Key Points
- The UK Government has introduced the Financial Services and Markets Bill before Parliament as part of the wider Leeds Reforms agenda.
- The Bill proposes significant reforms to the Senior Managers and Certification Regime (SMCR), consumer credit rules and the Financial Ombudsman Service (FOS).
- The Payment Systems Regulator (PSR) would be abolished, with its powers transferred to the Financial Conduct Authority.
- New regulatory gateways would apply to appointed representatives operating under authorised firms.
- HM Treasury would gain broader powers to recognise overseas financial regulatory regimes.
- The Bill also proposes shorter approval timelines for firms seeking regulatory permissions from the FCA and the Prudential Regulation Authority.
- Cryptoasset enforcement powers and anti-money laundering supervisory responsibilities would also be expanded.
- Most measures would only take effect following secondary legislation and regulator rule changes.
Inverted Pyramid Structure
What Does the Financial Services and Markets Bill Change?
The UK Government has introduced a wide-ranging Financial Services and Markets Bill aimed at reforming major areas of financial regulation, compliance oversight and consumer protection.
The legislation, presented before the House of Lords following its inclusion in the 2026 King’s Speech under the title Enhancing Financial Services Bill, forms part of the Government’s broader Leeds Reforms programme announced by Chancellor Rachel Reeves in 2025.
According to the UK Government, the Bill is intended to “modernise how the sector is regulated, and enable it to grow and lend more to businesses”, while maintaining regulatory standards and consumer protections.
The proposed legislation includes reforms affecting:
- Senior Managers and Certification Regime (SMCR)
- Consumer credit regulation
- Financial Ombudsman Service processes
- Payment systems regulation
- Ring-fencing rules for banks
- Overseas recognition frameworks
- Appointed representative oversight
- Cryptoasset enforcement powers
- FCA and PRA application deadlines
The Bill is expected to have practical compliance implications for financial services firms, directors, compliance officers and regulated businesses operating across the UK.
How Will SMCR Reforms Affect Financial Services Firms?
One of the most significant reforms concerns changes to the Senior Managers and Certification Regime.
The Government, alongside the FCA and PRA, has previously consulted on reducing administrative burdens linked to the SMCR framework. The Bill proposes removing several firm-facing obligations from primary legislation.
These changes include:
Removal of the Certification Regime
The Bill removes the Certification Regime from legislation, allowing the FCA and PRA to redesign elements of the framework through regulator rulebooks instead.
Currently, firms must certify annually that certain employees are fit and proper to perform regulated functions.
If enacted, firms may face revised certification obligations under future FCA or PRA rules rather than direct statutory requirements.
Changes to Conduct Rules Requirements
The legislation also removes statutory provisions relating to Conduct Rules and senior managers’ statements of responsibilities.
This would give regulators greater flexibility to tailor requirements across sectors and firm sizes.
For directors and compliance teams, the reforms may require:
- Reviews of governance frameworks
- Updates to internal compliance monitoring
- Revisions to accountability documentation
- Adjustments to staff training processes
Businesses conducting regulated activities may need to monitor future FCA consultations closely to understand replacement obligations once secondary rules are published.
What Will Change for Consumer Credit Regulation?
The Bill proposes extensive reforms to the consumer credit framework by repealing large parts of the Consumer Credit Act 1974 (CCA).
Currently, consumer credit regulation is split across:
- The Consumer Credit Act
- Secondary legislation
- FCA rules
The Government aims to consolidate more responsibility within the FCA rulebook.
Which Consumer Credit Rules Will Be Repealed?
The Bill would remove many remaining CCA provisions, including several disclosure and information requirements.
Associated sanctions linked to those provisions would also be repealed.
However, repeal measures would only take effect once replacement FCA rules are implemented.
This phased approach is designed to avoid regulatory gaps and ensure continuity for lenders and consumer credit firms.
What Are the Compliance Implications for Firms?
Consumer credit providers, lenders and financial intermediaries may eventually need to update:
- Customer disclosure documents
- Terms and conditions
- Compliance manuals
- Staff training procedures
- Consumer communications
Firms may also need to review their FCA permissions and reporting obligations as the regulator assumes greater control over the framework.
Companies involved in lending or regulated finance activities should assess whether future changes could affect authorisations, operational processes or customer-facing documentation.
How Will Financial Ombudsman Service Rules Change?
The Bill also proposes reforms to the Financial Ombudsman Service.
The FOS currently resolves disputes between consumers and financial services firms outside the court system.
Following a Government review of the UK redress regime, the legislation would modify how the ombudsman assesses complaints.
What Is Changing in the “Fair and Reasonable” Test?
Under the proposed reforms, the FOS would be required to consider whether firms complied with relevant FCA rules when determining whether conduct was “fair and reasonable”.
The Bill would also provide the FCA with additional powers to respond to mass redress events.
This could affect how firms manage:
- Complaint handling procedures
- Consumer remediation programmes
- Regulatory investigations
- Litigation risk assessments
Compliance departments may need to review dispute resolution strategies once updated FCA guidance is issued.
Why Is the Payment Systems Regulator Being Abolished?
The Bill formalises the Government’s previously announced plan to abolish the Payment Systems Regulator.
Its responsibilities would transfer to the FCA.
The Government has stated that consolidation is intended to simplify oversight of payment systems and reduce regulatory duplication.
What Will the FCA’s Expanded Powers Include?
Under the Bill, the FCA would receive additional objectives and powers relating to payment systems oversight.
Payment firms, fintech businesses and regulated institutions may therefore face:
- Revised supervisory structures
- New FCA reporting expectations
- Updated authorisation processes
- Changes to enforcement procedures
Businesses operating in payments infrastructure may need to monitor transitional arrangements carefully as responsibilities move between regulators.
How Will Ring-Fencing Rules Be Reformed?
The legislation also introduces targeted amendments to the UK banking ring-fencing regime.
Ring-fencing rules currently separate core retail banking services from investment and wholesale banking operations.
The Bill proposes creating mechanisms allowing aspects of the statutory framework to be updated through PRA rules rather than primary legislation.
What Does This Mean for Banks?
Large banking groups may gain greater operational flexibility if regulators are able to adapt requirements more quickly through rule changes.
However, firms would still need to comply with PRA oversight and prudential requirements.
Legal and compliance teams may need to monitor future PRA consultations regarding implementation standards and operational expectations.
What Is the New Overseas Recognition Framework?
The Bill would establish a broader framework enabling HM Treasury to recognise overseas regulatory regimes as comparable to UK standards.
Currently, many equivalence powers are derived from retained EU legislation.
Why Does This Matter for International Firms?
The proposed framework could affect:
- Overseas market access
- Cross-border financial services
- International investment activity
- Regulatory cooperation arrangements
As part of the Government’s Financial Services Growth and Competitiveness Strategy, existing equivalence regimes may gradually be replaced with overseas recognition arrangements.
Non-UK firms seeking access to UK markets may therefore need to monitor future HM Treasury determinations carefully.
What New Rules Will Apply to Appointed Representatives?
The Bill introduces significant reforms to the appointed representatives (AR) regime.
Currently, authorised firms can appoint representatives to conduct regulated activities under their supervision.
What Is the New FCA Gateway?
Under the proposed legislation, principal firms would require FCA permission before appointing representatives.
The Bill also proposes:
- Bringing appointed representatives within the scope of the SMCR
- Extending FOS compulsory jurisdiction to appointed representatives
- Expanding regulatory oversight of principal firms
This is expected to increase compliance obligations for firms using AR structures.
Principal firms may need to review:
- Oversight controls
- Due diligence procedures
- Monitoring systems
- Governance frameworks
- Record-keeping arrangements
How Will FCA and PRA Application Deadlines Change?
The Bill shortens several statutory decision deadlines applying to FCA and PRA applications.
Which Timelines Are Being Reduced?
The proposed reforms include:
- Complete applications reduced from six months to four months
- Incomplete applications reduced from 12 months to 10 months
- Senior manager approvals reduced from three months to two months
This could accelerate authorisation processes for regulated firms and financial services start-ups.
Businesses considering regulated expansion, company formation in financial services sectors or director changes involving regulated functions may need to prepare documentation earlier to meet revised expectations.
Firms seeking authorisations may also require stronger internal compliance preparation before applications are submitted.
What Changes Are Proposed for Cryptoasset Enforcement?
The Bill includes measures aimed at strengthening powers relating to criminal cryptoassets.
Recent economic crime reforms expanded law enforcement powers relating to digital assets, but the Government has identified limitations in areas such as crypto wallet freezing orders.
What New Powers Would HM Treasury Receive?
The legislation would permit HM Treasury to amend provisions linked to cryptoasset enforcement under legislation including the Proceeds of Crime Act 2002.
Cryptoasset firms and fintech businesses may therefore face evolving anti-money laundering and enforcement obligations.
The Bill also proposes expanding FCA anti-money laundering supervisory responsibilities.
What Other Regulatory Reforms Are Included?
Additional measures within the Bill include:
- A provisional licensing regime intended to support financial services start-ups
- Operational reforms affecting the FCA and PRA
- Potential future powers relating to access to in-person banking services
The Government launched an independent review into banking access on 14 May 2026, with conclusions expected later this year.
The Bill would allow HM Treasury to introduce future legislation or empower the FCA to ensure reasonable access to in-person banking.
What Happens Next in Parliament?
The Bill has been introduced in the House of Lords, although the date for second reading has not yet been announced.
Following scrutiny in the Lords, the legislation will proceed to the House of Commons before seeking Royal Assent.
The Government expects the parliamentary process to conclude before the end of 2026, subject to parliamentary scheduling.
However, many provisions would only take effect following:
- HM Treasury regulations
- FCA rule changes
- PRA consultations
- Secondary legislation
Parliament is also expected to scrutinise proposed delegated powers, particularly provisions enabling ministers to amend primary legislation through secondary regulations.
What Should UK Companies and Directors Do Now?
Although the Bill remains at an early legislative stage, regulated firms and directors may wish to begin assessing potential compliance impacts.
Areas likely to require attention include:
- Governance and accountability structures
- Consumer credit documentation
- FCA authorisation processes
- Appointed representative oversight
- AML compliance frameworks
- Complaint handling procedures
Businesses affected by the reforms may also need to review ongoing Companies House filings, director appointment records and HM Revenue and Customs obligations where operational or structural changes arise from future regulatory adjustments.
Some firms may seek professional support with regulatory filings, company formation matters, VAT registration or PAYE registration where business restructuring or new permissions become necessary under the evolving framework.
Further detail is expected through FCA and PRA consultations as the Bill progresses through Parliament.
