Chancellor Rachel Reeves outlines vision for regulatory reform

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.