concerns around the operation of the FOS have been mounting over recent years, particularly in connection with its perceived role as a quasi-regulator and its lack of interaction with the FCA on important matters. In November 2024, the Chancellor used her Mansion House speech to signal the need for reform on how consumer disputes are handled. A joint call for input from the FOS and the FCA was published shortly afterwards and HM Treasury announced a formal review. More recently, the FOS has published a consultation on the interest rate applied to compensation awards. Now, HM Treasury has published a consultation paper, the FCA and FOS have published a joint consultation paper, and the FOS has published its policy statement on interest on compensation awards. 

The FOS reforms are being heralded as a once-in-a generation transformation of the FOS. It is an attempt to return the FOS back to its beginnings as a simple impartial dispute resolution service that quickly deals with complaints from individuals.

FCA and FOS joint consultation paper

The proposals set out in CP25/22 aim to provide greater certainty, consistency and predictability for markets overall to ensure that consumers get appropriate redress when things go wrong.

The paper seeks comments on the following:

• Good practice examples for identifying and monitoring redress issues and clarifying the FCA’s expectations for firms carrying out proactive redress exercises.
• Amendments to guidance in SUP 15, clarifying when firms should report the identification of issues causing foreseeable harm or systemic issues to the FCA.
• Criteria to help assess if an issue is a mass redress event or has wider implications.
• A new registration stage for complaints and changes to the delegated authority of determinations at the FOS, to improve the quality, consistency and efficiency of case handling and achieve quicker outcomes for consumers.
• Stronger collaboration between the FCA and the FOS, through a new lead complaint process and a referral mechanism to improve consistency in interpretating regulatory requirements.
• Other amendments to the DISP and COMP sourcebooks to improve the operational efficiency of the FOS and the Financial Services Compensation Scheme (FSCS) respectively, for the benefit of consumers and Financial Ombudsman and FSCS levy payers.

The deadline for responses to the proposals is 8 October 2025.

The proposals in CP25/22 are consistent with, and should be read alongside, the government’s proposed reforms which we discuss immediately below.

HM Treasury Consultation Paper

On 15 July 2025, HM Treasury published a consultation paper on the review of the Financial Ombudsman Service (FOS).

The paper sets out the conclusions of the government’s review of the redress framework. The review, announced in March 2025, focused on whether the framework, including the FOS and the related legislation, continues to fulfil its intended purpose in an effective way. Feedback includes responses to the FCA and FOS’s March 2024 call for input.

The feedback highlighted that, in most cases, the FOS is fulfilling its intended role. However, it identified that, in a small but impactful minority of FOS cases, the role of the FOS has expanded beyond its original remit and there is not always coherence between the regulatory approach set by the FCA and the approach used by the FOS to settle complaints, leading to the FOS acting as a quasi-regulator.  This can leave firms acting in an uncertain regulatory environment.

HM Treasury’s consultation paper presents an updated redress framework and sets out proposals to reform the legislative framework within which the FOS operates to ensure it no longer acts as a quasi-regulator.

The government will introduce legislation, when time allows, to deliver the following reforms:

An adapted ‘fair and reasonable’ test: The FOS will be required to find that a firm’s conduct is fair and reasonable where it has complied with relevant FCA rules, in accordance with the FCA’s intent for those rules. The government intends this to operate so that there can be no retrospective application by the FOS of contemporary FCA rules and result in more consistent and predictable resolution of complaints for consumers and firms.

• A framework which formalises the roles of the FOS and the FCA in providing regulatory certainty: Where there is ambiguity in how the FCA rules apply, the FOS will be required to seek a view from the FCA and the FCA will be obliged to respond.  Where appropriate, a party to a complaint will be able to request that the FOS seeks the FCA’s view on interpretation of the rules.
• A framework that provides clarity on the roles of the FCA and the FOS in relation to wider implications issues and mass redress events: The FOS will be obliged to refer potential wider implications issues or mass redress events to the FCA and the FCA will be obliged to consider those issues. Parties to a complaint will also be able to request the FOS refer such an issue to the FCA. It will be for the FCA to decide how those issues should be addressed.
• A more flexible mass redress event framework: The FCA will be able to investigate and respond to mass redress events more easily, ensuring that, when needed, mass redress events can be considered and dealt with quickly and effectively, providing consistent outcomes for consumers and avoiding disruption to markets.
• An absolute time limit of bringing complaints to the FOS: Consistent with the aim of providing a simple, impartial dispute resolution service which deals quickly and effectively with complaints, an absolute time limit in legislation will require complaints to be brought within 10 years of the conduct complained of. This will avoid the risk of the FOS having to deal with a high number of historic cases, which can be challenging to resolve quickly and effectively.

The deadline for responses to the government’s proposals is 8 October 2025.

FOS interest rate award change

Also published on 15 July, was the FOS’s policy statement setting out its revised position on interest applied to compensation awards. The interest rate will change from 8% simple interest to a time-weighted average of the Bank of England base rate plus 1%. This change is expected to take effect for all complaints referred to the FOS on or after 1 January 2026.

10. Faster regulatory approvals

The government wants to make it quicker and easier to do business in the UK.  It is therefore proposing to set new, shorter deadlines for determining regulatory applications and the regulators will be expected to action applications faster than these new statutory deadlines wherever possible. The PRA and FCA will have to determine:

• New firm authorisations and variation of permissions within 4 months (instead of 6 months) for complete applications and 10 months (instead of 12 months) for incomplete applications.
• Senior manager approvals within 2 months (instead of 3 months).

In response, the PRA’s letter to the Chancellor says that:

• For new deposit-taker authorisations, which can vary significantly in complexity and cannot be easily categorised, the PRA will enhance how it communicates expected timelines to individual firms and provide regular and transparent feedback about progress.
• More straightforward applications can and should be completed well within legislative deadlines. The PRA already deals with many applications faster than existing deadlines.
• For senior manager regime applications, it will target completing at least 50% of cases within 45 days.

 The FCA’s letter to the Chancellor, says that:

• For variations of permission, it will target completing cases within three months for complete applications and six months for incomplete applications for adjacent business models.
• For senior manager regime applications, it will target completing at least 50% of cases within 35 days.
• For applications for authorisation, the FCA will align with the government’s proposed amended statutory deadline of 4 months for complete and 10 months for incomplete applications.

11. Targeted support

The FCA published a consultation paper at the end of June outlining its proposals for ‘targeted support’.  These proposals build on several FCA investigations and consultations carried out as part of the Advice Guidance Boundary Review (AGBR).  The FCA’s consultation paper consults on an additional tier of help for consumers who might otherwise fail to access advice. We discuss the FCA’s consultation proposals in our earlier article. 

On 15 July, HM Treasury published a policy note on the necessary legislative changes for the targeted support regime.  HM Treasury has proposed amendments to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) which will create a specified activity of targeted support in new article 55A of the RAO.  A person will provide targeted support when they make a recommendation to an individual that is based on an assessment of information about the individual. This recommendation will not be specific to the individual’s circumstances. The recommendation will be suitable for the individual and others who share similar characteristics and, or, circumstances. Crucially, when a person is providing targeted support, they will not be undertaking the regulated activity of advising on investments. 

HM Treasury intends to legislate in 2025, subject to feedback on the draft Order and when Parliamentary time allows. The government has committed to work with the FCA to roll out targeted support for consumer by ISA season 2026.

Please do not hesitate to get in touch with the contacts listed or your usual contacts at CMS if you would like to discuss any of these proposals.