With this backdrop we start to turn our attention back to the Financial Services sector that post the Global Financial Crisis has been a focus of more and more regulation, however globally and more specifically in the UK the Pendulum is swinging back.   

The UK’s regulatory landscape is shifting once again – and for once, it’s less about restriction and more about growth. With a new wave of reforms spanning ring-fencing, pensions, and the National Wealth Fund, UK policymakers are looking to unlock capital and reboot competitiveness.

With public finances under pressure, the UK government is exploring reforms to unleash the potential of financial services in driving economic growth. A key priority remains reducing the regulatory load on both the financial sector and broader private industry—illustrated by the Chancellor’s ambition to cut firms’ regulatory admin costs by 25% during this Parliament.

Over the coming weeks, the government will outline its economic agenda through a series of announcements—including the June Spending Review, further steps in the Pensions Investment Review, a refreshed Industrial Strategy, and the Mansion House speech in July—all expected to highlight the pivotal role of financial and capital markets in supporting UK growth.   

Here’s a quick breakdown of some of the key topics – and how it stacks up against moves in the US and EU.

• What is it:  Ring-fencing requires major banks in the UK to separate their retail banking operations from investment banking activities, with restrictions on how capital may be deployed from the ring-fenced bank and the provision of services intragroup; the US and EU have not applied equivalent rules.

• What’s changing now: Following the Skeoch Review, from Feb 2025 there are some near term changes to the regime including raising the deposit threshold from £25bn to £35bn, and offering some additional flexibility, for example in the treatment certain categories of relevant financial institutions.  

• What might change later: It was reported in the press in April 2025 that a number of leading banks in the UK approached the Treasury urging for the abolition of the ring-fencing regime in order to support businesses and stimulate economic growth, and that the Chancellor responded that they remained 'open-minded' about future policy. That said, Andrew Bailey set a less supportive tone in a letter to the Treasury Committee last week, stating removal of ring-fencing would have a "negative effect on UK lending".

• Why it matters: Some banks argue this could free up balance sheet capacity, reduce compliance burden, and make UK banks more agile – a potential win for competition and growth.  There is however still a long path to any substantive changes in policy given requirement for changes to primary legislation, and the potential political headwinds that might be faced. A middle ground stopping short of full abolition might be an alternative outcome.

• Mansion House Accord: In May 2025 17 of the UK's largest workplace pension providers committed to significantly increase investment in private markets, in a move that the Treasury says will unlock £50bn investment by the end of the decade. Although billed as a voluntary accord, the Chancellor subsequently announced there will be a 'backstop' power to set 'binding asset allocations'.  See latest Pension update. 

• DC [1] Schemes in focus: New requirements to disclose asset allocations and compare value for money may nudge schemes toward higher-return, illiquid assets.

• Consolidation drive:  The government continues to encourage scheme consolidation to unlock scale and steer more money into UK plc.

• Outcome sought:  Redirect institutional flows from gilts to growth equity, infrastructure, and private credit.  Though provision of a sufficient pipeline of UK investment opportunities remains a key dependency.

• The plan: Launched in October 2024 evolving out of the UK Infrastructure Bank, the NWF has total capitalisation of £27.8bn to co-invest in key sectors like green energy, advanced manufacturing, and life sciences.

• Mechanism: Anchored by public money but designed to crowd in private capital.

• Significance: Echoes global sovereign wealth fund models, adding a domestic investment champion to the toolkit. Informative white paper by Phoenix Group released in May suggesting policy recommendations that could overcome some perceived barriers. 

• Expected themes (July 2025):

- Continued push for pension reform and UK growth investing

- Progress update on Solvency II recalibration

- Possible clarity on ISA [2] reforms and UK retail participation in capital markets    

• Tone likely: Pragmatic, investor-friendly, and growth-oriented

• Pushback mounting: Regulators under pressure to water down Basel 3.1 implementation

• Leverage ratio debates: Industry lobbying to loosen supplementary leverage ratio (SLR) requirements resurfaces, with indication from Treasury Secretary Bessent recently that discussions were well progressed 

• SLR explainer: The SLR determines a minimum amount of capital that large US banks must hold irrespective of the risks of their exposures. As such, banks are required to hold capital against their holding of USTs [3]. Because the SLR requires that banks hold the same amount of capital for each dollar of safe or risky asset, it incentivises banks to shed low-yielding safe assets, such as Treasuries. Therefore a change to the SLR could see increased demand for Treasuries. The UK (& EU) may follow suit to make sure their banks aren’t disadvantaged.  

• Overall direction: While the Fed holds the line (for now), political pressure is clearly tilting toward looser capital rules, and more generally the loosening of the regulatory regime.  
  
  
• Want to dive in deeper? Learn more about Basel 3.1, key timelines for implementation and more with our helpful guide.

• Post-reset pragmatism: UK-EU regulatory dialogue has thawed since the Windsor Framework, with signs of more technical cooperation.

• EU Capital Markets Union (CMU): Still in slow motion, but Brussels remains focused on improving cross-border access and retail investment.

• UK vs EU tone: The UK is moving faster and more flexibly to adjust its rulebook for competitiveness.

The UK is quietly – and sometimes not so quietly – recalibrating its regulatory framework to support investment, innovation, and economic dynamism. Compared to an uncertain US environment and a cautious EU pace, the UK’s proactive reforms stand out. July’s Mansion House speech could set the tone for a new chapter in regulatory pragmatism – one where unlocking capital and reducing friction finally take centre stage.

1. DC [1] Defined Contribution
2.  ISA [2] Individual Savings Account
3. USTs [3] US Treasuries