Chancellor Rachel Reeves’ inaugural Mansion House speech on Thursday 14 November outlined sweeping proposed reforms to the UK’s financial regulatory framework. While a variety of issues were noted during the speech, including the shake-up of local government DC pension schemes, of particular interest to financial professionals are the proposals concerning the Financial Ombudsman Service, the Senior Managers and Certification Regime, and broader issues surrounding consumer redress.

Senior Managers and Certification Regime (SMCR)

The SMCR was initially introduced in 2016 as a mechanism to hold senior individuals accountable for their conduct in hopes of reducing harm to consumers and strengthen market integrity following the global financial crisis. 

In her address, Reeves has acknowledged the SMCR’s role in improving standards and accountability. However, the need for reform was emphasised as the regime has received sharp criticism for its costly and administrative burdens.

To address these challenges, the HM Treasury, together with the Financial Conduct Authority (FCA), and the Prudential Regulatory Authority will release their joint review findings which will include a commitment to consult on the removal of the Certification Regime (which relates to specific functions which are not senior management functions) from legislation.

Financial Ombudsman Service (FOS) and Redress Reform

Consumer redress was a central theme of Reeves’ speech. While she acknowledged the FOS is vital for consumers to seek redress, she noted that “reform is needed to create a surer climate for investment.” Reeves announced a new agreement between the FCA and the FOS to strengthen their collaboration. Key aspects of this reform include: (1) Clearer expectations on their cooperation, in particular regarding historic market practices and mass redress events; and (2) A joint Call for Input, (published on 15 November) which invites stakeholders to share views on how to improve the current redress framework. This aims to identify what changes could be made to assist with better outcomes for consumers and ensure regulatory requirements are consistent. The consultation remains open until 30 January 2025. 

Broader Measures to Boost Growth

In connection with these new regulatory reforms, Reeves also noted broader initiatives aimed at enhancing the UK’s position as a global financial leader, some of which include: (1) PISCES: Reeves has committed to legislate to establish PISCES, a new stock market by May 2025, to support the growth of companies. (2) DIGIT: a pilot project which will use distributed ledger technology to modernise the delivery of a Digital Gilt Instrument and is intended to demonstrate the Government’s commitment to innovation. (3) Insurance Reforms: a consultation on captive insurance, with the aim of enhancing the UK’s Insurance Linked Securities framework and cementing the UK’s lead position in the financial services sector.

A Vision for Reform

Reeves’ speech demonstrates the Government’s dedication to strengthening the UK’s financial regulation to enhance consumer trust, growth and responsibility. By way of addressing the issues around SMCR, the FOS framework and pursuing innovative financial reforms, the Government seeks to position the UK as competitive and a global leader in sustainable finance.

No doubt there will be a significant volume of analysis and comment on these proposed reforms in the coming weeks and months. It will be interesting to see what the output is from the various consultations taking place to assess and shape the proposals.