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Regulatory Updates – 17 July 2025
In her inaugural Mansion House speech, Chancellor Rachel Reeves set out a bold agenda to reform the UK’s financial regulatory landscape. Addressing City stakeholders, Reeves described current regulatory constraints as a “boot on the neck” of British business, arguing that excessive bureaucracy is impeding innovation and economic growth.
Key highlights:
- Regulatory reform: Reeves called for a more proportionate approach to regulation, encouraging regulators to support responsible risk-taking and innovation.
- Growth and investment: Deregulation was positioned as a key enabler of investment and productivity, particularly within financial services.
- City of London engagement: The speech reaffirmed the government’s commitment to maintaining the City’s global competitiveness.
- Policy shift: The address signals a notable shift in Labour’s stance, aligning more closely with pro-business, pro-growth policies.
This speech coincided with the publication of two major consultation papers by the FCA, forming part of the broader Leeds Reforms.
FCA consultation papers
CP25/21 – Review of the Senior Managers and Certification Regime (SMCR)
This consultation proposes significant changes to the SMCR framework, aiming to reduce complexity and regulatory burden while preserving accountability.
Key proposals:
- Structural reform:
- Removal of the Certification Regime from legislation, enabling the FCA and PRA to design a more flexible framework.
- Elimination of certain pre-approval requirements.
- Greater discretion for regulators in defining Senior Management Functions.
- Phase 1 reforms:
- Streamlining approval processes.
- Extending regulatory deadlines.
- Raising the threshold for enhanced SMCR firm classification.
- Phase 2 considerations:
- Simplifying responsibilities maps.
- Removing the Directory.
- Reducing complexity in Conduct Rule breach reporting.
The PRA’s parallel consultation (CP18/25) supports these changes, focusing on reducing regulatory friction while maintaining prudential standards.
CP25/22 – Modernising the redress framework
This paper outlines proposed reforms to the Financial Ombudsman Service (FOS) and the broader consumer redress system.
Key proposals:
- Aligning the FOS’s “fair and reasonable” test with FCA rules.
- Introducing a formal mechanism for the FOS to seek regulatory interpretation from the FCA.
- Establishing a 10-year absolute time limit for complaints.
- Enhancing the FCA’s role in mass redress events.
Additional measures:
- Pre-registration gatekeeping for FOS complaints.
- Clear criteria for identifying Mass Redress Events.
- Mechanisms for firms to submit lead complaints for early resolution.
- Increased flexibility for the FSCS in managing claims.
Consultation deadline: Both papers are open for comment until October 2025, with final rules expected by mid-2026.