The “Leeds Reforms” announced ahead of the Mansion House speech in the evening, signal a major directional shift, but the combination of reviews, deferrals, and minor adjustments raises questions about whether this is truly transformational or incremental. The regulatory tone is clearly pro-growth, yet the policy substance is more nuanced.

The Mansion House speech itself was largely a replay of the announcements made earlier in the day in Leeds, though the rhetoric was amped up a bit, with talk of regulation acting as "a boot on the neck of business", and the repeated mantra of regulating for growth not just for risk. Certainly, the call to arms to embrace more risk has landed well in the financial press since. 

Much is being made of a "bonfire of regulation" to unleash the full potential of UK financial services industry - is it just us, or does this feel a bit déjà-vu all over again? We wrote a piece in December 2022 entitled A bonfire of the regs? We've moved south from Edinburgh to Leeds, but the promise of tearing up the red-tape to achieve efficiencies feels similar. 

However there is lots to reflect on from this week - here's a quick rundown of the main themes (you can find all the speeches, consultations and policy papers here):

• Reduction in Red Tape:  Reeves pledges a “bonfire of red tape”, including cutting unnecessary regulatory burdens and streamlining guidance. Commitment to twice-yearly regulatory reviews to improve clarity and reduce duplication.   

• Review of Ring-Fencing: despite some sensational headlines from the FT about tearing it down (subsequently toned down), in reality the commitment is to a review of the ring-fencing rules to "strike the right balance between growth & stability". As we said last month in Fenced In, there is a way to go to a reformed state of affairs, but the signals on Tuesday were promising, talking of "meaningful reform". 

• Senior Managers & Certification Regime (SMR)[3]: targeted review and simplification of SMR. Faster turnaround on approvals; proposals to remove pre-approval for ~40% of roles. Seen as a boost for City hiring and compliance cost savings.

• Basel 3.1 and FRTB: one year delay to The Fundamental Review of the Trading Book (FRTB)[4] implementation until Jan 2028. No delay to broader Basel 3.1 framework, effective from Jan 2027, but capital relief introduced for smaller banks and building societies. The Minimum Requirement for Own Funds and Eligible Liabilities (MREL)[5] key thresholds amended to £25bn and £40bn for partial transfer & bail-in. Internal Ratings Based (IRB)[6] discussion paper expected mid-summer. Existing treatment for non-UK covered bonds extended. 

• Consumer Duty Review: HMT instructs FCA to review how Duty applies in wholesale markets and distribution chains. Expected interim guidance by September 2025. Aim is to reduce uncertainty for firms handling B2B products and institutional clients.

• Cash ISA Rules: no reform to the Cash ISA rules despite speculation. Focus instead on boosting equity ownership and financial literacy, including campaigns promoting shares over cash. As an aside though we see that Lond Term Asset Funds (LTAFs)[7] will be permitted in Stocks & Shares ISAs from next April. 

• Financial Education & Retail Participation: campaigns to promote retail equity investment. FCA and industry to expand access to financial guidance and build confidence in non-cash products. Possible future reform of stamp duty on share trading is hinted, but not yet confirmed. 

• Pension Reforms & Productive Investment: nothing new announced, but a re-statement of the Pension Scheme Bill, the Defined Contribution (DC)[8] & the Local Government Pension Scheme (LGPS)[9] megafunds, the voluntary target for DC schemes to allocate 10% to private markets under the Mansion House Accord (while stating 'confident' that mandatory powers won't be needed). A wider pensions adequacy review to assess contribution levels, outcomes, and possible new Pensions Commission. 

• Mortgage Reforms: lenders will have more flexibility to offer loans above the 4.5x income cap for borrowers with strong credit records, with the emphasis on encouraging home ownership and helping more people onto the housing ladder.

• Other Themes: launch of a “concierge service” to support international investment into UK financial services. Plan to modernise shareholding records and digitise ownership tracking. On the sustainable finance agenda, announcement made that government is abandoning the UK Green Taxonomy, with efforts instead directed to scale transition finance initiatives.   

   

Markets are likely to welcome clarity on Basel 3.1 timing, SMR simplification, and deregulatory tone. Changes to ring-fencing rules would be significant for the banking sector if enacted, but we are a long way from that being a reality. Realisation that Cash ISA reform is off the table may temper retail investment sentiment.

The pro-growth agenda may boost confidence, but questions remain over fiscal sustainability and whether regulatory reviews will convert into meaningful capital reallocation. Similar rhetoric on red tape reduction has appeared before – the test is execution. Overall a positive direction, but in the face of economic headwinds and tight public finances, some may ask whether it's game changing.   

References

[1] HM Treasury (HMT)

[2] Financial Conduct Authority (FCA)

[3] Senior Managers & Certification Regime (SMR)

[4] Fundamental Review of the Trading Book (FRTB)

[5] The Minimum Requirement for Own Funds and Eligible Liabilities (MREL)

[6] Internal Ratings Based (IRB)

[7] Lond Term Asset Funds (LTAFs)

[8] Defined Contribution (DC)

[9] Local Government Pension Scheme (LGPS)