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Taking stock of the UK Government’s financial services regulatory agenda

Many pieces of the puzzle unveiled, industry eagerly awaits more information around how this fits into the UK’s overall FS growth strategy

Our take

 

  • The Mansion House package is a sprawling collection of diverse initiatives. It makes it clear that the Government sees FS as a key driver of UK economic growth and competitiveness. But these initiatives are not yet a cohesive whole. The Government’s much-anticipated FS strategy, expected in Spring 2025, will be crucial in joining the dots to provide a fuller picture of how the package aligns to the Government’s 10-year roadmap for the transformation of the FS sector.
  • Most of the Government’s FS regulatory announcements were expected, and some continue the work of the previous Government. There were however some surprises. Key among these is modernising the redress system, with a focus on managing mass redress events, and a commitment to consult on removing the Senior Manager’s Certification Regime from legislation and replacing it with a more proportionate approach.
  • At this stage, many initiatives are high-level consultations and reviews, rather than concrete proposals, making it difficult to assess their individual and collective impact. The full effect of some of the biggest changes, such as the pensions reforms, may only crystallise towards 2030.
  • Even as the full details still develop, it is already clear that these initiatives sum to a substantial reform programme that will require significant time and effort by Government and the regulators to flesh out and implement. Initiatives requiring legislation must compete with other Government legislative priorities for Parliamentary time. Beyond primary legislation, other initiatives, such as open banking and open finance, require significant Government involvement in shaping further details before handing over responsibility to the regulators. Prioritisation and focus will be needed, as it will be challenging for Government and regulators to move forward simultaneously on all these fronts.
  • Many initiatives span the entire FS sector, including the FS strategy and reforms targeting conduct, sustainable finance and innovation, and will have widespread implications across all FS sub-sectors. This in turn raises a question of whether industry can absorb so many changes at once. Industry too would benefit from Government and regulator prioritisation.
  • One element of the package takes immediate effect – the new remit letters which the Government has sent to the regulators. The letters start from the premise in the Chancellor’s Mansion House speech that “the UK has been regulating for risk, but not regulating for growth”. 
  • The remit letters underscore growth as the “defining mission” for the Government. In this pursuit, the FCA and PRA are urged to enable more “informed and responsible risk-taking" by firms, and in the FCA’s case, customers. Reconciling this expectation with primary objectives related to financial stability, safety and soundness and consumer protection will be a challenge for the regulators. The PRA’s collaboration with HMT to facilitate investment in a broader range of assets by life insurers will serve as an early test of how regulators strike this balance. 
  • The UK is not alone in its push to reshape regulation in pursuit of growth and competitiveness. The same message was clear in recent EU-level and US elections. The FS industry worldwide should anticipate a reassessment of existing frameworks through a growth lens in the coming years.

Overview

 

The recent Mansion House package, a substantial list of announcements, consultations, and other publications, sets out what the Government and the regulators have in store for FS and how they should be regulated in a way that promotes UK growth and competitiveness. 

This analysis, encompassing both the Mansion House package and other major initiatives since the Government took office, examines emerging themes, unanswered questions, and the path ahead for the FS regulatory agenda. We explore both cross-cutting and sector-specific initiatives.

The table in the Annex summarises the FS regulatory initiatives announced at Mansion House and key next milestones.

 

Cross-cutting initiatives

The Strategy will detail the Government’s plans to chart a path towards long-term, sustainable, and inclusive growth for the FS sector, aiming to solidify the UK’s status as a global financial hub. While concrete details are absent for now – limited to a high-level call for evidence (CfE) – two key components are emerging.

First, the Strategy will likely prioritise five areas for growth: FinTech; sustainable finance; asset management and wholesale services; insurance and reinsurance; and capital markets. The Government did not disclose its rationale for this provisional selection, however, and the focus areas may evolve in light of industry input. For example, the Government is seeking views on other potential growth opportunities, such as retail banking, pensions, financial advice, and payment services. In our view, it is crucial that the Strategy identifies interdependencies and synergies between growth areas. For instance, while access to financial advice may not be a prioritised growth area in its own right, it is – if done well – a powerful enabler for retail investment.

Second, the Government has emphasised the critical role of regulation in fostering growth and unlocking investment, identifying the regulatory environment as one of five policy pillars central to growth.

Figure 1: High-level overview of the Strategy

Source: CfE on the Strategy

The CfE underscores the Government’s openness to industry input to shape the Strategy, even if the formal feedback window is short (closing on 12 December). Its wide-ranging and high-level questions invite respondents to shape crucial aspects, including its scope and key growth opportunities. A separate publication by HMT outlining areas of research interest reinforces the message that the Government is in listening mode on the interplay between regulation, financial sector size, growth, and stability.

With the release of both the FS Strategy and the broader Industrial Strategy slated for Spring 2025, the coming months will prove crucial for shaping the medium-term vision for the UK’s FS sector.

The Government's new remit letters to the FCA, PRA, PSR and FPC reiterate its focus on growth as a "defining mission", positioning FS as a key engine for achieving this goal. Unveiled at the Mansion House, the letters do not override the regulators' objectives but emphasise what the regulators must have “regard to” when carrying out their responsibilities.

Overall, the Government’s recommendations for the FCA and PRA are aligned, emphasising the importance of proportionate and effective regulation in enabling growth. Three key themes emerge:

1. Increased tolerance for risk-taking: both regulators are urged to embrace a greater appetite for risk, enabling more “informed and responsible risk-taking" by firms. The Government recognises the potential for difficult trade-offs and commits to supporting the regulators. Nikhil Rathi acknowledged that the push for growth will require a “more candid conversation about our collective risk appetite”. It is essential for this debate to happen soon. Greater risk may well bring greater reward, but this won’t always be the case. Effective risk management by all stakeholders in the FS ecosystem, beyond the regulators, will be critical.

2. Resilience over pre-emption: the Government’s call for the regulators to “trust in the systems [...] in place to manage the impact when things go wrong” suggests a shift to a supervisory approach more focused on resilience to the crystallisation of risks rather than pre-emptive risk reduction. The call to avoid regulatory “over-corrections” in response to idiosyncratic risks implies a higher threshold for market-wide interventions.

3. No let-up in protecting the vulnerable or supporting the financially excluded: the FCA letter re-emphasises the protection of vulnerable customers, suggesting that the push for growth will not compromise their needs. The addition of financial inclusion as an area that the FCA should consider underscores the Government’s emphasis on inclusive growth. A financial inclusion strategy, a pre-election proposal, will be crucial in detailing plans in this area, though timelines remain unclear.

The Government also issued its first joint remit letter to the FCA and PSR focused on payments. The letter directs the regulators to prioritise the development of a payments framework that strikes a balance between robust oversight and the flexibility necessary for innovation. As part of these reforms, the FCA will assume a leading role in coordinating policy overlaps with the PSR, including in high-priority areas such as open banking and fraud prevention. This shift aims to streamline regulatory oversight and enhance efficiency.

The renewed emphasis in the FPC’s remit letter on climate change and nature, alongside the addition of geopolitical risk, suggests an upcoming increase in supervisory scrutiny in those areas. This may be particularly true in the area of climate risk management, with updated supervisory expectations for banks and insurers due in early 2025.

The Government's early push to regulate Buy Now, Pay Later products, and its scrutiny of motor insurance pricing with the FCA, signal that consumer protection remains central to its FS agenda, even as it prioritises growth. 

However, striking a balance between these two imperatives is tricky. Plans to modernise the redress system are a case-in-point. The Government and regulators acknowledge that mass redress events are a source of uncertainty for the FS industry and a potential drag on growth. How this reform process unfolds will be an early test of the Government's ambition to reconcile consumer protection with its growth agenda. While the modernised system will address future mass redress events, it may not be in place in time to deal with current motor finance cases.

Three other initiatives indicate that the Government is seeking specific conduct and consumer protection regulatory levers to pull in pursuit of its growth and competitiveness agenda.

First, reviewing the Advice Guidance Boundary in the coming months, starting with pensions. This initiative aims to provide better support to customers navigating complex retirement and investment decisions, likely allowing firms to make suggestions to groups of customers with similar high-level characteristics (e.g., income bracket). In the long term, it holds the potential to channel retail and pensions savings away from low-yield assets such as cash towards more productive assets.

Second, the Government is committed to continuing the review of the Senior Managers and Certification Regime (SMCR), inherited from its predecessors. Citing concerns about cost and administrative burdens, the Government is committed to removing the Certification Regime from legislation, although further details about what will replace it have yet to emerge.

Finally, the FCA is seeking views on how its Handbook rules interact with the Consumer Duty principles. The new remit letter’s focus on growth may place added pressure on the FCA to reduce burdens and duplicative requirements via the review.

However, many of these initiatives are in their infancy, lacking concrete details. Assessing their full impact is therefore premature, pending further details from the Government and regulators in the months ahead.

The Chancellor announced that the Government wants the UK to be a global leader in sustainable finance. Financing the sustainability transition will in turn support clean energy industries, one of the growth sectors identified in the Government’s proposed industrial strategy, and will be a focus in the Government’s forthcoming FS strategy. 

The package of sustainable finance initiatives in the Mansion House speech and accompanying publications combine measures to help mobilise transition financing with making progress on regulatory requirements to ensure the transparency and soundness of sustainable investments. In addition, the Government has updated its remit letters for the FCA, FPC and PRA to set out how it expects regulators to prioritise sustainable finance.

On transition finance, earlier this autumn, the Government launched the National Wealth Fund (NWF) and Great British Energy. It has now also confirmed its support for the recommendations of the Transition Finance Market Review, beginning with establishing the Transition Finance Council to ensure delivery of the Review’s recommendations. At COP 29, after the Mansion House speech, the Government launched “Integrity Principles” for voluntary carbon and nature markets. 

The other updates provide some clarity on how existing regulatory initiatives will be progressed. This includes more information on the timing for the forthcoming ESG Ratings Bill, confirmation that the Government will consult on UK implementation of the ISSB reporting standards, and a consultation to establish whether the UK should adopt its own Green Taxonomy. 

A key difference from the approach to the sustainability transition of previous administrations is the Government’s plan to mandate regulated financial institutions and FTSE 100 companies to develop and implement credible transition plans that align with 1.5°C degree warming. Originally proposed in the Labour Party’s manifesto, the Government has now confirmed its intention to consult next year on how to implement this policy. 

In the round, the Government has set out an ambitious agenda on sustainable finance, but the detail is still to come. In the meantime, firms will need to balance the risk of moving before details are finalised with the challenge of making progress in such a complex regulatory and market environment. Scenario planning will help firms to explore critical paths for the further developments with respect to their business strategies and operating models. Moreover, firms can be fairly confident that ISSB will be adopted as planned, and begin to consider how its requirements can be embedded into existing corporate sustainability reporting programmes.

The Government has a clear ambition to support business and technological innovation. Yet its translation into concrete regulatory initiatives and roadmaps to provide the necessary clarity to enable innovation is mixed.

Payments

The National Payments Vision (NPV) signals a welcome commitment to reestablish the UK’s leadership in retail payments innovation. The ambitious blueprint, cautiously welcomed by the industry, embraces innovation, infrastructure modernisation, and regulatory simplification. It outlines foundations for progress on topics including open banking, payments infrastructure, digital identity and fraud prevention.

However, it does not yet amount to a detailed roadmap for UK payments. Significant work lies ahead. For example, a strategy to modernise retail payment infrastructure, superseding the stalled New Payments Architecture programme, is expected in Q2 2025. A comprehensive roadmap to streamline payments initiatives and foster collaboration is due in Q4 2025.

By design, the NPV focusses on retail payments. The BoE is advancing wholesale initiatives, including the Real-Time Gross Settlement (RTGS) payments system renewal and wholesale CBDC pilots.

Click here to read our analysis of the NPV.

Digital assets

The UK's regulatory approach to digital assets is not yet clear. While the announced digital gilt pilot signals intent to deliver on pledges to make the UK a hub for tokenisation, concrete details are limited. The Mansion House package offered no further details on stablecoins and unbacked digital assets. This lack of clarity may end up hindering investment and innovation within the sector. 

Artificial intelligence (AI) and data

The Government retains the previous administration’s technology-neutral approach to AI regulation in FS, with regulators relying on existing regimes such as the Consumer Duty and operational resilience. While not directly affecting FS, the anticipated consultation on regulating large AI model providers warrants close attention for potential ripple effects, such as vendor product or contract adjustments.

Meanwhile the Data Use and Access Bill signals a welcome commitment to Smart Data and open finance, though significant work lies ahead to translate it into a detailed regulatory framework. The Bill's targeted revisions to data protection regulations, such as a more proportionate regime for using data to support vulnerable customers, could prompt more responsible data-driven innovation in FS.

Sector-specific initiatives

The Government’s strategy for Life and Pensions is fully aligned with that of the previous Government, seeking to promote the provision of capital for UK productive assets.

With its flagship Review, and upcoming Pension Schemes Bill, the Government intends to consolidate the Local Government Pension Scheme pools, and Defined Contributions (DC) schemes. New minimum size and value for money (VFM) requirements for DC schemes will seek to create “megafunds”, mirroring Canadian and Australian structures. The Government expects larger schemes to be able to invest in a broader range of UK illiquid assets, but this is by no means guaranteed. Schemes expected to meet demanding VFM and Consumer Duty expectations may find more balanced investment opportunities outside the UK. Overall, the lead time for some DC reforms in the review is expected to be long (~2030), and more details are required to understand the full impact of the package, including on Phase 2 focused on retirement adequacy, expected next year. But it is already clear that the package will require extensive work by HM Treasury and the Department for Work and Pensions.

In the nearer future, the Government commits to ensure life insurers are able to invest in a broader range of illiquid assets, to benefit from Solvency UK reforms. The restatement of this commitment by the Chancellor in her Mansion House speech might signal more work is needed by the authorities and the NWF to deliver on it. For firms, the core challenge remains the paucity of UK illiquid assets that meet the Solvency UK criteria. Some of the guarantees offered by the NWF may help to address this issue, but additional information will be required about their scope.

Meanwhile the Government is advancing its commitment to support the competitiveness of the commercial insurance sector, especially the London market. With workstreams aiming to optimise commercial insurance rules, introduce a new UK captive regime and review the existing Insurance Special Purpose Vehicle framework, the Government and regulators are heading in a direction welcomed by the industry. However, only time will tell whether the substance of the proposed changes significantly improves UK competitiveness. As many of these workstreams are exploratory, there is still an opportunity for firms to influence the direction of travel.

Overall, the pension reforms hold significant potential for reshaping the market and delivering growth, but a fuller assessment awaits further details in Spring 2025. As it stands, the current shape of the other, nearer-term initiatives suggests that they are likely to have less impact.

The Government, working with the regulators, prioritised implementing Basel 3.1 over the summer. Uncertainty on the new US administration’s stance on the package may put pressure on the UK to reconsider its implementation. However, reopening the substance seems unlikely in our view. While US developments may influence the timing of implementation for the Fundamental Review of the Trading Book – already delayed in the EU – the UK authorities are expected to maintain a high threshold for any other changes.

The Government has continued reforms to loosen the threshold and scope of the ring-fencing regimes, effective from early 2025. The reforms will primarily benefit smaller-sized retail banking groups no longer within its scope. In the coming months we expect further developments on aligning the ring‑fencing and resolution regimes, a manifesto commitment.

In our view, the Government’s commitment to doubling the size of the cooperatives and mutuals sector, reiterated at the Mansion House, requires more clarity. It remains unclear whether the focus will be on expanding existing mutuals or encouraging new entrants. Establishing new entrants, such as building societies, presents a significant challenge, especially sourcing the initial capital (£1mn). The most recent market entrant was in 1980. Any regulatory changes to support the sector, guided by an FCA/PRA market landscape report only due by end-2025, are likely to be slow. The Government is already taking action to modernise the Building Societies Act, including changes to funding limit calculations and aligning governance requirements with the Companies Act 2006.

Time will tell if the renewed focus on growth and competitiveness will encourage the PRA to introduce greater flexibility in the regulatory framework for mutuals. For example, via changes to the Small Domestic Deposit Taker regime or reviewing constraints on treasury and lending activities in the building societies sourcebook (as set out in the supervisory statement - SS20/15).

The UK’s capital markets regulatory framework has undergone significant change in recent years, driven by the Financial Services and Markets Act 2023 (FSMA 2023) and the regulators’ expanded role in setting many requirements previously enshrined in EU law.

Significant reforms, including those stemming from the wholesale markets review and the Edinburgh reforms package, are largely finalised. These include the removal of the double volume cap and share trading obligation, amendment of the listing rules, and payments for investment research. Attention is now turning to the implementation of remaining reforms, which mostly lies with the regulators. Key FCA priorities include finalising changes to the derivatives trading obligation and the prospectus regime as well as consolidated tapes for bonds and equities.

However, two key reforms remain in the Government’s hands.

First, further legislative changes to the UK MiFID framework, including empowering the FCA to update rules on reporting of OTC positions. The FCA is exploring ways to harmonise wholesale market reporting requirements to reduce burdens on firms. Firms operating cross-border will welcome the FCA’s intent to avoid unnecessary upheaval. The FCA is conscious of areas where different transaction reporting rules in the UK and EU could create increased operational burdens.

Second, the Government remains committed to introducing the Private Intermittent Securities and Capital Exchange System (PISCES), a secondary market for unlisted companies that will facilitate the trading of existing shares in intermittent trading windows.

The Government reiterated the crucial role of the asset management industry in channelling investment towards high-growth companies and green infrastructure.

In 2023, the FCA commenced a comprehensive review1 of the asset management regulatory framework. The FCA has committed to consulting on a more tailored and flexible product information framework for consumer composite investments by end-2024, replacing the on-shored EU PRIIPs and UCITS regimes. Further reforms, including a potential overhaul of the alternatives regime, may be on the horizon, though details and timelines are unclear.

Conclusion 


The extensive package of reforms will require significant industry input and engagement to shape the final outputs. The Government and regulators are in listening mode. The renewed emphasis on growth and competitiveness opens the door for industry to suggest FS policy amendments to promote economic growth. 

We would like to acknowledge the contributions of all members of the Deloitte EMEA Centre for Regulatory Strategy in analysing the Mansion House package and contributing to this analysis

Annex – summary of key initiatives in the Government’s FS regulatory agenda

Cross-cutting initiatives

Sector-specific initiatives

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References

1 DP23/2: Updating and improving the UK regime for asset management