Promoting Growth and Competitiveness in the UK Financial Services Sector
House of Lords' Perspectives on Regulation and Competition Embraced by LMG
In 2025, the UK's financial services sector has seen a wave of reforms aimed at fostering growth and international competitiveness. The House of Lords Financial Services Regulation Committee and government documents have outlined a clear, multi-faceted strategy [1][2].
Focus Areas for Regulatory Reform
The strategy emphasizes a shift from a solely risk-focused regulatory environment to one that actively promotes growth and global competitiveness [1]. Five key areas have been identified as crucial for driving sectoral transformation over the next decade: delivering a competitive regulatory environment, harnessing the UK’s global leadership, embracing innovation and Fintech, building a retail investment culture, and ensuring the sector has the necessary skills and talent [1].
Key Regulatory Reforms
| Reform Area | Specific Recommendations | |-------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Competitive Regulatory Environment | Streamline processes to make regulators more agile; aim for a 50% reduction in burden for the Senior Managers and Certification Regime (SM&CR); clarify and refine the Consumer Duty’s scope, especially for wholesale firms; expedite authorisation processes for new firms [1][2]. | | Regulatory Structures & Oversight | Overhaul the Financial Ombudsman Service (FOS), ending its quasi-regulatory status to improve fairness and predictability; set new, shorter deadlines for regulatory applications to expedite market entry [2]. | | Banking Sector & Private Markets | Review the impact of post-2008 capital and liquidity reforms on bank lending, especially for SMEs and infrastructure; assess the rise of private markets as alternative finance providers, and consider whether their competitive advantage is regulatory in nature; recommend reforms to bank capital regulation to increase risk appetite for lending; benchmark against international examples (US, EU) to ensure the UK remains globally competitive [3]. | | Financial Infrastructure | The government has directed the Financial Market Infrastructure Committee to advance financial stability while facilitating innovation and supporting the growth mission, with a requirement for regular reporting and accountability to Parliament [4]. | | Specialist Growth Areas | Focus on making the UK the most attractive global hub for investment management, insurance and reinsurance, and sustainable finance; promote regional clusters and support international firms via the new Office for Investment [2]. |
Implementation and Next Steps
Specific consultations have been launched on SM&CR and FOS reforms, and the House of Lords is actively soliciting evidence on the impact of regulatory reforms on private markets and bank lending [1][3]. Regulators and the Financial Market Infrastructure Committee are required to respond to government recommendations, ensuring ongoing alignment with national growth objectives [4].
The strategy also emphasizes the need to develop a skilled workforce to sustain the sector’s competitiveness [1].
The London Market Group's Perspective
The London Market Group (LMG) has long advocated for changes in the regulation of the wholesale insurance industry, with a focus on safeguarding the London Market's leading position [5]. The LMG has published two documents focusing on this issue [6].
The LMG supports the Committee's recommendations, including the call for a more tailored and proportionate approach to regulation for the UK's financial services sector [7]. The group also welcomes the Committee's recommendation for more transparency on reporting by the regulators and a review of their statutory operating metrics [8].
The LMG believes that understanding of relative costs is critical for businesses choosing where to put capital and people [9]. The group has welcomed the Committee's recommendation of an independent study to assess the cost of compliance relative to other international jurisdictions [10].
The LMG has commented on the need for regulators to shift their operations and culture to support growth and competitiveness [11]. The group also supports the Committee's recommendation that H.M. Treasury introduce outcome-based growth metrics [12].
The LMG has welcomed the announcement of a UK regime for captive insurance companies, believing it will deliver benefits for the industry [13]. The group also supports the ongoing scrutiny the Committee intends to take over the course of the parliament [14].
The Committee's recommendations were made after listening to market leaders and stakeholders, including those from the London Market Group [15]. The LMG looks forward to working with the government and regulators to implement these recommendations and continue promoting the growth and competitiveness of the UK financial services sector.
[1] House of Lords, Financial Services Regulation Committee, Inquiry into the Regulation of the Wholesale Insurance Market, 2025, https://www.parliament.uk/business/committees/committees-a-z/lords-select/financial-services-regulation-committee/news-parliament-2019/regulation-of-the-wholesale-insurance-market-report-published-17-12-2025/
[2] HM Treasury, Financial Services Future Regulatory Framework, 2025, https://www.gov.uk/government/publications/financial-services-future-regulatory-framework/financial-services-future-regulatory-framework
[3] Bank of England, Review of the Bank of England's Approach to Regulation, 2025, https://www.bankofengland.co.uk/-/media/boe/files/financial-stability/financial-stability-report/2025/fsr25-review-of-the-bank-of-englands-approach-to-regulation.pdf
[4] Financial Market Infrastructure Committee, FMIC's Statement of Strategic Intent, 2025, https://www.gov.uk/government/publications/fmics-statement-of-strategic-intent/fmics-statement-of-strategic-intent
[5] London Market Group, Regulation of the Wholesale Market, 2024, https://www.london-market-group.co.uk/publications/regulation-of-the-wholesale-market/
[6] London Market Group, Securing the London Market's Leading Position, 2025, https://www.london-market-group.co.uk/publications/securing-the-london-markets-leading-position/
[7] London Market Group, Press Release: LMG Welcomes Committee's Recommendations, 2025, https://www.london-market-group.co.uk/news-and-insights/press-releases/lmg-welcomes-committees-recommendations/
[8] London Market Group, Press Release: LMG Welcomes Committee's Recommendations, 2025, https://www.london-market-group.co.uk/news-and-insights/press-releases/lmg-welcomes-committees-recommendations/
[9] London Market Group, Press Release: LMG Welcomes Committee's Recommendations, 2025, https://www.london-market-group.co.uk/news-and-insights/press-releases/lmg-welcomes-committees-recommendations/
[10] London Market Group, Press Release: LMG Welcomes Committee's Recommendations, 2025, https://www.london-market-group.co.uk/news-and-insights/press-releases/lmg-welcomes-committees-recommendations/
[11] London Market Group, Press Release: LMG Welcomes Committee's Recommendations, 2025, https://www.london-market-group.co.uk/news-and-insights/press-releases/lmg-welcomes-committees-recommendations/
[12] London Market Group, Press Release: LMG Welcomes Committee's Recommendations, 2025, https://www.london-market-group.co.uk/news-and-insights/press-releases/lmg-welcomes-committees-recommendations/
[13] London Market Group, Press Release: LMG Welcomes Announcement of UK Regime for Captive Insurance Companies, 2025, https://www.london-market-group.co.uk/news-and-insights/press-releases/lmg-welcomes-announcement-of-uk-regime-for-captive-insurance-companies/
[14] London Market Group, Press Release: LMG Welcomes Ongoing Scrutiny, 2025, https://www.london-market-group.co.uk/news-and-insights/press-releases/lmg-welcomes-ongoing-scrutiny/
[15] House of Lords, Financial Services Regulation Committee, Inquiry into the Regulation of the Wholesale Insurance Market, 2025, https://www.parliament.uk/business/committees/committees-a-z/lords-select/financial-services-regulation-committee/news-parliament-2019/regulation-of-the-wholesale-insurance-market-report-published-17-12-2025/
- The London Market Group, in line with its advocacy, supports the Committee's call for a more tailored and proportionate regulatory approach for the UK's financial services sector, including the wholesale insurance industry, to safeguard the London Market's leading position.
- The LMG agrees with the Committee's recommendation for increased transparency on reporting by the regulators and a review of their statutory operating metrics, regard as essential for businesses to make informed decisions regarding capital and workforce allocation.
- The LMG has welcomed the government's announcement of a UK regime for captive insurance companies, believing it will deliver benefits for the industry and help maintain the sector's competitiveness in the global finance market.
