The Financial Services and Markets Bill (FSMB) contains proposals that will add to the UK regulators' statutory objectives and shift the accountability between them, Parliament and HM Treasury (HMT). As final approval of the FSMB looms, the regulators have started to discuss how they will implement their new responsibilities and how regulated firms and the wider financial services industry might be impacted as a result.

As the UK departed from the EU, the Government established the Future Regulatory Framework Review to determine how the financial services regulatory framework should adapt to the UK's new position. Through consultations in October 2020 and November 2021, the Government sought feedback on the way the UK could develop a framework that is fit for the future but also maintains a coherent and agile approach to financial services regulation, delivers appropriate protections and promotes financial stability. In the next stage of this process, the Government has proposed changes through the FSMB, which are currently being debated in Parliament.

New objectives

The Government is keen to ensure that regulators facilitate the long-term growth and international competitiveness of UK economy. The FSMB therefore introduces new secondary objectives for the PRA and FCA which require them to act in a way that advances the international competitiveness of the UK economy and its growth in the medium to long term. These are labelled as secondary objectives so as not to undermine the regulators' primary objectives of — for the PRA — promoting the safety and soundness of regulated firms and protecting insurance policyholders and — for the FCA — ensuring market integrity, protecting consumers and promoting effective competition.

The FSMB also adds a new regulatory principle for the FCA and the PRA, requiring them, when discharging their general functions, to have regard to the need to contribute towards achieving the UK net zero emissions target.

Accountability measures

The FSMB supports the comprehensive use of the Financial Services & Markets Act (FSMA) model throughout the sector i.e. delegating the setting of regulatory requirements to the regulators, working within an overall policy framework set by the Government and Parliament. As the regulators' powers are increasing, so the FSMB also introduces various measures to increase their accountability to HMT, external stakeholders and Parliament:

  • A requirement for the regulators to respond annually to the formal recommendation letters submitted by HMT under existing provisions in FSMA 2000. The responses should outline the action each regulator has taken, or intends to take, on the basis of the recommendations — or the reasons no action has been taken.
  • A legislative requirement for the regulators to keep their rules under review and publish a statement of policy for how they will conduct rule reviews.
  • A mechanism to allow HMT to direct the regulator to review its rules where it may be in the public interest e.g. when market developments may mean that current rules are no longer appropriate or where there is substantial evidence that the rules are not achieving their purpose. These reviews could be carried out by an independent reviewer, if appropriate.
  • After consistent feedback that the regulators need to improve their cost benefit analysis of regulation, the FSMB requires the FCA and the PRA to establish and maintain a new statutory Cost Benefit Analysis Panel each (“the CBA Panel”). Subject to a materiality threshold, the regulators should consult their CBA Panel before publication of consultations on rules. The CBA Panels will also be able to review the regulators' CBA methodology and processes by examining published CBAs.

There is ongoing uncertainty about whether the Government will introduce a regulatory 'call in' or public interest intervention power to the FSMB. This power would enable the Treasury to “direct a regulator to make, amend or revoke rules”. The Government held this proposal back from the initial version of the FSMB but has recently written to the Treasury Select Committee to signal its intention to amend the legislation and introduce this power at a later stage. There are questions about whether this power would be an undue challenge to regulatory independence.

Regulators' responses

The regulators have started setting out how they are going to respond and change their ways of working to incorporate these new objectives.


A September Discussion Paper (DP) sets out a vision for the PRA as an accountable, accessible and proportionate rule-maker, noting that strong and responsive rules can protect resilience and facilitate competitiveness at the same time, avoiding unnecessary trade-offs. Feedback is invited until 8 December on all the areas covered in the DP including the proposed approach to the new secondary objective and how this will fit into the existing framework, international engagement, the policy cycle, and the new PRA Rulebook. Further publications will follow as the PRA develops its future approach to prudential policy.

In a speech coinciding with the publication of the DP, Vicky Saporta, PRA Executive Director for Prudential Policy, noted that “good prudential regulation is a bit like an effective immune system” and flagged the PRA's intention to take a proactive approach to the new secondary objective. She cautioned that the new regime should be based on openness rather than weakening standards to attract business: “Taking our new competitiveness objective seriously will not mean entering a regulatory race to the bottom. Instead, we will make rules that allow the UK economy to benefit the most from the UK's strengths as a leading financial centre without compromising on safety and soundness.”

Sam Woods, PRA CEO, used his Mansion House speech in October to focus on growth and competition, expressing support for the FSMB and reiterating the need for future UK prudential regulation to be robust, global and independent.


In an effort to become more accountable, the FCA set out 'commitment outcomes' in its 2022-25 Strategy. These explain the actions the FCA will take to help create the conditions for financial services to deliver the outcomes it expects. There are corresponding outcome metrics to measure progress. These metrics include research data that records the attitudes, perceptions or behaviours of consumers/ firms and market data.

In his October Mansion House speech, FCA CEO Nikhil Rathi detailed how upfront effort from firms in implementing the outcomes focused Consumer Duty should mean fewer new rules down the line. He also set out how the FCA “embraces a secondary objective of promoting growth and competitiveness, aligned to international standards”, citing as examples the long established regulatory sandbox and early and high growth oversight with new firms.

However, he did say that as the FCA embeds competitiveness further in its approach, it is vital that it does not compromise on consumer protection, market integrity and competition. It is not the FCA's role to create or maintain barriers to entry that support short term revenues of incumbent players at the expense of new entrants. While happy to embed a secondary objective for growth, he noted that making it a primary objective would undermine the FCA's international standing.

He also spoke out against the proposed call-in power — suggesting that it would undermine the FCA's independence and agility at speed — which it has demonstrated in its reaction to COVID-19, Russia, the rising cost of living and unprecedented market turbulence.

The FCA Board has noted that moving forward with the Future Regulatory Framework review would have a significant impact on industry and that it would need to re-prioritise its work and commitments in order to deliver these outcomes. The FCA is committed to delivery of its existing statutory objectives and maintaining confidence in financial services as these plans progress.

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