Named the Leeds Reforms, the strategy aims to turn the UK into the “number one destination” for financial services by 2035 by attracting investment and creating jobs through the cutting of red tape.
This includes returning the Financial Ombudsman Service (FOS) to its “original purpose as a simple impartial dispute resolution service”, instead of acting like a quasi-regulator, the announcement from the Treasury said.
The FOS’ decisions will be more aligned with Financial Conduct Authority (FCA) rules. Today, the resolution service said it would be changing the interest rate charged to firms when awarding compensation to customers, to track 1% above the Bank of England’s average rate.
This will be implemented from 1 January 2026.
The FCA and FOS are jointly consulting on changing the way the resolution service processes complaints, so claims are “well-evidenced” before an investigation begins.
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This will include adapting the FOS ‘fair and reasonable’ test, giving the FCA more flexibility to manage mass redress events, including pausing complaints handling, and introducing a formal process for the FOS to refer issues to the FCA to clarify the regulator’s rules before a final decision is made.
A time limit for bringing cases to the FOS will also be introduced, set at 10 years and subject to exceptions such as longer-term products.
Changes have also been proposed to the Senior Managers and Certification Regime (SM&CR), which the government said was originally intended to address failures in individual accountability and culture that contributed to the 2008 financial crisis. However, it said it had been implemented in a way that created “unnecessary costs for business”.
The Treasury said the reforms would “help deliver a commitment to radically streamline the regime, cutting the burden on firms in half”.
The FCA has proposed giving firms more time and flexibility to submit applications for approving new senior managers after an unexpected or temporary change.
It also plans to remove duplication where the same people are certified for separate functions, provide guidance on how firms can streamline annual checks to certify people as ‘fit and proper’, and give firms more time to report updates to senior manager responsibilities.
It will also increase how long criminal record checks for senior manager applications are valid for before an application is submitted.
This consultation will close on 7 October.
The government has announced changes to the minimum requirement for own funds and eligible liabilities (MREL) for banks and mortgage lending policy, ahead of Chancellor Rachel Reeves’ Mansion House speech later today, which is also expected to include details on the permanent mortgage guarantee scheme.
Reeves said: “We fixed the public finances and stabilised the economy. Now we need to double down on our global strengths to put the UK ahead in the global race for financial businesses – creating good skilled jobs in every part of the country and helping savers’ money go further through our Plan for Change.”
Modernising financial services
Industry figures welcomed the plans to reform the financial services sector.
Mike Reigner, chief executive of Santander UK, said: “We welcome the announcement of the Leeds Reforms today, which set out a positive vision for UK financial services. The changes outlined within the package are important steps to modernising the UK’s regulatory architecture, and will enable banks like ours to support our customers better and drive growth within the wider economy.”
Charlie Nunn, chief executive of Lloyds Banking Group, also welcomed the “ambition shown in the Leeds Reforms to unlock investment, boost financial resilience, and support long-term economic growth”.
He added: “As a sector, we have a vital role to play in helping customers make the most of their money and in facilitating investment and innovation that benefits communities and businesses across the UK.”
David Postings, chief executive of UK Finance, said: “Financial services are vital to the UK economy and I strongly welcome the Chancellor’s support for our sector as one of the UK’s global strengths.
“We submitted a range of ideas to government to help support growth and the UK’s position as a global financial centre. Across many of these key areas, the Chancellor has listened and delivered significant positive change.
“Reforming the Financial Ombudsman Service, streamlining regulation in areas such as the Senior Managers and Certification Regime and the Consumer Duty, and supporting work by regulators to unlock capital for lending, will all help to drive investment and create a more pro-growth operating environment.
“Having a regulatory system that allows for appropriate risk-taking is vital to ensuring the sector can better support UK businesses, consumers and the government’s growth mission.”
