Financial Services and Markets Bill [HL]: Progress in the Lords

Approximate read time: 30 minutes

Contents

1. Key points

2. What would the bill do?

3. Second reading in the House of Lords

4. Letters from the minister and report of the Lords Delegated Powers and Regulatory Reform Committee

5. What happened at committee stage?

1. Key points

• Introduced under Sir Keir Starmer’s government, the Financial Services and Markets Bill [HL] aims to support growth and investment and modernise the regulation of financial services. The government contends the bill will “unlock growth and investment across the country and boost protections for consumers”.1
• The House of Lords gave the bill an unopposed second reading. The bill passed committee stages unamended, although 178 amendments were tabled and debated.
• Concern was raised at committee stage about clause 3, which would give the Treasury broad regulation-making power to implement any recommendations made by the independent review into in-person banking access. The House of Lords Delegated Powers and Regulatory Reform Committee drew the attention of the House to these powers, saying they were too wide and should be removed from the bill. The government has maintained that the powers in clause 3 will allow it to act swiftly and proportionately but has promised further detail on how clause 3 will operate.
• While opposition parties have been largely supportive of the bill’s aims, a number of concerns were voiced. Opposition members tabled a range of probing amendments about consumer credit regulation and the Financial Ombudsman Service, regulator accountability and parliamentary oversight, anti-money laundering supervision, climate and nature-related obligations, AI and digital resilience, and banking ring-fencing reforms
• The government has said it is considering bringing forward an amendment about the Financial Conduct Authority’s (FCA) role in advancing the UK’s international competitiveness and growth objectives. The government also sought to move technical amendments at committee stage but withdrew them after objections from members who said they had been given insufficient time to scrutinise them.

2. What would the bill do?

The bill’s provisions are extensive and aim to make reforms to several areas of financial regulation, including:

• delivering the “next phase” in reform of the Consumer Credit Act 1974 in relation to the remaining provisions of the act and secondary legislation2
• reforming credit union common bonds
• providing the government with a power to implement any future recommendations made by the independent review into in-person banking access, which was announced by the government on 14 May 20263
• introducing reforms to the Financial Ombudsman Service (FOS)
• abolishing the Payment Systems Regulator (PSR) and transferring its functions to the Financial Conduct Authority (FCA)
• reforming the UK’s anti-money laundering (AML)/ counter-terrorist financing (CTF) supervisory regime and enabling the FCA to assume new supervisory responsibilities for the UK’s AML/CTF regime
• making a number of changes to improve the operational effectiveness of the FCA and the Prudential Regulation Authority (PRA)
• introducing a ‘provisional licences’ authorisation scheme
• reforming the senior managers and certification regimes (SMCR)
• making changes to the UK’s banking ring-fencing regime4

The bill was introduced in the House of Lords on 19 May 2026.5 The House of Lords Library published a briefing ahead of second reading of the bill in June 2026:

• House of Lords Library, ‘Financial Services and Markets Bill [HL]: HL Bill 5 of 2026–27’, 3 June 2026

As introduced, the bill contained 53 clauses and three schedules. It also includes a number of provisions which would create delegated powers, including ones which would create so-called Henry VIII powers which enable ministers to amend or repeal provisions in an act of parliament using secondary legislation.6 The scope of the bill’s delegated powers, particularly those which would be created by clause 3, has drawn criticism from the House of Lords Delegated Powers and Regulatory Reform Committee and opposition members, as explored in more detail below.

3. Second reading in the House of Lords

The Financial Services and Markets Bill received its second reading on 8 June 2026.7 Opening the debate on behalf of the government, Lord Stockwood, then minister for investment at the Department for Business and Trade and HM Treasury, outlined the importance of the UK’s financial sector:

[…] the financial services sector is one of the UK’s greatest economic success stories: we are the world’s largest net exporter of financial services, and it makes up around 20% of UK exports. The sector made 8% of UK GVA in 2025, totalling £224bn. It plays a vital role in our economy, underpinning services that households and businesses rely on every day. It provides high-quality jobs throughout the country. It was in recognition of this that the chancellor announced a significant set of reforms in her speech to the sector in Leeds.8

Lord Stockwood said the bill contained important reforms and welcomed stakeholder reaction it had received:

The Financial Services and Markets Bill will modernise how the sector is regulated, enable it to grow and lend more to businesses and make consumer protections fit for the digital age. It will achieve these objectives while maintaining high standards of regulation and oversight, ensuring that consumers and businesses continue to engage with the sector with confidence and that it will meet their needs. I am pleased that the bill has been welcomed by a range of stakeholders operating across and alongside the sector.9

Responding for the Conservative Party, Baroness Neville-Rolfe agreed on the importance of the UK financial services sector. However, she contended the UK economy overall had suffered from low growth in part due to “over-regulation”, particularly of financial services.10 She argued that the bill would not deliver the “step-change” required to address this issue.

However, Baroness Neville-Rolfe said the bill did contain positive reforms:

We […] welcome in principle the proposed changes to credit unions and the proposed transfer of the Payment Systems Regulator into the FCA. The changes outlined to the Financial Ombudsman Service are also positive, and we expect that this will bring some further clarity to its role and the regulatory landscape more widely. We also welcome measures designed to reduce approval timelines and to reform the senior managers and certification regimes.11

Baroness Neville-Rolfe argued the key problem was around what was missing from the bill:

For example, it contains nothing on financial education—so key to improving our savings and investment culture and performance. More importantly, while this legislation removes significant amounts of old regulations, it hands extensive powers to the Treasury and to the regulators to design what comes next. Yet Parliament is being asked to approve that transfer of power without seeing in sufficient detail the regulatory framework that will replace what is being repealed. The incredibly broad powers in clause 3, on in-person banking, are a good example. The repeal of a large volume of consumer credit architecture, with the expectation that much of what is removed from statute will later be recast into FCA rules, transfers responsibility for policy-making from Parliament to the FCA—that is another example. We believe that this is unwise.

Moreover, the obscure provisions in clause 14 on anti-money laundering appear to give the FCA and PRA new powers to extend regulations and impose burdens on a number of professions not currently so regulated.12

She argued that deregulation “ought not to mean removing rules from primary legislation and recreating them elsewhere, beyond proper parliamentary scrutiny”.13 Baroness Neville-Rolfe also warned the UK still lacked a clear strategy for digital assets and raised concerns over the impact of the bill’s ring-fencing provisions on the competitiveness of UK firms. She posed several questions to the government, including what was the level of confidence that the regulatory measures in the bill would prove less onerous than the regime they are replacing and what assessment the government had made of the FCA’s operational readiness to take on the additional responsibilities required.14

For the Liberal Democrats, Lord Sharkey said that he welcomed the bill and the “growth in competitive objectives that inform it”.15 However, he raised concerns over consumer protections and the level of transparency and independent oversight:

Under [clause 5] the chair [of the Financial Ombudsman Service] is appointed directly by the Treasury. This is a major structural shift that was not included in the original consultation. The clause also states that the terms of appointment must secure the chair’s independence from both HMT [HM Treasury] and the FCA. The ombudsman scheme occupies a unique position within our regulatory architecture. It must command the confidence of consumers while maintaining credibility with the industry. Independence is therefore essential: it is not merely a matter of statutory wording; it is also a matter of perception. Where appointments are made directly by the government, questions inevitably arise about whether sufficient distance exists between ministers and those exercising important quasi-judicial functions.16

He also argued that the government had failed to produce robust evidence that the FOS reforms contained in the bill were required:

The FOS resolves over 200,000 cases each year, upholding about 30%. We are told that the FOS is acting inconsistently and that it has strayed into becoming a quasi-regulator. If that were true—if this were really a systemic problem—the government should be able to produce a substantial body of evidence. If it were true, there should be hundreds or even thousands of FOS decisions demonstrating this pattern. If such a list exists, HMT and the FCA have not published it—it is certainly not in the impact assessment. If such a list does not exist, the case for much of the reforms to the FOS rests on assertion rather than evidence. I invite the minister to point us towards the specific FOS cases that justify the proposed sweeping reforms.17

He argued the reforms could reduce access to the FOS, reducing access to free and impartial redress; introduce extra bureaucracy and costs; and “ultimately, damage confidence and trust in the financial services industry”.18

Lord Sharkey also raised concerns over the powers in clause 8 to reform the test used when determining complaints under the compulsory jurisdiction regime:

This may well be the most controversial provision in part 2. Historically, the ombudsman has determined complaints according to what is fair and reasonable in the circumstances. Critics have argued that this has sometimes allowed decisions to diverge from the regulatory rule book, creating uncertainty for firms that believed that they had complied with the FCA requirements.

We should ask ourselves whether strict alignment with regulatory rules could weaken consumer protection in cases where the rules themselves are incomplete, outdated or silent on emerging risks. The strength of the ombudsman system has been its ability to look beyond technical compliance and to consider fairness in a broader sense. If that flexibility is narrowed too far, some consumers may find that conduct that was plainly unfair nevertheless escapes effective remedy.19

He cited evidence from the consumer group Which? who said the proposed reforms to the FOS and the FCA “appear to come at the expense of consumer protections” and that any benefits arising from weaker consumer safeguards “are likely to be temporary while longer term costs could be significant, particularly for vulnerable who rely most on access to redress and effective regulatory protections”.20

Other key themes raised in the debate included:

• Financial inclusion, credit unions and community finance: Many speakers welcomed the reforms to credit unions and called for stronger support for community development financial institutions (CDFIs) and mutuals. They stressed that affordable, ethical credit was essential for people and businesses excluded from mainstream finance.
• Regulator accountability and parliamentary scrutiny: Several peers raised regulator accountability, given the new powers that would be granted to them and the scope of the bill’s regulation-making powers. Peers said proportionality, transparency and democratic oversight should remain embedded in day-to-day regulatory decisions.
• Consumer protection, redress and mis-selling: Speakers raised concerns about proposed changes to the FOS and cautioned against weakening consumers’ ability to obtain fair remedies. For example, they cited mis-selling, fraud affecting investors, and unequal power between firms and consumers.
• Fraud, economic crime and online platforms: Peers highlighted authorised push payment (APP) fraud, cyber-enabled fraud, deepfakes, and the role of online marketplaces and technology companies. Several argued that platforms should face stronger responsibilities and that fraud prevention should be more central to the bill.
• Access to finance for SMEs and regional economies: Several peers argued that small businesses, especially in Scotland and outside London, struggle to secure investment despite strong entrepreneurial potential. Banks were urged to take more risk and investors to look beyond London. Several members also questioned how well the financial sector served the rest of the economy.
• AI, cyber resilience and digital exclusion: The bill was criticised for containing little about AI, cyber threats and digitally excluded consumers. Peers said that modern financial regulation must cover new technologies while preserving face-to-face banking and access to cash.
• Climate, nature and sustainable finance risks: A number of speakers argued the bill was a missed opportunity to address climate-related financial instability, nature-related disclosures and deforestation-linked finance. They said that physical climate risks could threaten insurance, housing and wider financial stability.

In his closing statement, Lord Stockwood attempted to answer some of the questions raised during the debate. On the new responsibilities being passed to regulators, Lord Stockwood argued that this reflected a long-established approach and the government believed that the “regulators remain the most appropriate entities to make rules for the sector”.21 On the matters that regulators needed to take into account when performing their functions (known as the “have regards” requirements), Lord Stockwood argued the changes in the bill would allow for more effective oversight and challenge:

The changes will require the regulator to set out the regulation and supervision clearly, making it easier for Parliament and stakeholders to understand, engage with and challenge them. The “have regards” will remain in legislation. This will support the work of the government and Parliament to hold the regulators to account, cutting out dense piecemeal reporting to focus on the bigger picture. The reforms will reduce unnecessary and duplicative burdens on the regulators, allowing them to speed up and focus on what is important while maintaining the important information needed for meaningful scrutiny. For example, the bill will require the FCA and the PRA to continue to report annually on how they are advancing their competitiveness and growth strategies. This will support the Treasury’s biannual performance reviews held with the CEOs and the regulators, introduced as part of the government’s wider regulation action plan.22

Concerning the bill’s use of delegated powers, particularly those contained in clause 3, Lord Stockwood said:

[…] the government are taking this power now to ensure that we can respond swiftly to the independent review of access to banking services once it concludes. The government are committed to keeping all aspects of the power under review as the bill progresses through Parliament and as the independent review completes its work. We expect to narrow this power once the review is concluded.23

Lord Stockwood also attempted to provide reassurance on several other areas such as financial literacy, ring-fencing, the timetable for the consideration of consumer complaints, regulatory burden and coordination between the FCA and FOS, all of which were discussed in greater depth at committee stage.

The bill received a second reading without division.24

4. Letters from the minister and report of the Lords Delegated Powers and Regulatory Reform Committee

The minister also wrote to several members after second reading to clarify the government’s position on issues raised or provide a response to points made by those members during the debate. Those letters were deposited in the Library as follows:25

• Department for Business and Trade and HM Treasury, ‘Letter to Baroness Young of Old Scone on the Financial Services and Markets Bill: Matters raised at second reading’, 22 June 2026
• Department for Business and Trade and HM Treasury, ‘Letter to Baroness Morgan of Coates on the Financial Services and Markets Bill: Matters raised at second reading’, 22 June 2026
• Department for Business and Trade and HM Treasury. ‘Letter to Baroness MacLeod of Camusdarach on the Financial Services and Markets Bill: Matters raised at second reading’, 22 June 2026
• Department for Business and Trade and HM Treasury, ‘Letter to Lord Kamall on the Financial Services and Markets Bill: Matters raised at second reading’, 22 June 2026

On 19 June 2026, the House of Lords Delegated Powers and Regulatory Reform Committee published a report on the Financial Services and Markets Bill, specifically concerned with clause 3 on access to banking services.26 As drafted, clause 3 would provide the Treasury with a broad regulation-making power designed to allow the government to implement any recommendations made by the independent review into in-person banking access, known as the ‘Access to banking services review’.27 This would be a Henry VIII power, allowing for the amendment of primary and secondary legislation through such regulations.

The committee said that, whilst it recognised there might be a need to act swiftly following the review, to “enact a legislative solution to an as yet undefined problem is to act prematurely and imprudently”.28 The committee said the power granted by clause 3 was too wide and thus should be removed from the bill:

We have previously recognised the need for delegated powers in complex financial services legislation. However, the problem with clause 3 is that it confers a wide regulation-making power on ministers before any key policy decisions have been made, before any problem has been clearly identified and assisted by a power to amend any act of parliament ever made. Such a power severely compromises effective parliamentary scrutiny. We consider that the power in clause 3 is inappropriately wide and should be removed from the bill.29

5. What happened at committee stage?

The bill was considered in Grand Committee over six sittings between 22 June and 8 July 2026.30 178 amendments were tabled, though none were added to the bill. This includes technical government amendments that were withdrawn after opposition members contended that ministers had not allowed sufficient time for scrutiny.

5.1 Committee stage sitting 1: Consumer credit, regulatory accountability and the delegated powers in the bill

Debate at committee stage began with a focus on the proposals in the bill to reform consumer credit regulation.31 Several members tabled probing amendments which reflected concerns in a range of areas including that statutory protections were being repealed before Parliament had seen the FCA rules intended to replace them, raising questions about whether consumers could lose important rights and safeguards. These concerns centred on a range of issues, such as the time limits for bringing a complaint and the “fair and reasonable” test contained in the provisions, which were returned to at several points over the course of committee stage.

Several amendments were also debated on the subject of regulatory accountability. Members argued that transferring greater responsibility from legislation to the financial regulators risked weakening parliamentary scrutiny and democratic oversight, particularly where regulators would be making policy decisions with significant consequences for consumers and firms.

The debate also highlighted broader concerns about the bill’s delegated powers, particularly in clause 3. Several members cited the Delegated Powers and Regulatory Reform Committee report. They questioned whether too much discretion was being given to ministers and regulators, creating uncertainty about how the new framework would operate and whether Parliament would retain sufficient control over future changes. Members also raised the impact of the shift away from traditional banking models on consumers, particularly those who value or rely on in-person services, and how the government can best support alternatives to traditional high street banks such as banking hubs.

Several peers also raised the issue of access to finance and affordable credit, the responsibilities of financial institutions, and how small businesses and communities underserved by the current system can be better supported.

In response, the then minister for investment, Lord Stockwood, argued that the bill’s reforms would create a more flexible and modern regulatory regime while maintaining strong consumer protections.32 He emphasised that the FCA would consult on replacement rules, that transitional arrangements would be put in place, and that existing scrutiny and accountability mechanisms would ensure regulators remained answerable for their decisions. On clause 3 and the Delegated Powers and Regulatory Reform Committee’s recommendation, Lord Stockwood said:

Clause 3 ensures that we can act swiftly and proportionately if the evidence from the access to banking services review supports intervention. Once the access to banking services review has concluded and made its recommendations, the government will assess whether any further legislative change may be required. I appreciate that the power is broad and that many of the amendments in this group are aimed at scrutinising or reducing the breadth of that power. I also recognise that the Delegated Powers and Regulatory Reform Committee has drawn clause 3 to the attention of the House and recommended that the power be removed from the bill. The government have considered that report and will be responding in writing in the normal way before report.33

Lord Stockwood said the government would “come back in some detail at a later stage” about how the powers in clause 3 would be exercised.34 Lord Stockwood also said that he would write to members concerning several issues raised during the debate, including the alignment of the FOS’s “fair and reasonable” test with FCA rules and shared liability for APP fraud and related issues.35 Those letters were deposited in the Library as follows:36

• Department for Business and Trade and HM Treasury, ‘Letter to Baroness Neville-Rolfe and Baroness Kramer on the Financial Services and Markets Bill: Matters raised at committee stage (first day)’, 30 June 2026
• Department for Business and Trade and HM Treasury, ‘Letter to Lord Davies of Brixton, Baroness Kramer and Baroness Neville-Rolfe on the Financial Services and Markets Bill: Matters raised at committee (first day)’, 1 July 2026

5.2 Committee stage sitting 2: Payments, regulatory process and scrutiny, and balance between growth, risk and protection

The second day of debate began with a focus on payments regulation after the PSR was abolished, and in particular whether transferring the PSR’s functions to the FCA would preserve specialist payments expertise and representation.37 Amendments probed whether the FCA would retain the PSR’s emphasis on competition, innovation and service-user interests, and whether digital settlement assets and other payment systems were properly captured.

Amendments were also tabled to explore how the new regulatory regime proposed in the bill would operate in practice, including minimum consultation periods, ensuring suitable transparency, and whether certain payment systems should be designated where disruption would have serious consequences for users. The underlying concern was that, once functions move from the PSR to the FCA, the statutory framework should not become more discretionary or more opaque, or less responsive to market participants and consumers.

Several peers also again raised the issue of accountability, particularly whether the bill provides for sufficient parliamentary and sector-specific scrutiny over the new powers granted to regulators and whether there was sufficient clarity about their guiding objectives.

Members also raised intelligence sharing between supervisory authorities in the financial sector, and on addressing money laundering and counter-terrorism financing. Concerns were raised about the transfer of regulatory functions in these latter areas to the FCA, and over the anti-money laundering regime more broadly. Members also questioned the regulatory principles set out in the Financial Services and Markets Act 2000 and whether they remained fit for purpose.

The latter stage of the debate included a focus on the bill’s requirement in clause 16 for the FCA and PRA to produce long-term strategies for delivering their key objectives. In particular, Baroness Noakes (Conservative) spoke to amendment 70 which would have required the FCA’s strategic priorities to include its secondary competitiveness and growth objective.38 Baroness Noakes said the minister had indicated to her that the government agreed the principle behind the amendment and was open to bringing forward its own proposal on the subject. This was confirmed by Lord Stockwood in his remarks, who said:

On amendment 70, the government agree with the noble Baroness, Lady Noakes, that the FCA’s secondary international competitiveness and growth objective should be central to the formulation of its long-term strategy. Growth is the number one priority for this government and the financial services sector, as many have noted, is key to delivering this. The government always intended the FCA’s long-term strategy to set out its priorities for advancing our international competitiveness and growth objective. We are looking into this point to determine if this is fully clear within the drafting of the clause, and we are open to tabling an amendment on report should we determine that it is needed. I thank the noble Baroness for bringing this to my attention and commit to keeping her and other noble Lords informed as this consideration progresses.39

On the other issues raised, Lord Stockwood said the government had consulted on several areas which were under discussion and that the bill already contained sufficient protections to ensure accountability and transparency. He also cautioned against imposing new conditionality that would prove overly restrictive and prevent the Treasury and regulators from acting swiftly and effectively. On money laundering and antiterrorism financing, he said he recognised members’ concerns but reiterated it was the government’s intention to simplify and strengthen a fragmented supervisory system and improve consistency.40

Lord Stockwood also attempted to move technical government amendments during the debate, including those concerning the transfer of functions from the PSR to the FCA. These amendments sought to ensure the new provisions work as intended and to correct drafting errors in the original bill.41 However, following objections from some members that they had been given insufficient time to scrutinise the provisions, the minister said he would withdraw the amendments and bring them back at report stage.42

Lord Stockwood also said that he would write to members on various issues, including on how the financial services sector would be prepared for the changes enacted by the bill and making recommendations to regulators and whether Parliament would have a role in this process.43 He also said the government would return to the issue of regulatory oversight in future committee sittings and later stages of the bill.44 Those letters were deposited in the Library as follows:45

• Department for Business and Trade and HM Treasury, ‘Letter to Baroness Neville-Rolfe and Baroness Kramer on the Financial Services and Markets Bill: Matters raised at committee (second day)’, 29 June 2026
• Department for Business and Trade and HM Treasury, ‘Letter to Baroness Neville-Rolfe on the Financial Services and Markets Bill: Matters raised at committee (second day), 2 July 2026

5.3 Committee stage sitting 3: Regulatory scope and proportionality, climate and nature goals, sustainable growth

Discussion at the third day of committee stage began with a focus on clause 17 of the bill and the interaction between financial regulation, climate policy and regulatory accountability.46 Several members raised concerns the bill would remove existing regulatory principles requiring regulators to consider sustainable economic growth and the UK’s climate and environmental objectives. Amendments were also tabled to ensure the FCA and PRA would take account of climate risk and report regularly on how those risks are reflected in their work. In addition, amendments were also tabled aimed at ensuring regulators considered nature loss, biodiversity decline and environmental harms as financially material risks.

Discussion also continued about the principles underpinning financial sector regulation. Several members raised the issue of proportionality when discussing the approach taken by regulators and the frameworks they will operate under. There was particular concern that small organisations and firms should not be disadvantaged. Some members called for the expansion of regulatory principles and making them more detailed and directive. Members also discussed the issue of financial inclusion and ensuring individuals are able to understand and manage their money.

Latter stages of the debate focused on FCA and PRA reporting and consultation requirements, transparency, and on how regulators can be effectively held to account.

Lord Stockwood said the government did not believe additional statutory reporting duties were necessary, including on climate and nature targets. He argued that climate-related issues were critical but contended it would not be beneficial to place further regulatory obligations on firms and financial institutions through new duties, disclosures and reporting requirements. The government’s concern was that adding more statutory requirements would increase compliance costs and administrative burdens, diverting resources away from investment, innovation, productivity and growth.

On regulatory principles, Lord Stockwood said the government’s view was that it was better to have a principled framework within which the regulators can exercise expert judgment rather than dictate more detail. He also said the government had sought feedback on transparency and reporting frameworks and contended the bill would ensure oversight without overly burdensome requirements and avoid duplication. Again, Lord Stockwood said he would write to members on several issues they raised during the debate, including how regulatory proportionality will be achieved so small firms are not disadvantaged and the FCA’s consumer duty and what it means for financial inclusion.47 Those letters were deposited in the Library as follows:48

• Department for Business and Trade and HM Treasury, ‘Letter to Baroness Neville-Rolfe, Baroness Kramer, Baroness Noakes, Baroness Bowles and committee members on the Financial Services and Markets Bill: Matters raised at committee (third day)’, 13 July 2026
• Department for Business and Trade and HM Treasury, ‘Letter to Baroness Tyler of Enfield on the Financial Services and Markets Bill: Matters raised at committee (third day)’, 13 July 2026

5.4 Committee stage sitting 4: Regulatory flexibility, competitiveness and growth, regulatory approvals and authorisations

The fourth day of committee stage included continued debate on the subject of regulatory flexibility, including whether UK regulators should be required to align with international financial standards or merely have regard to them when pursuing their competitiveness and growth objective.49 Some peers argued that, post-Brexit, Britain should retain greater freedom to diverge from international rules where this would benefit UK competitiveness, in contrast others stressed that adherence to international standards underpinned market confidence, stability and the UK’s reputation as a leading global financial centre.

Several amendments also sought to place a greater emphasis on competitiveness and growth, with proposals including enhanced parliamentary reporting on how regulators advanced growth, extending competitiveness considerations to the Bank of England's regulation of financial market infrastructure, and ensuring that competition, innovation and growth were reflected in the oversight of payment systems.

Debate also included increasing the efficiency of regulatory approvals and authorisations, including whether regulators should face stronger incentives to process applications more quickly. Peers highlighted concerns about delays in authorisations, senior manager approvals and firms entering or expanding in the market, arguing that lengthy processes can act as a drag on investment, innovation and growth. Members also again discussed the accountability of financial services regulators and tabled amendments aimed at probing the measures in the bill to introduce new mechanisms to ensure there was appropriate oversight and that the regulatory burden placed on firms was proportionate.

Lord Stockwood emphasised the government’s approach was to embed growth and competitiveness more deeply, including through enhanced annual reporting.50 However, he rejected proposals to weaken the requirement to align with international standards, arguing that high standards and regulatory predictability were central to the UK’s attractiveness as a financial centre. He also resisted extending growth and competitiveness objectives to certain Bank of England functions, particularly the oversight of central counterparties and securities depositories, on the grounds that financial stability and resilience must remain paramount. On payment systems, he argued that the bill already provided for an appropriate framework to promote competition, innovation and growth while maintaining effective regulation.

Lord Stockwood said he would write to members with data on the time it took to process regulatory approvals and the bill’s provisions regarding the Treasury’s power to intervene, and the FCA’s and PRA’s approach to the cumulative burden of regulation. Those letters are yet to be published at the time of writing.51

5.5 Committee stage sitting 5: Digital resilience, regulating AI in financial services, FCA structure and regulatory proportionality

On the fifth day of committee, members moved amendments to require the FCA and PRA to establish minimum regulatory standards for the digital operational resilience of regulated firms.52 Concerns were raised over the lack of provisions governing technology in the bill and around risks relating to third-party dependencies, cyber-attacks and supply-chain vulnerabilities. Amendments were also moved to explicitly incorporate AI governance requirements within the regulatory framework. It was also suggested that financial services firms should designate a specific individual or function responsible for AI governance.

Members also returned to the subject of the FCA’s organisational structure and how it could support the government’s competitiveness and growth objectives. Amendments were debated, for example, which would have required the FCA to set up a wholesale markets and firms division and a specific duty to support innovation, competitiveness and sustainable growth in wholesale markets. Peers also raised issues around consumer access, and the practical impact of regulation on individuals and smaller market participants. Further amendments were tabled on a range of issues including inheritance tax payments, regulation of litigation funding, building society governance, the appointed representatives regime and its effect on access to financial advice, and streamlining senior manager approvals.

Lord Stockwood acknowledged the importance of both AI and digital resilience, and agreed that these issues will become increasingly important for the financial services sector.53 However, he said the amendments tabled were unnecessary as regulators already possessed sufficient powers to address these issues.

On the structure of the FCA and wholesale markets, Lord Stockwood said he recognised the intention behind these amendments and agreed that wholesale markets were a vital part of the UK’s financial services sector.54 However, he said the FCA had to retain sufficient flexibility including where there was a less clear distinction between wholesale and retail activities. As in previous debates, Lord Stockwood resisted putting detailed new statutory requirements into the bill, arguing that existing FCA, PRA, SMCR, operational resilience, consumer duty and other frameworks already give regulators flexibility to address many of the risks raised.

During the debate Lord Stockwood again sought to move technical amendments to the bill providing for a transitional measure which would enable the Treasury to restate the existing overseas recognition regimes inherited from the EU within the new overseas recognition regime framework.55 However, following an objection by Baroness Noakes (Conservative), and noting that she had met with the minister to discuss the issue, the amendments were not moved.56 Lord Stockwood also said he would write to members on why the issues which regulators must “have regard to” do not include economic crime issues of anti-money laundering and transparency of ownership and why there is a requirement to consult the regulators for powers under new section 408A but not under new section 408B.57 Those letters are yet to be published at the time of writing.58

5.6 Committee stage sitting 6: Ring-fencing and financial stability, cross-border banking groups and shared services, growth, innovation and competitiveness across financial services regulation

Debate began on the sixth day of committee on amendments concerning clauses 39 and 40 and whether the bank ring-fencing regime should be retained, reformed or repealed.59 Several members argued that ring-fencing has become costly, duplicative and internationally anomalous given the development of resolution planning, stronger capital/ liquidity rules and prudential supervision. However, others warned that the regime remained an important “firebreak” protecting retail banking, taxpayers and essential services from wholesale or investment banking risks, especially amid private credit, AI, geopolitical and capital-buffer concerns.

Several amendments were also debated on more technical questions of whether easing ring-fencing rules on intra-group services could expose UK ring-fenced banks to risks where services are supplied by overseas group entities outside PRA consolidated supervision. Concerns were raised that, in a crisis, continuity of services to a UK retail bank might depend on foreign regulators or group entities, while opponents cautioned that extra statutory safeguards could disadvantage foreign-owned banks and duplicate existing PRA and operational continuity in resolution protections.

Later groups of amendments addressed amendments on insurance-linked securities, digital assets, tokenisation, digital identity, financial education, dispute resolution, debanking and employment-related competitiveness concerns.

Key themes included whether tax uncertainty is holding back the UK’s insurance-linked securities market; whether the UK needs a clearer digital assets and tokenisation strategy, industry forum and consumer redress framework; whether financial capability should be elevated as part of consumer protection; whether the FOS should be replaced or reformed; and whether regulatory risk-aversion is contributing to debanking of SMEs, charities, defence firms, politically exposed persons and digital asset businesses.

On ring-fencing, Lord Stockwood said the government remained committed to preserving core protections for financial stability and depositor protection while making the regime more flexible, proportionate and better aligned with prudential and resolution frameworks.60 On later amendments he argued that existing workstreams—such as the ‘Wholesale financial markets digital strategy’, the ‘Digital securities sandbox’, the ‘National payments vision’, FCA/PRA engagement, Money and Pensions Service functions, FOS reform and ongoing FCA work on account closures—made further statutory reviews or duties unnecessary at this stage. Lord Stockwood also said he would write to clarify further matters on the FOS and how it would operate in practice and on the compensation cap for senior managers.61 Those letters are yet to be published at the time of writing.62

Image by Tadas Petrokas on Unsplash.

Footnotes

• 1 HM Treasury, ‘Boost for Britain’s financial services and greater protections for consumers as new legislation is introduced’, 20 May 2026.
• 2 Explanatory notes, p 10.
• 3 HM Treasury, ‘Government reviews access to face to face banking services’, 14 May 2026.
• 4 House of Lords Library, ‘Financial Services and Markets Bill [HL]: HL Bill 5 of 2026–27’, 3 June 2026.
• 5 UK Parliament, ‘Financial Services and Markets Bill [HL]’, accessed 30 July 2026.
• 6 UK Parliament, ‘Henry VIII clauses’, accessed 30 July 2026.
• 7 HL Hansard, 8 June 2026, cols 1146–216.
• 8 HL Hansard, 8 June 2026, col 1146.
• 9 HL Hansard, 8 June 2026, col 1146.
• 10 HL Hansard, 8 June 2026, col 1151.
• 11 HL Hansard, 8 June 2026, col 1152.
• 12 HL Hansard, 8 June 2026, col 1152.
• 13 HL Hansard, 8 June 2026, col 1152.
• 14 HL Hansard, 8 June 2026, col 1153.
• 15 HL Hansard, 8 June 2026, col 1154.
• 16 HL Hansard, 8 June 2026, col 1154.
• 17 HL Hansard, 8 June 2026, col 1155.
• 18 HL Hansard, 8 June 2026, col 1155.
• 19 HL Hansard, 8 June 2026, col 1155.
• 20 HL Hansard, 8 June 2026, col 1156.
• 21 HL Hansard, 8 June 2026, col 1212.
• 22 HL Hansard, 8 June 2026, col 1213.
• 23 HL Hansard, 8 June 2026, col 1212.
• 24 HL Hansard, 8 June 2026, col 1216.
• 25 Letters deposited in the House’s libraries are available through the UK Parliament ‘Deposited papers’ database.
• 26 House of Lords Delegated Powers and Regulatory Reform Committee, ‘Second report of session 2026–27’, 19 June 2026, HL Paper 18 of session 2026–27.
• 27 HM Treasury, ‘HM Treasury: Access to banking services review’, 14 May 2026.
• 28 House of Lords Delegated Powers and Regulatory Reform Committee, ‘Second report of session 2026–27’, 19 June 2026, HL Paper 18 of session 2026–27, p 2.
• 29 As above, p 3.
• 30 UK Parliament, ‘Financial Services and Markets Bill [HL]: Committee stage’, accessed 30 July 2026.
• 31 HL Hansard, 22 June 2026, cols 191–272GC.
• 32 HL Hansard, 22 June 2026, col 201GC.
• 33 HL Hansard, 22 June 2026, cols 231–2GC. For further information on the ‘Access to banking services review’, see: HM Treasury, ‘HM Treasury: Access to banking services review’, 14 May 2026.
• 34 HL Hansard, 22 June 2026, col 233GC.
• 35 HL Hansard, 22 June 2026, col 261GC.
• 36 Letters deposited in the House’s libraries are available through the UK Parliament ‘Deposited papers’ database.
• 37 HL Hansard, 24 June 2026, cols 297–352GC.
• 38 HL Hansard, 24 June 2026, col 326GC.
• 39 HL Hansard, 24 June 2026, cols 332–3GC.
• 40 HL Hansard, 24 June 2026, col 319GC.
• 41 HL Hansard, 24 June 2026, col 309GC.
• 42 HL Hansard, 24 June 2026, col 310GC.
• 43 HL Hansard, 24 June 2026, col 324GC.
• 44 HL Hansard, 24 June 2026, col 335GC.
• 45 Letters deposited in the House’s libraries are available through the UK Parliament ‘Deposited papers’ database.
• 46 HL Hansard, 29 June 2026, cols 353–430GC.
• 47 HL Hansard, 29 June 2026, col 382GC.
• 48 Letters deposited in the House’s libraries are available through the UK Parliament ‘Deposited papers’ database.
• 49 HL Hansard, 1 July 2026, cols 466–522GC.
• 50 HL Hansard, 1 July 2026, col 468GC.
• 51 Letters deposited in the House’s libraries are available through the UK Parliament ‘Deposited papers’ database.
• 52 HL Hansard, 6 July 2026, cols 1–60GC.
• 53 HL Hansard, 6 July 2026, col 5GC.
• 54 HL Hansard, 6 July 2026, col 17GC.
• 55 HL Hansard, 6 July 2026, col 45GC.
• 56 HL Hansard, 6 July 2026, col 45GC.
• 57 HL Hansard, 6 July 2026, col 60GC.
• 58 Letters deposited in the House’s libraries are available through the UK Parliament ‘Deposited papers’ database.
• 59 HL Hansard, 8 July 2026, cols 105–76GC.
• 60 HL Hansard, 8 July 2026, cols 119–20GC.
• 61 HL Hansard, 8 July 2026, col 161GC.
• 62 Letters deposited in the House’s libraries are available through the UK Parliament ‘Deposited papers’ database.