On 14 November 2024, the new Chancellor of the Exchequer, Rachel Reeves, gave a speech at the annual Mansion House dinner and announced a package of measures around financial services reform (available here: Mansion House 2024 - GOV.UK). There is a lot to digest here and it is very interesting to see the new government’s emphatic focus on growth.
Some regulators and trade associations have publicly released responses to the package, for example:
- FCA statement on Mansion House speech
- UK Finance responds to the Chancellor's Mansion House speech | Insights | UK Finance
- ABI response to Chancellor's Mansion House speech | ABI
The speech
The Chancellor of the Exchequer delivered a comprehensive Mansion House speech emphasising the government's commitment to fostering economic growth, enhancing the competitiveness of the UK's financial services sector, and ensuring economic stability.
Key points include:
Economic Growth as a National Mission: The Chancellor stressed that improving economic growth has been central to their agenda, both in opposition and in government. The recent budget aimed to provide economic stability and tackle supply-side issues to spur growth.
Budget Highlights: The budget focused on economic stability by making tough choices on spending, welfare, and taxes, and on boosting public investment by £100bn over five years to drive growth and create jobs.
Financial Services Sector as a Growth Engine: The Chancellor highlighted the importance of the financial services sector, which employs 1.2 million people and accounts for 9% of the UK's economic output. Plans to increase investment and reform in this sector were outlined, including significant changes to the UK’s listing regime and the launch of the Financial Services Growth and Competitiveness Strategy.
Pension Fund Reforms: The speech detailed plans to overhaul the UK's pension funds to unlock £80bn for investment in private equity and infrastructure projects. This includes creating "megafunds" by consolidating Defined Contribution and Local Government Pension Schemes.
International Investment and Partnerships: The Chancellor underscored the importance of attracting international investment, mentioning the £63bn investment from the recent International Investment Summit. She also emphasized the need to maintain strong trade relationships, particularly with the United States and the European Union, while exploring opportunities with other significant economies.
Regulatory Reforms: A series of regulatory reforms were announced to make the UK’s financial services sector more dynamic and competitive. This includes reviewing the Senior Managers and Certification Regime, adjusting pay deferral arrangements, and streamlining regulatory requirements (she was referring to the recent Consumer Duty Call for Input here).
Public Service and Economic Reforms: The Chancellor called for reforms in public services and the economy to improve efficiency, productivity, and value for money. This includes using digital technology more effectively and focusing on prevention to manage system pressures
Innovation and Support for Growth Sectors: Commitments were made to support innovation and growth in various sectors, including launching a pilot for a Digital Gilt Instrument (DIGIT) and consulting on captive insurance to strengthen the UK’s position as a financial services centre.
Focus on Sustainable Finance: The Chancellor expressed the ambition to make the UK a global leader in sustainable finance, including the launch of the Climate Investment Fund Capital Market Mechanism and the co-launch of the Transition Finance Council.
Overall, the Chancellor's speech outlined a broad and ambitious agenda focused on economic growth, investment, and reform, particularly within the financial services sector, to ensure the UK's competitiveness on the global stage.
The Package
Growth and international competitiveness
What was said/published?
The government published a Call for Evidence on their new Financial Services Growth and Competitiveness Strategy.
The Strategy will focus on 5 priority growth opportunities:
Fintech
Sustainable finance
Asset management and wholesale services
Insurance and reinsurance
Capital markets
In brief, the government has asked for: “submissions of evidence or analysis of how the financial sector can drive growth, the role that regulation plays in the sector’s growth, and ways to improve the international competitiveness of the sector…”
This should be of interest to any firms involved in the UK financial services sector.
Timing
Call for Evidence closes 12 December 2024 (only 4 weeks away!)
Strategy to be published Spring 2025
Pensions
What was said/published?
The government published the interim report of the Pensions Investment Review which set out proposals to deliver a major consolidation of the UK pension system (the creation of so-called “megafunds”) that seeks to unlock billions of pounds of new investment for the UK economy and boost returns for savers: Pensions_Investment_Review_interim_report.pdf
This was accompanied by two Consultation Papers:
Timing
Final report in Spring 2025
Pension Schemes Bill - 2025
ESG
What was said/published?
The UK government is (finally…) consulting about a UK Green Taxonomy (following a lot of work undertaken by the Green Technical Advisory Group a few years ago): UK Green Taxonomy - GOV.UK
The government has also published a response to the consultation on regulation of ESG ratings and draft legislation on the regulation of ESG Ratings providers. Including a possible new regulated activity of “providing ESG ratings”.
The FCA has released a statement welcoming the publication of the consultation response and the draft legislation.
The government also published policy paper setting out principles on voluntary carbon and nature market integrity. The principles are voluntary, aiming to support organisations engaged in discretionary action towards net zero and nature positive transitions, and should be followed by organisations that wish to align with them.
The government is co-launching the Transition Finance Council with the City of London to take forward recommendations from the Transition Finance Market Review.
Timing
Taxonomy consultation closes 6 February 2025
Deadline for comments on the draft regulation by 14 January 2025
FCA will consult on rules in 2025 once legislation is finalised
Early 2025 – there will be a consultation on the implementation of the principles
Regulator remit
What was said/published?
New remit letters were sent to the Financial Conduct Authority, Prudential Regulation Committee, Financial Policy Committee and Payments Systems Regulator to ensure a greater focus on growth.
A re-affirming remit letter was also sent to the Monetary Policy Committee: Monetary policy remit: Mansion House 2024 - GOV.UK
Timing
Immediate
Advice
What was said/published?
The government announced that the FCA will consult on the Advice Guidance Boundary Review (ABGR) – on “transformational changes” to financial advice and guidance.
The FCA announced an update to their page on the AGBR.
The FCA, ICO and TPR also published on Friday 15 November a joint statement around data protection and effective communications to consumers in relation to retail investments and pensions.
Timing
The FCA will consult on high-level proposals for targeted support in pensions in December 2024
H1 2025 – FCA will consult on rules for better support for consumers in retail investments and pensions
Redress
What was said/published?
The government announced a package of measures modernising the Financial Ombudsman Service (FOS) rules.
The FCA/FOS Memorandum of Understanding (MOU) has been updated.
The FCA/FOS have published a joint Call for Input on Modernising the Redress System. This Call for Input escribes challenges around “mass redress events” and asks for input on how the redress framework could be modernised to lead to better outcomes for customers and firms. The Disputes Sourcebook in the FCA Handbooks (DISP) has not been reviewed for 10 years so it is in need of modernisation. Clearly some respondents commented on DISP in their responses to the Consumer Duty Call for Input around streamlining the FCA Handbook, which is referenced here.
Timing
Call for Input closes 30 January 2025
Responses and next steps due H1 2025
SMCR
What was said/published?
It now seems that we can expect even bigger SMCR changes than anyone anticipated, with a commitment to consult on removing the current Certification Regime from legislation. We did have a suspicion that perhaps the consistent delays to the SMCR review’s publication was because they were re-looking at the substance.
We know the Certification Regime is costly and burdensome to implement and maintain – particularly identifying staff in large organisations, annual certifications and uploading / removing individuals from the Financial Services Register. When we supported firms in responding to the initial Discussion Papers and Call for Evidence, and in our own response to Treasury we focussed heavily on the fact that a lot of the SMCR’s pain points for firms, particularly relating to the administration of the regime, came from the underlying legislation. Therefore, any meaningful change would require legislative amendments and political buy-in, which, prior to the election, wasn’t looking likely.
The Chancellor also mentioned the PRA consultation on reducing the length of pay deferrals in an effort to attract and retain talent and the FCA consultation on transformational changes to financial advice and guidance (see above) as part of a rebalanced approach to consumer protection.
Timings
Outcomes of the SMCR review will be published “shortly”
Fraud
What was said/published?
The government calls for tech and telecoms companies to go further in tackling fraud.
Timing
No further details as of yet
Mutuals and co-ops
What was said/published?
The government published a Call for Evidence seeking views on the merits of, and considerations for, reforming credit union common bond requirement for membership in Great Britain.
The government also Wrote to the Financial Conduct Authority and Prudential Regulation Authority requesting a report on the current mutuals landscape.
The government also welcomed the establishment of an industry-led Mutual and Co-operative Business Council.
Timing
Call for Evidence closes 6 March 2025
Asked for report before the end of 2025
Payments
What was said/published?
The government has published a National Payments Vision (NPV). In summary:
- The Vision: “A trusted, world-leading payments ecosystem delivered on next generation technology, where consumers and businesses have a choice of payment methods to meet their needs.”
- The Vision itself is actually a relatively short document split into:
o Introduction
o Overarching vision regardless of method of payment
o Short term actions to strengthen foundations (focusing on Open Banking and fraud)
o Early actions to deliver on the ‘three pillars’ (being: innovation, competition, security)
o Delivery of Payments Forward Plan (led by a cross-regulator and industry Payments Vision Delivery Committee)
- The Vision is predominantly focused on retail payments and picking up the points of the Garner review – many are addressed but others are not.
- It matches up quite closely with the NPV as presented to an Innovate Finance industry roundtable organised earlier in the year with HMT to obtain feedback on the government's initial proposals for the NPV – the government seem to have taken on board industry feedback.
The FCA has released a brief, positive statement on the NPV: https://www.fca.org.uk/news/statements/fca-welcomes-treasurys-national-payment-vision
Timing
Various impact points over the next 12 months
DIGIT
What was said/published?
The government will launch a pilot to deliver a Digital Gilt Instrument (DIGIT).
Timing
No further details or indication of timing as of yet
PISCES
What was said/published?
The government announced their response to the consultation on the Private Intermittent Securities and Capital Exchange System (PISCES), a new bespoke market for private company shares.
Timing
Legislation due by May 2025
MiFID
What was said/published?
The government announced the next steps in the reform of UK MiFID to support UK competitiveness and market integrity: Next steps for reforming the UK Markets in Financial Instruments Directive - GOV.UK
HMT will give the FCA fuller powers of direction in relation to the reporting of OTC (over-the counter) positions;
HMT will use FSMA23 to revoke firm-facing requirements in MiFIR re transaction reporting and delegate the setting of a new regime to the FCA (see below related Discussion Paper); and
HMR will revoke the firm-facing requirements in the MiFID Organisational Reg so they can be replaced in the FCA Handbook. On 15 November 2024, the FCA published a Discussion Paper 24/2 Improving the UK transaction reporting regime.
On 15 November 2024, the FCA published a Discussion Paper 24/2 Improving the UK transaction reporting regime. The FCA is looking to improve quality of transaction reporting data whilst reducing the burden on firms.
Timing
Discussion Paper closes 14 February 2025
Insurance
What was said/published?
The government launched a consultation on the potential for a new approach to captive insurance.
The government is also considering what steps it might take to help further improve the UK’s Insurance Linked Securities offering, building on the PRA’s ongoing reforms to the UK regime.
Timing
Consultation will close 7 February 2025
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