June 2026
In July 2025, the UK Chancellor of the Exchequer launched the ‘Leeds Reforms’ – a package of measures intended to simplify regulation, broaden access to financial advice and boost the growth of the UK financial services industry. Our initial analysis can be found here.
Nearly a year on, we take stock of progress on the reforms and the extent to which they have started to, or are likely to achieve, their stated objectives.
The government and regulators continue their work to deliver the Leeds Reforms. The general direction is one of simplification and support to competitiveness and innovation. However, as any regulatory change, even simplification, typically requires consultation and updates to legislation and/or regulatory policy, many of the potential impacts or benefits are yet to be felt by firms. It is also worth noting that different firms often want different things – for example some would favour more radical change or closer alignment with the EU.
In May 2026, the UK Government introduced a new Financial Services and Markets Bill (FSMB) into Parliament. The Bill will alter the legislative framework to implement various reforms that have been in train for the last few years, including:
The new FSMB is designed to implement several of the measures set out in the FS Growth and Competitiveness Strategy. Other initiatives delivered or in train include the establishment of the Office for Investment: Financial Services, offering a concierge service for international FS firms looking to set up or expand in the UK, the appointment of FS AI champions, an industry-led campaign promoting the benefits of retail investment, and the expected launch, in summer 2026, of a skills compact for financial services.
Whether the Strategy will actually deliver its ambition to, by 2035, make the UK ‘the global location of choice for financial services firms to invest, innovate, grow and sell their services throughout the UK and to the world’, remains to be seen.
Reforms to the SM&CR were announced in 2022 but have been painfully slow. The FCA and PRA have now implemented their ‘phase 1’ amendments, but these were largely administrative in nature rather than game-changing. In fact, certain aspects of the changes have the potential to broaden the scope of the regime, particularly in the context of the SMF7 role for dual-regulated firms.
The proposed legislative changes in the FSMB for the ‘phase 2’ reforms look to be more meaningful, for example repealing the certification regime and removing regulatory pre-approval for some senior management functions and statutory requirements relating to statements of responsibilities. However, these will take some time to push through the legislative and policymaking process. Read more here.
Since late 2024, HMT, the FCA and the FOS have been considering reforms to modernise the redress framework, improve consumer outcomes and provide greater certainty for firms. The Leeds Reforms proposed to address key industry concerns by improving complaint quality, reducing friction and duplication, strengthening regulatory alignment and enabling faster, more proportionate responses to individual complaints and large-scale redress events.
Progress has been gradual, but HMT has now confirmed the legislative reforms and the FCA and FOS have consulted on pre-legislative changes. The benefits will take time to be realised as legislation progresses and FCA rules are finalised. Even so, it is encouraging that these landmark reforms are on track. Once implemented, they should deliver meaningful change including greater certainty for firms launching innovative products and services. With the overall direction now clear, firms can begin to adapt their complaint and redress frameworks.
Developments in this area are amongst the most exciting of the various reforms underway. The FCA’s targeted support regime (read more here) has been fully implemented and several firms have been authorised. Amongst the positives are the FCA and FOS working closely together from the outset and the FCA’s pre-application support service which has smoothed the authorisation process for firms.
The FCA has also moved at speed to consult on simplifying the advice regime, although this looks to be less impactful than some had hoped (read more here). And wider changes are in the pipeline, with revisions to the FCA’s client categorisation framework due to be finalised later in 2026.
In arguably the most significant of all the changes, the FCA has ripped up the retail disclosure regime inherited from the EU and introduced a new, more flexible disclosure framework under the Consumer Composite Investments regime. It remains to be seen whether the new disclosures will result in more engagement from retail investors. What is certain is that there is significant amount of work for firms to get through before the end of the transition period in 2027.
The Leeds Reforms included a new Wholesale Markets Financial Digital Strategy to drive growth and competitiveness of wholesale markets across three themes: market optimisation, market transformation and market leadership.
The most notable progress has been on market transformation:
Progress on market optimisation has been slightly slower:
In terms of market leadership, UK regulators and policymakers are continuing to work domestically and with other jurisdictions to build global approaches to digitalisation, through collaborations such as the FCA’s work with IOSCO to develop international standards for cryptoassets.
The Leeds Reforms committed to freeing up capital for investment and supporting growth and competitiveness in the banking sector. Significant progress has been made in progressing policy, though there is further work to do, notably on capital and foundation IRB, and some implementation dates will be in 2027 and beyond, meaning it is still too soon for certain potential benefits to be realised.
Review and reform of the ring-fencing regime was high on the agenda ‘to strike the right balance between growth and stability’. The government published its conclusions and proposals in May 2026, with plans to take forward ‘a package of meaningful reform’ across five key issues which include creating a more agile and proportionate framework, allowing ring-fenced banks to provide more services to consumers and to share resources and services across the ring-fence, and addressing inefficiencies in the framework. Banks which lobbied for the regime to be scrapped altogether have so far been disappointed. The PRA intends to consult in summer 2026 on ways for banks to share resources and services more flexibly across the ring-fence.
The Financial Policy Committee’s promised assessment of bank capital requirements was published in December 2025 and included the decision to reduce the benchmark for Tier 1 capital from 14% to 13% of risk weighted assets (RWAs). Further priority areas for review or additional work include enhancing the usability of buffers, assessment of the functioning of the leverage ratio in the UK, interactions in capital requirements related to domestic exposures, an approach to the automatic indexation of regulatory thresholds (PRA to consult on this in 2026), and consideration of a systematic approach to the indexation of regulatory thresholds.
Changes to the MREL and resolution assessment thresholds were implemented on 1 January 2026 with some transitional provisions. Updates to resolution reporting and disclosures will come into effect from 1 January 2027.
The government also pledged to implement the Basel 3.1 requirements in a way that supported UK competitiveness. Final PRA policy (PS1/26) was published in January 2026, with no material changes to the ‘near-final’ rules that had been issued in September 2024. Implementation, as for the new ‘Strong and Simple’ regime for small domestic deposit takers, will be from 1 January 2027, with a carve-out for the new internal model approach (IMA) under the Basel market risk (FRTB) framework until 1 January 2028, to allow more time for the US approach to be clarified.
Finally, the Reforms proposed to make it easier for mid-sized banks to compete in the mortgage market. The PRA published Discussion Paper (DP) 1/25 on 31 July 2025, asking for feedback by 31 October on a possible ‘foundation IRB’ approach to replace the current ‘disproportionately challenging’ IRB approach for medium-sized firms. There has been no further update.
Insurance-specific elements of the Leeds Reforms consist of commitments to develop a UK captives regime and update the risk transformation framework. These are targeted changes, of direct interest to particular firms or segments of the market.
HMT has taken on board industry feedback in several areas in its development of the UK captives regime, including broadening both eligibility and scope to cover, for example, Group Life, certain compulsory lines (on a reinsurance basis) and limited use by financial services firms to manage their own risks. A key feature is the ability to establish captives through Protected Cell Company (PCC) structures, which should broaden access, particularly for smaller firms that are unlikely to establish a standalone captive. The PRA and FCA are expected to consult on the detailed design of the regime in summer 2026. This is likely to include a more proportionate approach to capital, reporting and authorisation, with implementation anticipated around mid‑2027.
The newly introduced FSMB establishes the legislative foundation for some of these developments, including to enable Protected Cell Companies (PCC) to operate as insurers. The remaining components of the captives regime, however, can now be taken forward by the regulators directly.
This is positive and pro-growth – if gradual and targeted - direction of travel. The incoming Chief Executive of the PRA, Katharine Braddick, has noted that there may be merit in reviewing the post-review Solvency UK in the future, particularly in relation to insurers’ ability to invest more effectively in infrastructure.
The Leeds Reforms included the government’s restated commitment to:
SRS S1 and S2 have been finalised and available for voluntary use since February 2026. The FCA has consulted (CP26/5) on applying them to listed issuers from January 2027. The government will establish a voluntary oversight and registration regime for providers of third-party assurance over sustainability disclosures, with the Financial Reporting Council (FRC) tasked with setting up an interim regime by mid-2026 ahead of legislation. The government also consulted on transition plans in 2025, as part of its commitment to ‘secure Britain’s position as the green finance capital of the world’, but there has not yet been any further output.
The FPC continues to monitor transition-related vulnerabilities. From a prudential regulation perspective, PRA PS5/25 has set increased expectations for firms’ management of climate-related risks requiring a significant uplift in approaches under the previous SS3/19.
ESG ratings regulation has also advanced. Final FCA rules for ESG ratings providers are expected in Q4 2026 with the regime due to take effect from June 2028.
The Leeds Reforms included measures to speed up regulatory decision-making across authorisations, variations of permission (VoP) and SM&CR applications, intended to address concerns that existing processes constrained growth and competitiveness and made the UK less attractive for external investment or firm expansion.
The FSMB has now introduced legislation to implement tighter deadlines and, interestingly, the PRA and FCA began to measure performance against them in advance of any statutory requirement to do so. The FCA’s Q4 2025/2026 operating metrics show that 92.3% of new firm authorisation applications and 97.4% of VoP applications were processed within the revised deadlines, while the PRA reported that 100% of authorisations and VoPs processed met the revised deadlines. Although based on a relatively small dataset, these results suggest that the changes are already positively impacting firms.
The proposed Overseas Recognition Regime will allow HMT to determine that the regulatory framework in another jurisdiction provides similar outcomes to the UK – thereby enabling overseas firms to provide services directly into the UK without having to comply with duplicative requirements. This could be particularly beneficial in new areas of regulation such as ESG ratings and digital assets.
As events of the last few years have shown and continue to show, financial services regulation is not the only factor to have an impact on economic growth and competitiveness. The direction of change in regulation is generally perceived as positive, and the Leeds Reforms are now being implemented and having some impact. However, the amendments already proposed to the FSMB show that significant reform to financial services rules is never going to be straightforward, quick or without challenge for policymakers or industry. It is important for firms to continue to track the multitude of changes.
