Mansion House 2025: UK uses “Leeds Reforms” to rewire financial system

Rachel Reeves has used a summit in Leeds to announce a wide-ranging package of reforms to financial regulation.

A new strategy for financial services

The Leeds Reforms seek to make the UK the number one destination for financial services in the next ten years. To achieve this aim, the government has released a Financial Services Growth and Competitiveness Strategy.

One of the areas of focus in the strategy is the regulatory framework. The government plans to make several interventions to ensure that the UK’s financial services regulatory environment is proportionate, predictable and internationally competitive. These include:

• shorter deadlines for determining regulatory applications
• changes to the capital framework for banks
• addressing concerns about how the Consumer Duty applies to wholesale firms
• reforms to the Senior Managers and Certification Regime and Financial Ombudsman Service

The Strategy is informed by a call for evidence which was opened alongside the Chancellor’s first Mansion House speech in November 2024. A consultation on the proposed cross-cutting reforms relating to the regulatory environment closes on 9 September 2025.

Read our blogpost for more: UK puts growth at heart of financial services strategy

Streamlining SMCR

In a consultation paper, HM Treasury proposes:

• removing the Certification Regime from legislation, allowing the FCA and PRA to replace it with a new regime
• removing the requirement for pre-approval for some roles
• giving the regulators more flexibility in how they define Senior Management Functions

The FCA and PRA are also consulting on changes to their SMCR rules. FCA CP25/21 sets out proposals for a first phase of reforms, such as improving approval processes, extending regulatory deadlines and raising the threshold for becoming an enhanced SMCR firm. A second phase will explore simplifying management responsibilities maps, removing the Directory and streamlining Conduct Rule breach reporting. The PRA proposes its Phase 1 reforms in CP18/25.

All three consultations close on 7 October 2025. The regulators expect to finalise the rules in mid-2026.

Consumer Duty

The government has asked the FCA to report to it on how the Consumer Duty applies to wholesale firms. According to the Financial Services Growth and Competitiveness Strategy, the FCA will set out how it plans to deal with concerns about the way the Consumer Duty is working for wholesale firms engaged in distribution chains which impact retail consumers and provide certainty on the categorisation of professional clients.

The report is due by the end of September 2025.

FOS reform

Following a review of the Financial Ombudsman Service, an HMT consultation proposes:

• changing the “fair and reasonableness” test to align with FCA rules
• introducing a mechanism for the FOS to seek the FCA’s view on the interpretation of its rules
• introducing an absolute time limit of 10 years for bringing complaints to the FOS

HMT also wants to make it easier for the FCA to intervene quickly on mass redress events.

In an accompanying FCA/FOS consultation, the FCA and FOS aspire to implement what they can ahead of any legislative changes and also propose among other measures:

• gatekeeping of FOS complaints at a “pre-registration” stage to resolve fundamental deficiencies or wait for FCA guidance
• criteria for treating an issue as a mass redress event (e.g. volume and cost, impact on firms and the market) with the FCA then to actively manage the issue
• an ability for firms to ask the FOS to consider a representative sample of “lead complaints” first
• greater flexibility for the FSCS in deciding who to pay to (e.g. under a scheme of arrangement) and to settle claims without further investigation if more efficient

Both consultations close on 8 October 2025.

Wholesale Financial Digital Markets Strategy

HMT has released a strategy focusing on the UK’s plans to drive forward the digitalisation of wholesale markets. The strategy sets out the government’s commitments which include removing paper from wholesale markets, introducing a next day T+1 securities settlement cycle in October 2027, enabling tokenisation of financial assets and appointing a Digital Markets Champion.

The Digitisation Taskforce, chaired by Sir Douglas Flint, has released its final report. In its response, the government accepts all the recommendations and plans to legislate end the issuance of paper shares in 2027.

HMT has also published an update on its pilot for a Digital Gilt Instrument. New features to be tested as part of the pilot include delivering on-chain settlement of DIGIT transactions and enabling settlement of over-the-counter trades.

Overseas recognition regimes

HMT has published draft regulations on overseas recognition regimes. As explained in a guidance note, these regimes are an important tool in supporting cross-border financial services by unilaterally recognising where an overseas regulatory framework provides for similar outcomes to the UK regime.

ESG: No green taxonomy

In a response to its 2024 consultation, the government says that it will not develop a UK taxonomy. This is in part due to the significant work that would be needed to navigate interoperability challenges.

Read our blogpost: UK government scraps plans for Green Taxonomy

ISAs and Targeted Support

The government says it is considering reforms to ISAs to achieve the right balance between cash savings and investment. As a first step, the government will allow Long Term Asset Funds to be held in Stocks & Shares ISAs next year. An industry-led advertising campaign will also seek to raise awareness of the benefits of investing.

The government has opened a consultation on draft regulations for setting up a “transformational new regime” known as Targeted Support. The regime is intended to allow firms to provide more affordable investment advice. Providing Targeted Support will be a new regulated activity which will be carved out from the regulated activity of advising on investments.

The consultation on Targeted Support closes on 29 August 2025. The regime is expected to go live in April 2026.

Updates to UK CRR

HMT has published a policy paper on applying the model of regulation under the Financial Services and Markets Act 2000 to the UK Capital Requirements Regulation. The paper covers changes relating to Basel 3.1, the overseas recognition regimes and definitions in the UK CRR which will be retained in legislation.

HMT has also published:

• draft transitional regulations that will require institutions to apply specified PRA rules for the calculation of their market risk capital requirements until the end of the transitional period of 31 December 2027
• draft regulations that will restate relevant definitions in UK legislation

The PRA has opened a consultation on its proposed implementation of Basel 3.1 in which it proposes a delay to the market risk modelling elements to 1 January 2028.

Feedback on the PRA consultation and the HMT publications is invited by 5 September 2025.

Ring-fencing review

HM Treasury will undertake a short review of the ring-fencing regime, working with the Bank of England and reporting into the Economic Secretary to the Treasury. In its Financial Services Growth and Competitiveness Strategy, the government says that it intends to uphold the regime to protect financial stability but wants to identify reforms to support its growth agenda. This could include enabling ring-fenced banks to provide more products and services to UK businesses and allowing banks to share resources and services more flexibly across the ring-fence.

The review will report by early 2026.

Other developments

• The FCA has finalised its rules for public offers and admissions to trading (PS25/9) and for public offer platforms (PS25/10). The FCA has also released a statement on its reforms to capital markets. Client subscribers to the Linklaters knowledge portal can read our briefing here: Prospectus Rules: Admission to Trading on a Regulated Market: Key changes for equity capital markets
• HMT has released a consultation on updating the UK EMIR framework for central counterparties.
• In a response to its 2024 consultation, HMT has confirmed that it will introduce a dedicated framework for captive insurance. A captive insurer is an entity that insures or reinsures the risk of other companies within the same group. The FCA and PRA will consult on new rules in summer 2026.
• An update from the Payments Vision Delivery Committee explains how an industry-led company will lead the procurement and delivery of a new retail payments infrastructure. Read our blogpost for more: One step closer to the next generation of UK retail payments infrastructure.
• A new "Office for Investment: Financial Services" will provide a dedicated concierge service to provide regulatory and wider business support to international financial services firms to establish or grow their presence in the UK.