Unlocking Capital, Driving Innovation: The Chancellor’s Financial Services Agenda

Author: Priscilla Gaudoin - Head of Risk & Compliance - published August 2025

Topics: Regulatory Strategy, Regulatory Change, Accountability, Innovation

Regions and Regulators: UK, FCA

“We are rewiring the UK’s financial system to unlock investment, drive innovation, and create skilled jobs across the country.”
— Chancellor Rachel Reeves, Mansion House Speech 2025 

On 15^th July 2025, Chancellor Rachel Reeves delivered a landmark speech at the Mansion House, outlining a new vision for the UK’s financial services sector. Centred around growth, innovation, and competition, her agenda signalled a decisive shift in regulatory philosophy.

At the heart of Chancellor’s speech were a series of ambitious reforms designed to modernise the UK’s financial services landscape. Centred on six key pillars, the agenda aims to reduce regulatory friction, boost investor confidence, and enhance competitiveness across banking, investment, and digital finance.

The Government’s strategy highlighted six specific areas for action.

Figure 1: Six areas for regulatory attention 

From sweeping reforms under the SM&CR regime to greater support for retail investors and accelerated access to mortgages, the proposals mark a significant shift toward a more agile, growth-oriented regulatory framework. Crucially, the speech also introduced targeted reforms to bank capital rules, ring-fencing and digital asset infrastructure, laying the foundation for a reimagined and more dynamic financial ecosystem.  

1. Reforms to promote ‘informed risk-taking’

The Chancellor called for a more measured approach to risk-taking. The goal being to support the wider strategy of growth within financial services by reviewing and simplifying regulatory requirements, as well as improving the regulatory approval processes.

2. Support for retail & wholesale Investors

According to the  most recent data from HM Treasury and the Financial Conduct Authority (FCA), approximately £430 billion in savings is currently held in cash by UK consumers (approx. 24% of adults) that could potentially be invested for higher yields. This figure excludes emergency savings and represents funds that are not currently being invested despite the potential for better returns. 

The Government wishes to encourage savers to move away from low-yield deposits towards better investment opportunities. Such a move would require better risk warnings that are read by investors.

3. Faster mortgage access

The Chancellor also proposed new mortgage guarantee schemes and relaxed loan-to income ratios to help first-time buyers onto the property ladder.  This reduces lender risk and increases product availability for low-deposit borrowers. This will aid the UK economy by boosting homeownership among lower-income groups, stimulate economic growth by increasing housing market activity, and improve financial inclusion by making mortgage products more accessible.

4. SM&CR & FOS reforms

A review of the current SM&CR was requested and came as no surprise given the Government’s Call for Evidence published in March 2023. Additionally, the FOS proposed reforms show alignment with the FCA’s strategy.  The reforms aim to lower barriers for new entrants and fintechs, encouraging innovation and competition, which aligns with the regulators’ secondary objective to promote growth and international competitiveness.

5. Bank capital & ring-fencing adjustments

From 1 January 2027, the UK is set to adopt Basel 3.1 capital rules for domestically focused banks but will delay modelling requirements for market risk until the following year. This phased approach aims to reduce initial complexity and give banks time to adjust.

The goal is to lower capital buffers, freeing up capital for lending, particularly to SMEs and infrastructure projects.  Additionally, the Bank of England plans to raise the asset threshold for Minimum Requirement for Own Funds and Eligible Liabilities (MREL) to £25-£40 billion, reducing resolution costs for mid-sized and challenger banks. This is intended to promote competition and support local banking resilience.

A review of the ring-fencing rules (due by early 2026) seeks to offer flexibility whilst preserving core protections. It aims to allow retail banks to offer more services to businesses, enabling greater sharing of back-office operations across the ring-fence, as well as addressing inefficiencies whilst preserving protections for depositors and aiding stability.

6. FinTech, digital assets & investment promotion

A new concierge service for international investors is to be launched by October 2025, operating within the Office for Investment.   It will provide tailored support to overseas firms wishing to establish or expand their operations in the UK’s financial sector. Simplifying regulation will help them to navigate the requirements and encourage global capital investment into the UK.

Additionally, the government supports the development of tokenised securities frameworks such as stablecoins, digital gilts (DIGIT pilot), and wholesale digital assets.

So, what does this mean for firms and the wider industry?

Impacts for financial services:

The speech signals the way forward for financial services and is also aligned with the key messages from both the FCA and PRA. For several years, we’ve heard UK governments indicate that the UK needs to maintain its leading position in the financial sector. The benefits for the sector focus upon:

• Growth & Competitiveness: Over 80% of FS leaders expect reforms will enhance growth to attract foreign investment, though some want strict safeguards against undue financial risk. Streamlining could save the sector an estimated £40 million annually.
• Regulatory efficiency: Faster senior manager, firm and product approvals aim to reduce friction and enable quicker product launches and strategic hires.
• Fuelling innovation: Support for FinTech scaling, digital assets, and modernised infrastructures (like digital gilts) aim to cement the UK as a technology hub.

What are the challenges?

Whilst the benefits look great, there are also a few words of caution relating to consumer protection and the ‘go-fast’ approach. Critics warn that dismantling ring-fencing or weakening FOS may reopen systemic vulnerabilities. Some also worry that policies favouring finance over real-economic growth, pose the risk of asset bubbles and consumer harm without the right guardrails in place.

Figure 2 Benefits vs Challenges

This creates both opportunities and challenges for the industry. For example, asset management and wealth managers need to consider both the opportunities and challenges posed by these changes.

Opportunities include:

1. Expanded retail engagement.  Launching retail campaigns and encouraging proactive investment from savers will create an enlarged client base for firms.

2. Product innovation freedom. With risk-warning reviews and regulatory streamlining, managers can accelerate new fund launches, especially in equities and long-term asset funds.

3. Simplified administration and faster decisions.  Reducing SM&CR administrative burdens and quicker approvals could free resources to deploy on client focused innovation.

4. FinTech collaboration potential. Creating a digital asset infrastructure would boost opportunities for tokenised funds, ESG products, and digital platforms integration.

However, firms also need to consider the following challenges:

1. 1. Fiduciary responsibility amid risk. With regulations encouraging risk, managers will need to balance innovation against a duty of care and transparent advice.
   2. Compliance complexity. Navigating the shifting rules, e.g. new SM&CR expectations, FOS limits, ring-fencing rollback, requires active investment in compliance capabilities, and retraining staff.
   3. Retail protection expectations.  Even as consumer-facing campaigns expand, managers must ensure robust advice, risk disclosures, and suitability assessments to uphold standards and reputation.

What does this mean for Consumer Duty?

Of course, there will be an impact upon Consumer Duty, specifically in three key areas:

Figure 3: Key areas impacting Consumer Duty

The FCA has been asked to assess whether Consumer Duty applies appropriately in wholesale contexts, especially in distribution chains impacting retail outcomes.

And despite deregulatory momentum, the duty to deliver ‘good outcomes’ remains key. Managers must guard against dilution under pressure to innovate faster or push products into retail distribution.

Lastly, risk-warning reforms oblige firms to review consumer-facing communications for clarity and fairness, part of the broader consumer duty obligations.

What action is needed?

Firms would be advised to focus their attention on improving the following areas:

1. Tracking regulatory developments

Firms need to stay engaged with upcoming consultations on ring-fencing, FOS, SM&CR and Consumer Duty. It is crucial to review and ascertain the impact of any consultations upon your own firm.

2. Review product pipelines & communications

Firms need to focus on clear messaging as well as compliance. Testing risk-warnings, reviewing ISA-enabled funds for retail customers should be given consideration.

3. Update compliance & advisory models

Firms should prepare by reviewing their current Consumer Duty obligations, consider enhancing consumer disclosures and ensure robust suitability processes.

4. Invest in digital & FinTech partnerships

Firms need to consider their business models and consider any preparations for digital asset, tokenisation, and ISA product expansion.

5. Strengthen governance

Consideration should be given to how firms and react to the shifting regulatory demands such as the SM&CR reforms and risk frameworks that are linked to the UK’s growth mandates.

Final Observations:

Chancellor Reeves’ 2025 Mansion House reforms set a bold agenda, positioning the UK as an agile, growth-oriented global financial centre. There’s real potential for improved retail participation, dynamic asset management, and innovation.

However, success depends on a balanced execution: speed without compromising consumer protection, innovation without shirking fiduciary responsibilities.

As the industry moves from deregulation rhetoric to concrete rule changes, asset and wealth managers that embrace digital transformation, reinforce transparency, and maintain consumer-first principles will best capitalise on this emerging opportunity. Cutting red tape will not be enough, this transformation demands thoughtful governance, modernised infrastructure, and a renewed commitment to sustainable, ethical finance.

How Ruleguard Helps The Financial Sector:

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Related Webinars, White Papers and Blogs

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• Bridging Compliance and Technology
• UK & Ireland: Regulatory Priorities for 2024/25
• Regulatory Updates: Blueprint for Success
• Regulatory Developments: How to be a catalyst for change
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• Guide to the FCA's Strategy
  

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About the author

In a career spanning 30 years, Priscilla has worked as a consultant, CCO and MLRO providing regulatory oversight and advice to firms across the financial services industry. She is responsible for our thought leadership programme, writing regular articles and white papers, and hosting webinars on a variety of regulatory matters.

She is a Fellow of the International Compliance Association, a certified GRC practitioner, and a member of the Institute of Risk Management.

 

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