Key Points
- The UK government has introduced the Financial Services and Markets Bill 2026-27 in the House of Lords.
- The legislation forms part of the wider Leeds Reforms agenda aimed at modernising UK financial regulation.
- Key reforms affect the Senior Managers and Certification Regime (SMCR), Financial Ombudsman Service (FOS), ring-fencing, and anti-money laundering supervision.
- HM Treasury proposes shorter statutory deadlines for authorisations, approvals, and regulatory permissions.
- The Financial Conduct Authority (FCA) will gain expanded oversight powers in several areas, including appointed representatives and AML supervision.
- New provisional licences could allow businesses temporary authorisation for up to 18 months.
- The reforms may affect UK financial services firms, directors, authorised firms, overseas businesses, and trust or company service providers.
- Most measures will require secondary legislation or regulator consultations before taking effect.
What Is Included in the Financial Services and Markets Bill 2026-27?
The UK government has formally introduced the Financial Services and Markets Bill 2026-27, marking a significant legislative step in delivering the wider Leeds Reforms programme aimed at reshaping the UK’s post-Brexit financial regulatory framework.
The Bill completed its first reading in the House of Lords on 19 May 2026 following its inclusion in the King’s Speech earlier this month. The proposed legislation contains a wide range of reforms affecting financial regulation, consumer protection, anti-money laundering supervision, authorisation processes, and banking oversight.
According to international law firm Latham & Watkins, the Bill addresses reforms “that cannot be completed through regulator action alone”.
The legislation follows ongoing criticism that regulators such as the Financial Conduct Authority and the Prudential Regulation Authority have been unable to fully implement government reform plans without primary legislation.
As reported by Latham & Watkins, FCA Chief Executive Nikhil Rathi stated in correspondence to the Treasury Committee earlier this year that regulators were “moving fast” but still required legislation or government action in several areas.
How Will SMCR Reforms Affect UK Firms and Directors?
One of the most closely watched elements of the Bill is the proposed reform of the Senior Managers and Certification Regime.
The government plans to remove the Certification Regime from primary legislation, allowing regulators to redesign the framework through FCA and PRA rules instead. The Bill would also allow firms to appoint certain senior managers without prior regulatory approval in specified circumstances.
Additional proposed changes include:
Removal of Statements of Responsibilities Requirements
The Bill would repeal statutory provisions requiring firms to maintain Statements of Responsibilities for senior managers.
Changes to Conduct Rules Obligations
Requirements for firms to notify regulators about Conduct Rules breaches and train staff on those rules would also be removed from legislation.
The reforms are expected to reduce some administrative burdens on regulated firms, although businesses will still need to monitor forthcoming FCA and PRA consultations expected later in 2026.
For directors and senior managers, the changes could alter approval timelines and governance procedures. Businesses undergoing restructuring, director changes, or senior management appointments may need to reassess internal compliance frameworks and reporting arrangements.
Financial services firms involved in company formation or regulated entity structuring may also need to review governance documentation and authorisation processes as the reforms progress.
What Changes Are Proposed for the Financial Ombudsman Service?
The Bill also introduces major reforms to the Financial Ombudsman Service.
According to HM Treasury’s consultation response published in March 2026, the reforms are intended to improve predictability for regulated firms while preserving consumer protections.
Introduction of a 10-Year Complaint Deadline
The legislation proposes an absolute 10-year limit for bringing complaints to the FOS.
Revision of the “Fair and Reasonable” Test
The Bill would recalibrate the FOS’s “fair and reasonable” assessment framework so that firms complying with FCA rules are more likely to be considered as acting fairly.
New FCA Referral Mechanism
The reforms would establish a formal referral mechanism between the FOS and the FCA, particularly in cases involving regulatory uncertainty or systemic issues.
The government also proposes giving the FCA enhanced powers to respond rapidly to mass redress events.
For regulated businesses, these measures may provide greater certainty regarding long-tail liabilities and complaint exposure. However, firms will still need to maintain robust complaints handling procedures and FCA compliance systems.
How Will Ring-Fencing Rules Change for Banks?
The Bill proposes updates to the UK banking ring-fencing framework introduced after the global financial crisis.
Under the proposals:
- Certain aspects of ring-fencing would move from legislation into PRA rules.
- The PRA would gain flexibility to waive rules where equivalent prudential safeguards already exist.
- The framework would recognise modern bank resolution tools rather than focusing solely on insolvency scenarios.
HM Treasury confirmed these changes following its ring-fencing review conclusions published on 18 May 2026.
Banks and large financial groups may face future rule changes through regulator consultations rather than direct legislative amendments, potentially increasing the speed of future regulatory updates.
What Does the Bill Mean for Consumer Credit Regulation?
The government also plans substantial reform of the Consumer Credit Act 1974.
Most provisions under the Act are expected to be repealed and replaced with FCA rules aligned with the Consumer Duty framework.
Which Consumer Credit Rules Will Remain?
Certain provisions will remain in legislation where regulators consider them unsuitable for replacement through FCA rules alone or where further policy work remains ongoing.
The move towards a more outcomes-focused regime could significantly change compliance obligations for lenders, brokers, and credit providers operating in the UK.
Businesses involved in credit activities may need to prepare for future FCA consultations, revised disclosure requirements, and updated conduct expectations.
How Will Overseas Recognition Regimes Operate?
The Bill introduces a framework enabling HM Treasury to create overseas recognition regimes intended to replace retained EU equivalence arrangements.
Under the proposed framework, HM Treasury would gain powers to recognise overseas jurisdictions and regulatory systems through secondary legislation after consulting UK regulators.
The measures are intended to facilitate cross-border financial activity while allowing the UK to establish a bespoke recognition framework independent of EU structures.
The reforms may affect overseas firms seeking UK market access and UK businesses operating internationally.
Why Are Authorisation Deadlines Being Reduced?
The Bill includes several cross-cutting reforms designed to accelerate regulatory approvals and reduce administrative delays.
Shorter FCA and PRA Decision Timelines
Proposed deadline reductions include:
- New firm authorisations reduced from six months to four months for complete applications.
- Variation of permissions decisions reduced from six months to four months.
- Senior Manager approvals reduced from three months to two months.
- Financial promotion approvals reduced from three months to two months.
Incomplete applications would generally move from a 12-month statutory deadline to 10 months.
The government also intends to introduce powers allowing future deadline reductions through secondary legislation.
For firms seeking FCA authorisation, regulated status, or permission variations, faster processing times may improve business planning and operational certainty. However, businesses may also face increased pressure to submit complete and accurate applications at the outset.
Companies involved in regulated company formation, FCA registration projects, or PAYE registration and VAT registration connected to regulated launches may need to ensure supporting compliance documentation is fully prepared before submission.
How Will Appointed Representatives Be Affected?
The Bill proposes tighter controls on the appointed representatives regime.
Only authorised firms with specific FCA permission would be allowed to act as principals for appointed representatives under the proposed reforms.
Extension of SMCR to Appointed Representatives
The SMCR would also extend to appointed representatives.
FCA Rule-Making Powers Expanded
Requirements relating to appointed representative agreements would move out of legislation and into FCA rules.
Additionally, appointed representatives would fall within the compulsory jurisdiction of the FOS in certain cases.
The proposals are likely to increase compliance obligations for principal firms supervising appointed representatives, particularly around oversight, governance, and complaints handling.
What Are the Proposed Provisional Licences?
The Bill introduces a provisional licences framework under the Financial Services and Markets Act 2000.
Under the proposals, businesses could obtain temporary Part 4A permissions for up to 18 months before securing full authorisation.
The FCA would determine which regulated activities qualify for the regime through future rulemaking.
The temporary authorisation model resembles the mobilisation regime currently used for new banks and could benefit fintech firms and start-ups entering regulated markets.
What Changes Are Proposed for AML and CTF Supervision?
The legislation also expands the FCA’s role in anti-money laundering and counter-terrorist financing supervision.
The FCA would assume supervisory responsibility for:
- Legal service providers
- Accountancy service providers
- Trust or company service providers
The reforms follow government proposals announced in October 2025 after consultation on AML supervisory reform.
Businesses operating as trust or company service providers may face enhanced FCA oversight, revised reporting expectations, and stricter supervisory engagement if the reforms proceed.
Companies handling incorporation services, director appointments, confirmation statement filing, or related corporate administration services may need to review AML compliance controls and customer due diligence procedures.
What Happens Next for the Financial Services Bill?
The Bill must now progress through the full parliamentary process before becoming law.
A date for the second reading in the House of Lords has not yet been announced. Most measures will require commencement regulations or secondary legislation before taking effect.
Further FCA and PRA consultations are also expected across several reform areas later in 2026.
For regulated firms, directors, and compliance teams, the Bill signals continued movement towards a more flexible, regulator-led financial services framework. However, businesses will likely need to monitor future consultations closely to understand the detailed operational impact of the reforms as implementation progresses.
