22nd May 2026
With a few notable exceptions, much of the new Bill is a laundry list of financial lobbyist asks. It won't do anything to stimulate growth but it will undermine consumer protections.
It’s been a busy week in the Treasury. No sooner was the King’s Speech out of the way than a first draft of the new Financial Services & Markets Bill was published – with Consumer Credit Act reform rolled in with it as well.
The Bill itself is a mish mash of all sorts of things – some of which were brand new this week, while some were the conclusion of the Chancellor’s deregulatory tear which she has been on since she took office in number 11 almost two years ago.
Leaving consumer credit reform aside for one moment – this Bill is mostly a lot of political posturing designed to give the outside world the impression that Britain is open for business and is ready to reclaim its place as the world’s leader in financial services. In reality, very few of the changes announced will have any major impact – and it seems fanciful to think that this Bill will make any meaningful difference on the attractiveness of the UK as a financial hub. At best, it amounts to a minor watering down of consumer protections. At worst, it sows the seeds that will ensure we are less well protected when the next financial crisis comes round the corner.
Given that Parliamentary time is limited – to me it feels like this is a waste of a Bill.
The key headlines that the Treasury has pointed to are these:
The combination of the Payment Services Regulator and the Financial Conduct Authority
The transference of the senior managers certification regime off the statute and into FCA rules
Reform of the Financial Ombudsman Service
Reform of the bank ring-fencing rules
Support for the credit union sector.
The last of these is largely positive. Credit unions already play an important part in affordable lending, and this will allow them to expand further.
But combining the Payment Services Regulator and the Financial Conduct Authority is little more than a rebranding exercise. The two organisations already sit within the same building – and it will simply mean a transfer of payment regulators into the FCA. It’s certainly not the bonfire of the regulators that the Chancellor has been keen to characterise it as.
As for the SMCR changes – there may well be some savings for businesses here, and it’s right that we review rules and ensure they are working and proportionate. But the FCA already had the power to make its own changes – and while this will give it more leeway, it’s hard to see how this made it to the top of the list of Government priorities given that it’s a regime that’s only been in place for a decade.
Reforming the ring-fence is also tinkering with legislation that was only implemented a few years ago - and once again the tweaks here are unlikely to have a major impact. Not all the banks even agree that changes to the regime is a good idea. Barclays’s CEO was quick to point out that these rules were introduced to prevent another financial crisis. To be tinkering with them just a few years after they were implemented feels like a waste of time – and potentially dangerous. Thankfully, they are not getting rid of the ring-fence altogether – which could have had bigger implications and been much more cavalier.
Then we get to FOS reforms. As I’ve written before, I don’t think these changes will be enormously consequential. The finance lobby has persuaded the Chancellor that the FOS writes regulation through the backdoor and is not predictable enough. But the changes being made will not materially alter that. The fair and reasonable test remains – and with the FCA moving to a more principles-based approach, it’s inevitable that the FOS will end up having to bring clarity to areas where the FCA has yet to opine.
Thankfully the Treasury has dropped the idea of reserving a power which would have allowed it to prevent the FOS relying on the Consumer Duty when making its decisions – a move that had the potential to cause chaos.
However, it is pressing on with a 10-year time bar on all FOS complaints – scrapping the current rule which says there’s no time limit if consumers weren’t aware of the harm they had suffered. According to the Treasury’s own cost-benefit analysis – this will lead to around 3,000 valid complaints a year being turned down without a hearing – which will lead to a trivial saving of around £19m to the financial services industry. For those 3,000 people – the chance to have their case heard could have been life changing. But the industry will barely even notice the difference.
In terms of new measures, the Treasury have also announced a new Access to Face to Face banking enquiry, to be led by former FCA director Richard Lloyd. While the Treasury rightly points out that many people rely on face to face banking and are struggling as banks close their branches – much of the heavy lifting around this issue has already done through the Access to Cash work which concluded at the tail end of the last Government.
We have new Post Office banking hubs being rolled out across the country – and in many communities where the last bank has closed, there are still local Post Offices where people can get access to face to face banking services. It’s hard to see what this report will add to the debate. Again, it feels more like the Treasury scrabbling around for an issue that’s important to a key voter group, pushing it up the political agenda to demonstrate they care about consumers as well as the finance lobby.
In terms of the consumer credit reforms, I’m largely fine with what’s being proposed. It’s a bit odd that having dragged their feet for a long time, and promised a two-phase consultation, they have now ditched phase two altogether and barrelled the reforms in with the new Financial Services & Markets Bill.
But I don’t oppose the changes. They will see the clunky consumer credit disclosure rules handed over to the FCA to manage – and hopefully improve. Whilst core consumer protections like Section 75 will be preserved in the new Bill.
More controversially to some, the Sanctions elements of the Consumer Credit Act will be scrapped. These were provisions that allowed credit agreements to be deemed as unenforceable if they were not enacted in exactly the right way. As regulation has evolved, the sanctions provisions have looked increasingly out of kilter with regulation in other financial markets. And there’s nothing to stop consumers complaining to the FOS and getting justice if they are poorly treated by a lender.
So while I’m pleased to see consumer credit reforms finally hitting the fast track – the rest of this Bill feels like it was written by UK Finance.
Given that it’s now highly unlikely the current Chancellor will be in number 11 by Christmas, I imagine there’s every chance that some – maybe all – of these reforms will never complete their route through Parliament. Let’s see.
My great hope is that whoever takes over is willing and ready to prioritise substance over style, and spends a lot less time in the pocket of the finance lobby. Over the last two years, the Treasury has published a weak Financial Inclusion Strategy, it fudged the Motor Insurance Taskforce, and it has changed the FCA's focus with its misguided obsession that our world class regulation of financial services has been a key blocker to growth. There's still three years left of this Government and I'm holding out some hope that the Treasury's next occupants will be willing to get to grips with some of the tougher challenges around the poverty premium and fairness in financial markets.