UK Treasury to Push Financial Services Reforms in King’s Speech to Boost City Growth

Prime Minister Keir Starmer’s government will use the King’s Speech on 13 May to legislate sweeping financial services reforms, including abolishing the Payments Systems Regulator and overhauling the Financial Ombudsman Service, aiming to stimulate UK growth by reducing regulatory burden on the City of London.

The Chancellor’s vision of a “golden age” for London’s financial sector hinges on dismantling what ministers call outdated oversight structures, yet Bank of England data shows the UK’s financial intermediation sector grew just 1.2% annually in real terms over the past decade—less than half the pace of GDP expansion—raising questions about whether deregulation alone can reverse a structural productivity gap.

Critics warn that removing the Payments Systems Regulator before 2027 could create oversight vacuums in fast-growing areas like instant payments and crypto-asset settlements, where transaction volumes have surged past £850 billion annually according to UK Finance’s 2024 Payment Systems Review, increasing reliance on private-sector compliance tools and real-time transaction monitoring platforms.

The Payments Systems Regulator Sunset Clause

PSR’s current mandate covers over 50 payment systems processing £7.5 trillion in yearly transactions, but its proposed abolition—delayed until at least 2027 per the regulator’s own February statement—has left fintech firms in a holding pattern, unable to plan long-term technology investments amid regulatory limbo.

This uncertainty is particularly acute for embedded finance providers integrating banking services into non-financial platforms, a segment projected to reach £120 billion in UK transaction value by 2028, where consistent regulatory treatment across jurisdictions is critical for cross-border scalability.

“We’re not resisting reform—we require clarity. Until the PSR’s fate is settled, we’re building dual compliance tracks, which adds 18-22% to our operational overhead.”

The gap between policy intent and implementation timing is creating demand for modular regulatory technology stacks that can dynamically adjust to shifting rulebooks, a niche where RegTech providers specializing in API-driven compliance automation are seeing increased inquiry volume from mid-tier banks and payment institutions.

Financial Ombudsman Service: From Quasi-Regulator to Dispute Resolver

Treasury plans to strip the FOS of its quasi-regulatory functions—evidenced in a 2023 public consultation where 11% of upheld complaints involved allegations of overreach—refocusing it purely on consumer dispute resolution with mandated 90-day turnaround targets.

Current FOS data shows average case resolution times of 142 days for banking complaints and 187 days for investment disputes, metrics that directly impact consumer trust and potentially increase litigation costs for firms facing prolonged uncertainty.

This shift places pressure on financial institutions to strengthen internal complaint handling systems, driving demand for AI-powered case management platforms that can categorize, prioritize, and resolve retail complaints before escalation to the ombudsman—a capability increasingly embedded in enterprise CRM suites used by retail banks and wealth managers.

“The ombudsman’s role creep has forced us to over-invest in defensive compliance. A streamlined FOS means we can redirect those resources toward product innovation instead of procedural buffering.”

Certification Regime Repeal and the Compliance Vacuum

The proposed abolition of the annual “fit and proper” certification requirement for thousands of senior financial services staff removes a key annual control point, shifting accountability toward continuous monitoring frameworks—a change that aligns with FCA’s broader shift toward outcomes-based regulation but leaves firms scrambling for real-time personnel risk tools.

UK Finance estimates this change could affect over 85,000 senior roles across banking, insurance, and investment firms, creating immediate demand for integrated HR-risk platforms that combine background screening, adverse media monitoring, and automated disqualification alerts—a function increasingly bundled into enterprise GRC suites offered by specialized compliance technology vendors.

Without the annual reset, latent conduct risks may accumulate undetected, particularly in high-turnover environments like trading floors and relationship management teams, where misconduct referrals to the FCA rose 34% year-on-year in 2023 per the regulator’s enforcement data.

As the May King’s Speech approaches, the success of this reform agenda will depend not just on parliamentary passage but on the market’s ability to adopt private-sector solutions that fill the oversight gaps left by retreating regulators—creating a structural opening for B2B providers in regulatory technology, compliance automation, and enterprise risk management who can prove their tools deliver measurable reductions in conduct risk and operational friction.

For firms navigating this transition, the World Today News Directory offers a vetted network of specialized providers—from RegTech platforms to corporate law firms—equipped to help turn regulatory uncertainty into operational advantage.