Leeds Reforms Set UK Government Agenda for Financial Services

On 15 July 2025, the Chancellor of the Exchequer, Rachel Reeves, delivered her second Mansion House speech, having earlier that day announced the so-called Leeds Reforms to “position the UK as the number one destination for financial services companies by 2035”. The reforms are underpinned by a large number of policy materials published by HM Treasury and the regulators, and form part of the first-of-its-kind Financial Services Growth & Competitiveness Strategy, which the UK government published in parallel. Reeves commented that this is “the most wide-ranging package of reforms to financial services regulation in more than a decade”. 

Unlike the Chancellor’s first Mansion House speech, which clarified the government’s approach but did not include much detailed new policy (see this Latham blog post), this speech sets out more concrete reforms and describes precisely what the government plans to change to further its growth agenda and how it intends to effect this change.

While the announcements follow a distinct deregulatory agenda, they do not signal a “bonfire of regulation”; many of the proposals are targeted and measured. However, what is striking about the measures is their breadth and the number of areas of regulation they address, across both retail and wholesale markets.

This Client Alert highlights the key messages from the announcements and provides an overview of the key measures for areas of interest. 

Key Messages

As might be expected, Reeves continues to use the rhetoric of regulating for growth, not risk, and the package of reforms focuses heavily on “rolling back regulation that has gone too far”. 

What is interesting about the measures is that, unlike the previous government’s Edinburgh Reforms, they benefit from detailed discussions amongst government, industry, and regulators. This level of collaboration could make it more likely that the reforms will come to fruition and that change will be achieved within a faster timeframe than some of the Edinburgh Reforms. Although this may mean another rapid raft of changes for the industry, stakeholders are likely more aligned with the government’s position due to the groundwork undertaken prior to the announcements.

What is also notable is that, despite recent criticisms of the regulators by the government and the apparently fractious relationship between the government and the FCA in particular, there now appears to be more of an entente. Many of the measures hand back responsibility to the regulators for crafting the details of the reforms, showing that the government trusts that they are on board with delivering on its promise of cutting red tape. Reeves explicitly thanked the CEOs of the FCA and the PRA in her speech, showing more cordial relations, as she mentioned being “pleased to have been able to work in lockstep with our regulators”. 

However, one area the publications do not address head on is the regulators’ attitude to risk-taking. This has been the subject of exchanges between the regulators and the government on numerous occasions recently, with the regulators requesting more clarity from the government around its expectations to ensure alignment. The government has not provided the regulators with any explicit or detailed guidance on this point beyond stating that the focus should be on “regulating for growth” and not just regulating for risk. 

While having a heavy domestic focus, the Mansion House speech also demonstrates an international outlook, with Reeves noting attendees from US and EU regulators and specifically calling out trade deals. The next steps regarding implementation of the Berne Financial Services Agreement with Switzerland were published as part of the Leeds Reforms. This international outlook indicates an acknowledgement that the UK’s position on the global stage still remains of paramount importance.

Key Measures

Streamlining Regulatory Processes and Other Framework Reforms

HM Treasury is consulting on targeted reforms to the regulatory framework, including shorter statutory deadlines for the regulators to determine key authorisation applications, as set out below: 

• The FCA will aim to complete variation of permission applications within three months for complete applications and six months for incomplete applications, if the permission sought is aligned with the firm’s existing business model. 
• The regulators will aim to complete at least 50% of Senior Manager applications within 35 days (FCA) and 45 days (PRA). 

HM Treasury is proposing to introduce a requirement for the regulators to produce long-term strategies for how they will advance their objectives, focusing on their top priorities and the outcomes they aim to achieve. These would be similar to the FCA’s recently published five-year strategy document.

HM Treasury is also looking to rationalise how the numerous legislative “have regards” feed into regulator decision-making, along with consideration of how to clarify the interaction between various obligations and duties placed on the regulators. The regulators have highlighted on several occasions how the ever-expanding list of considerations confuses and slows down policymaking. Similarly, HM Treasury will consider how it can rationalise reporting requirements faced by the regulators.

The Financial Services Growth & Competitiveness Strategy lays out how the government will introduce a concierge service within the new Office for Investment. This new provision, expected to launch by October 2025, will provide a tailored service to companies considering setting up and expanding in the UK by helping them navigate the UK regulatory landscape and broader barriers to entry.

HM Treasury has published policy materials and draft legislation relating to setting up new Overseas Recognition Regimes, to replace the equivalence frameworks inherited in various pieces of assimilated law.

Moreover, the Strategy mentions innovation in financial services, including that the government will be appointing an artificial intelligence (AI) champion in financial services, with a focus on how AI can drive growth. 

Capital Markets

The FCA published its well-trailed final rules under the new Public Offers and Admissions to Trading Regulations regime and Public Offer Platforms regime alongside the Chancellor’s announcements. The former will replace the UK Prospectus Regulation, while the latter will provide a new mechanism for raising scale-up capital. Together, and alongside last year’s listing regime reforms (see this Latham blog post), these measures aim to help reinvigorate UK capital markets. 

Key changes to the UK prospectus regime include:

• An increase to the threshold for when a prospectus is required for further capital raising to 75% of issued share capital (from 20%)
• For an IPO involving a retail offer, a reduction of the period during which the prospectus must be made available to the public from six working days to three working days
• Streamlining the disclosure requirements for non-equity issuances to promote lower denomination issuances
• A less strict “recklessness” standard of liability for forward-looking information in prospectuses that satisfies the FCA’s criteria for “protected forward-looking statements” 
• New specific requirements and guidance around sustainability disclosures

The FCA plans to consult on further Technical Notes and guidance during the remainder of 2025, including on working capital disclosures, sustainability disclosures, and forward-looking statements, before the regime goes live on 19 January 2026. See this Latham Client Alert for more detail.

Further, the Chancellor announced that there will be a new Listings Taskforce within the Office for Investment, with the aim of attracting businesses to IPO in London, and confirmed that the first trading events through PISCES (the new intermittent trading venue) are set to occur later this year.

In addition, the Digitisation Taskforce has published its final report, outlining a staged plan by which paper share certificates will be eliminated and all shareholders will hold through the intermediated securities chain. See this Latham blog post for more information.

Wholesale Markets

While there are few new measures directly impacting wholesale markets, HM Treasury and the regulators mention in their policy papers various upcoming dates relevant to wholesale markets reforms, some of which are new or have been updated. These include:

• The FCA’s Consultation Paper on the transaction reporting regime will be published in Q4 2025, with final rules due in 2026. 
• As recently announced, the FCA will review its client categorisation rules, with a particular focus on the elective professional category. The review aims to provide greater clarity about the rules and protections applying to different customer groups, particularly for wholesale firms, and the FCA will update on next steps in Q4 2025.
• The FCA will award the contract for the consolidated tape for bonds in 2025, and will consult on a consolidated tape for equities in Q4 2025.
• The FCA will review the securitisation rules to identify areas it can simplify and remove barriers to issuing and investing in Q4 2025, ahead of finalising new rules in H2 2026.
• The FCA will publish an engagement paper on potential reforms to the market risk framework for small and medium-sized investment firms by the end of 2025, followed by a Consultation Paper in 2026.
• The FCA is carrying out a review of the remuneration framework for asset managers and investment firms and will provide an update on this work by the end of 2025. The PRA and FCA will finalise their proposals on the remuneration rules for banks by the end of 2025.
• HM Treasury will publish draft legislation on alternative investment fund managers in spring 2026, alongside an FCA consultation. 

The Strategy mentions that the government and regulators are continuing to review and reform assimilated law, in particular MiFID, EMIR, and the Benchmarks Regulation. This might suggest that there are formal proposals on the Benchmarks Regulation in the works; previously this was not amongst the next cohort of files for review. 

Notably, the Chancellor has asked the FCA to report by the end of September on how it plans to address concerns about the application of the Consumer Duty for firms primarily engaged in wholesale activity. The FCA is expected to set out how it plans to deal with concerns about the way the Consumer Duty is working for wholesale firms engaged in distribution chains that impact retail consumers.

Further, the government unveiled a Wholesale Financial Markets Digital Strategy, which establishes a vision for digitalising UK wholesale markets and drive efficiencies. The government will appoint a Digital Markets Champion to deliver this vision.

Bank Capital Reforms

HM Treasury and the Bank of England/PRA published a collection of materials relating to bank capital, aiming to make sure the UK aligns with international standards for the largest global businesses, while allowing smaller domestic challengers to benefit from more flexible and proportionate requirements.

In a bid to bring clarity to the industry, the PRA confirmed that the Basel 3.1 requirements for lending and trading activities will apply from 1 January 2027. However, it plans to delay the new modelling requirements for market risk until 1 January 2028 in light of ongoing uncertainty surrounding international implementation of Basel 3.1, as well as making certain other adjustments to the market risk framework (also known as the Fundamental Review of the Trading Book). Having a confirmed date for Basel 3.1 implementation means the PRA has also confirmed that the new Strong and Simple capital regime for small domestic deposit takers will take effect on 1 January 2027, without need for an interim capital regime.

Alongside these developments, HM Treasury published a policy update on plans to repeal and restate parts of the UK Capital Requirements Regulation. The update addresses the draft transitional arrangements required to facilitate the PRA’s proposed delay to the implementation of Basel 3.1 market risk provisions, the proposed approach under the new Overseas Recognition Regimes, and the restatement of certain definitions. 

The PRA will work on developing a more responsive and agile approach to banks using internal models for credit risk. In particular, the PRA will enhance its pre-application engagement with firms to (i) help ensure firms’ readiness and identify difficult issues before formal submission of applications, (ii) give firms dedicated submission slots, (iii) complete documentation quality checks within four weeks, and (iv) review complete applications within six months. For first-time applicants, the PRA will provide dedicated support including named account managers. The PRA also commits to a target of taking final decisions in 18 months. Further, the PRA plans to publish a Discussion Paper on Internal Ratings Based Models on 31 July 2025, seeking to help challenger banks use their own risk models.

The Bank of England published its final policy on setting a minimum requirement for own funds and eligible liabilities (MREL). This is a type of additional capital which larger firms must hold to provide an extra buffer in a resolution scenario. The Bank of England aims to reduce barriers to expansion for smaller firms by raising the indicative assets threshold at which MREL requirements kick in from £15–£25 billion to £25–£40 billion. The threshold will be updated every three years from 2028, to take account of economic growth. 

The new policy provides greater clarity and flexibility on when a transfer or bail-in resolution strategy is required, and ensures MREL requirements are no higher than minimum capital requirements for firms with a transfer resolution strategy. In addition, the PRA launched a consultation on raising the threshold at which firms come into scope of more extensive reporting and disclosure requirements on their resolvability from £50 billion to £100 billion in retail deposits, ensuring only the largest firms are subject to the full suite of requirements.

The government is planning a further review of the bank ring-fencing regime; a prime candidate for review as this domestic measure makes the UK an international outlier. It is targeting “meaningful” reform, but it is clear this does not mean scrapping the regime altogether. The Economic Secretary to the Treasury will lead the review, and HM Treasury will report back in early 2026. This review will look at both the legislation and PRA rules and assess options for: 

• allowing ring-fenced banks to provide more products and services to UK businesses;
• addressing inefficiencies in how ring-fencing is applied to banking groups; and
• examining the case for allowing banks to share resources and services more flexibly across the ring-fence.

Finally, the government welcomes the Financial Policy Committee’s recent announcement that it will undertake a “major review” of bank capital requirements, reviewing its assessment of the levels of capital needed to support UK financial stability. It plans to report back to the Chancellor by the end of 2025.

SMCR

Initial discussions around reform of the SMCR began in spring 2023 (see this Latham blog post), and next steps have been expected for some time. HM Treasury and the regulators are now consulting on their proposals, but reform will take place in two phases, with the most impactful reforms reserved for phase 2. Therefore, although the Chancellor announced the reforms will result in “reducing the burdens it imposes on firms by 50%”, the most substantive changes will not be seen in the near term. 

As previously announced, HM Treasury is consulting on removing the Certification Regime from legislation. It would then be up to the regulators to establish a replacement regime in their rules. Disappointingly, neither regulator sets out its plans for the future of the Certification Regime in its consultation, so there is little indication of what the future regime might look like.

HM Treasury is also consulting on reducing the overall number of Senior Managers within the regime, by providing greater flexibility for the regulators in specifying the list of Senior Management Functions that require regulatory pre-approval. It also proposes to amend the legislation so as to enable the regulators to permit firms to appoint certain Senior Managers without pre-approval by the regulators. Firms would still need to diligence candidates appropriately and notify the regulator of appointments. Again, the regulators do not indicate in their consultations how they might respond to this change, so there is no clarity at present as to which Senior Manager roles might be cut, or no longer subject to full regulatory approval.

HM Treasury is considering whether other aspects of the regime should be removed from legislation, to allow the regulators to develop more proportionate rules. These include requirements relating to the provision, maintenance, and updating of Statement of Responsibilities, and to the reporting of Conduct Rule breaches.

Meanwhile, the FCA and the PRA are consulting on some helpful tweaks to the regime as part of phase 1, including:

• Amendments to the 12-week rule so that firms must submit a complete Senior Manager application within 12 weeks of the unforeseen departure or temporary absence of the current Senior Manager, rather than requiring that the full approval process (including regulatory approval) be completed within 12 weeks. The regulators acknowledge that the current time period is too short. They say this has forced them to provide forbearance, which can “lead to inconsistent approaches”. However, the regulators will apply the Senior Manager Conduct Rules to individuals utilising the 12-week rule (at present, only the Individual Conduct Rules apply). They also note that, if a recruitment process is expected to take longer than 12 weeks, a firm would need to apply to approve an interim candidate. However, the FCA indicates that it may consider expanding use of the 12-week rule in phase 2. The regulators also both propose new guidance on the use of the 12-week rule, including emphasising that they expect firms to use the rule reasonably and infrequently.
• Providing additional guidance on SMF7 (Group Entity Senior Manager) to give firms more clarity as to who is in scope of this function. This includes some non-exhaustive examples, such as the relationship between a Group CFO and a UK entity CFO. Further, the PRA proposes to amend the SMF7 definition for dual-regulated firms to bring in scope controllers who apply significant influence over the day-to-day management or conduct of the firm’s affairs in relation to its regulated activities (e.g., private equity owners).
• Providing additional FCA guidance to emphasise the considerations a firm should have when determining if SMF18 (Other Overall Responsibility) applies.
• Providing additional FCA guidance on the allocation of Prescribed Responsibilities, although the FCA states that it does not expect firms to reconsider existing allocations simply to align with the guidance.
• Allowing firms to only submit revisions to Statements of Responsibilities and Management Responsibilities Maps to the regulators every six months, subject to some exceptions. However, firms would still need to keep these up to date internally.
• Clarifying when firms ought to give a qualified regulatory reference if an employee leaves while under investigation, indicating that firms should consider the circumstances but that “references should not be based on unproven allegations or mere suspicions”. This is important guidance for HR functions to consider.
• Reducing the period in which a regulatory reference must be provided by an authorised firm to four weeks for FCA firms. The PRA is not proposing an equivalent change.
• Extending the validity period of criminal record checks from three to six months prior to an application being submitted. The FCA is also proposing to remove the requirement for firms to undertake criminal record checks where an existing SMF holder is applying for an SMF in the same firm or group, while the PRA confirms the requirement does not apply to an individual moving roles in the same firm. However, the requirement for criminal record checks for overseas candidates will not change, despite the regulators acknowledging the difficulties firms may face.
• Clarifying the breadth of discretion firms have in developing their certification processes.
• Removing the duplication of FCA Certification Functions in some circumstances by removing the requirement for separate certification for different roles. For example, an individual would not need to be certified as a Significant Management Function holder if the individual is also certified as an FCA Material Risk Taker at the same firm.
• Allowing more time for firms to update the Directory of Certified Persons, extending this to 20 business days for most updates.
• Providing more FCA guidance to further support firms in considering how to apply the 
  Conduct Rules.
• Making the PRA’s SMCR materials more easily navigable by creating a policy index showing where all of the key rules and guidance can be found.
• Raising the thresholds for becoming an Enhanced Firm under the FCA regime, in line with inflation.

The regulators are proposing that the phase 1 changes would likely take effect in mid-2026. Further, the FCA indicates some of the areas it would like to explore as part of phase 2, in addition to reducing the number of Senior Managers requiring approval and replacing the Certification Regime. These include reviewing its list of Prescribed Responsibilities, further streamlining the Senior Manager assessment process, removing the Directory of Certified Persons, and streamlining Conduct Rule breach reporting.

Redress Framework

The government has made clear since last year’s Mansion House speech that it plans to introduce substantive reforms to the Financial Ombudsman Service (FOS). Further, the government has been openly critical about the wide latitude of the FOS to decide difficult cases with significant implications for the industry, and the impact this has on investment in the UK financial services industry. Most recently, the House of Lords Financial Services Regulation Committee stressed that the FOS must not continue to function as a quasi-regulator.

HM Treasury is now consulting on a package of reforms to the legislative framework, with a view to returning the FOS to its original purpose as a simple, impartial dispute resolution service, with its decisions more aligned with the FCA’s rules. In particular, HM Treasury is proposing to:

• “Adapt” the fair and reasonable test, such that the FOS will be required to find that conduct is fair and reasonable if it complies with the FCA’s rules (in accordance with the FCA’s intention for what those rules should achieve).
• Introduce a mechanism to support the FOS in applying FCA rules in accordance with the FCA’s regulatory intent. Where there is ambiguity as to how the FCA’s rules apply, the FOS will be required to request a view from the FCA, and the FCA will be required to provide a view within a prescribed timeframe.
• Legislate to ensure that parties to a complaint have the ability to request that the FOS refers an issue of rule interpretation to the FCA before issuing a final decision.
• Oblige the FOS to refer wider implications of mass redress events to the FCA. The FCA will have a more flexible framework to respond to such events, including pausing complaints handling without industry consultation. 
• Amend legislation to make it easier for the FCA to “call” a mass redress event.
• Impose an absolute time limit for FOS complaints of 10 years since the event occurred.

The FCA and the FOS are consulting in parallel on proposals to modernise the financial redress system in response to their November 2024 joint Call for Input, which include: 

• Improving how the FCA and the FOS work together to ensure consistency in the interpretation of regulations. This includes a new referral process and a lead complaint process to look at novel and significant complaint issues as they emerge.
• Clearer guidance for firms on more quickly reporting issues to the FCA that could lead to a mass redress event or have wider implications.
• Good practice examples to help firms identify and monitor redress issues, and clarifying the FCA’s expectations for firms carrying out proactive redress exercises.

Further, the FOS confirmed that, following an earlier consultation, the new standard interest rate on compensation awards where consumers have been deprived of their money will be the Bank of England base rate + 1%, down from 8%. The 8% interest rate will be retained for late payment of awards. The FOS aims to introduce this change for new complaints referred to it from 1 January 2026, but will confirm the implementation date in due course.

The FOS plans to consult later this summer on the introduction of different levels of case fees for financial services firms, depending on the circumstances of a complaint, to make the system fairer and support early resolution.

Retail Investment

The government announced a number of initiatives to support retail investment.

First, it highlights the FCA’s recent consultation on targeted support in pensions and retail investments, which aims to make it easier for firms to provide certain types of support to consumers without facing the same compliance burden as when providing individualised advice. The new regime will allow firms to make suggestions concerning particular products or courses of action, aimed at groups of consumers who share common characteristics. It will be a type of regulated advice, but subject to less onerous regulatory obligations. To support this, the government has published a policy note and draft legislation to amend the regulatory perimeter to introduce a new regulated activity of targeted support. An FCA Policy Statement is expected in December 2025, with targeted support expected to be rolled out from April 2026.

Alongside these developments, there will be an industry-led campaign to promote the benefits of retail investment from April 2026. There will also be a review of risk warnings on investment products to ensure these are helping and not hindering investment decisions; findings will be reported in January 2026.

The government will allow Long Term Asset Funds to be held in Stocks & Shares ISAs from April 2026, and will continue to consider further reforms to ISAs and savings. 

Sustainable Finance

The most significant announcement is that the government will not take forward plans to create a UK Green Taxonomy. The consultation response explains that most feedback was mixed or negative, and the government therefore considers that other policies are of higher priority in building out the UK’s sustainable finance framework.

The government recently published its long-awaited consultations on the endorsement of a UK version of ISSB standards (to be known as UK SRS) and on taking forward requirements on transition plans for financial institutions and listed companies (see this Latham blog post). 

The Leeds Reforms and wider Strategy contain little in the way of further announcements. However, these publications do firm up several upcoming dates. In particular, the government will publish final versions of UK SRS for voluntary use, and the FCA will consult on updating its TCFD-aligned disclosure requirements for listed issuers to reference UK SRS, by the end of 2025. The government has also confirmed that it will legislate to bring ESG ratings providers within scope of regulation by the end of 2025. The FCA will then consult on its rules for the new regime.