One oft-criticised feature of the UK financial services regime is the complexity and the volume of the FCA’s handbook of rules and guidance and a host of materials which often serve as informal guidance. In this blog post, we discuss a number of proposals set out by the FCA in a recent feedback statement (FS25/2), in which it announced immediate areas for action and further plans for reviewing FCA requirements following the introduction of the Consumer Duty.
The FCA’s proposals should be viewed in the context of the UK government’s pro-growth agenda. There is much focus on the regulator’s secondary objective of “facilitating, subject to aligning with relevant international standards, (a) the international competitiveness of the economy of the United Kingdom (including in particular the financial services sector), and (b) its growth in the medium to long term”. Streamlining the regulatory rulebook could help boost growth and make the UK financial services sector more competitive.
To the relief of many who responded to its July 2024 call for input, the FCA has decided that now is not the time for a wholesale overhaul of its Handbook. However, the FCA is proposing to make a number of changes to its rules, including the following:
- Retiring over 100 pages of outdated guidance.
- Withdrawing hundreds of supervisory publications.
- Giving firms more scope to tailor customer communications, including for online and digital transactions.
- Revisiting rules for businesses with overseas customers, such as whether UK insurance firms need to apply UK regulations abroad.
The FCA says it will use an accelerated consultation process to act on measures where there is a clear case for change and stakeholders support quick action. In areas with mixed feedback, the FCA will engage further with stakeholders to gather input on proposed further action and identify areas requiring significant change.
The FCA’s action plan includes new work it will begin immediately and proposals it intends to explore further, as set out in more detail below. The FCA plans to hold an in-person summit in summer 2025 to discuss these issues. It will publish a further statement to outline its full programme of work in September 2025.
These initiatives will bring welcome simplification and removal of overlap to parts of the framework. However, while this is a good start, there is scope for plenty more, so our message to the FCA is keep it up!
Mortgage rule review
On 7 March 2025, the FCA announced a review of its responsible lending and advice rules for mortgages. The aim is to simplify requirements, update or remove detailed and prescriptive requirements now covered by the Consumer Duty, and support good customer outcomes. In addition, several respondents to the call for input said current mortgage disclosure rules are too prescriptive, limiting firms’ ability to tailor information and adapt to consumer preferences, such as using digital sales channels.
In May 2025, the FCA will consult on proposals to make remortgaging easier, reduce borrowing costs through term reductions, and allow borrowers to discuss their options with firms outside a regulated advice process. The FCA also plans to publish a discussion paper in June 2025 covering topics such as risk appetite and responsible risk-taking, alternative affordability testing and product innovation, lending into later life and consumer information needs and disclosure requirements.
International application of conduct rules
UK-based firms often need to comply with both FCA regulations and the rules of the customer’s jurisdiction when providing products or services internationally. The FCA plans to review this approach, starting with the insurance sector, and will publish a discussion paper by summer 2025 to explore whether conduct rules like the Consumer Duty should apply to firms serving customers abroad, while adhering to international obligations.
Consistency in definitions
The FCA plans to review its Handbook definitions of retail customers and SMEs, which are currently complex and vary across sectors, in order to make them more consistent and reduce compliance costs. The FCA will soon consult on changes to the definition currently used in the insurance sector to determine which SME customers need protection under retail customer rules.
Rules for advertising consumer credit
Alongside the Treasury’s review of the Consumer Credit Act, the FCA will review financial promotion rules for consumer credit. Within the next year, it will consult on removing unnecessary prescriptions, updating outdated requirements, and improving alignment with the Duty. The FCA will also consider reviewing rules on Annual Percentage Rate (APR) disclosures.
Retail banking disclosures
The FCA plans to make the disclosure requirements for retail banking more flexible by reviewing prescriptive rules and removing them where appropriate, so that firms can tailor communications for their customers.
Rules for insurance and funeral plans
In a 2024 discussion paper, the FCA explored options to simplify the rules for insurance firms in order to better balance protections for small commercial customers and retail consumers and to boost competition. The FCA plans to consult by summer 2025 on these proposals. The consultation will also include other changes, such as allowing firms more flexibility in how often they review product value under the product governance rules and removing the specified minimum hours of training and development for insurance employees.
Alongside this consultation, the FCA will also seek views on other proposals such as limiting the application of the Duty and other conduct rules outside the UK and reviewing some of the product-specific rules in the Insurance Conduct of Business sourcebook, including those for packaged bank accounts and GAP insurance.
Public reports of asset management assessment of value
Later this year, the FCA plans to consult on changes to the requirement for asset managers to report annually on their value assessments, in order to align it with the FCA’s broader approach to value assessments.
Client assets rules
The FCA will also consult on updating requirements in the Client Assets sourcebook later in 2025. It plans to amend the record-keeping requirements for some due diligence relationships, broaden the reconciliation rules, and add flexibility to the rules on removal of interest owed to firms. The FCA will keep the rules under review as industry practices evolve.
Training and competence requirements
The FCA will review the Training and Competence sourcebook and competence requirements in other sourcebooks, using insights from its insurance sector work to guide its approach.
Reporting requirements linked to insurance pricing rules
The FCA will review the reporting requirements that were introduced following its general insurance pricing practices market study.
Clarifying rules on product governance and fair value
The FCA will engage with stakeholders to clarify how its rules on product governance and fair value in the Consumer Duty interact with each other and other rules in the Handbook.
Clarifying the application of the Consumer Duty through distribution chains
The FCA will work with firms to clarify its expectations under the Consumer Duty for firms in retail distribution chains, especially those that do not interact directly with retail customers. This includes guidance on information sharing within the chain and proportionate application of the Duty to firms with indirect roles.
Guidance for smaller firms
The FCA plans to pilot dedicated guides for small firms in 2025 to help them understand the FCA’s requirements and implement outcomes-focused regulation, even though it is mindful that a one-size-fits-all approach may not always be suitable. The FCA will consider a broader roll-out depending on the pilot’s success.
Retiring outdated guidance
The FCA plans to retire several pieces of outdated guidance later this year, including guidance in the mortgage and consumer finance sectors and guidance related to the Treating Customers Fairly initiative.
Withdrawing historic supervisory communications
The FCA plans to review all Dear CEO and portfolio letters pre-dating its 2022-25 strategy, with a view to withdrawing most of them, though they will remain publicly accessible. The FCA will keep the market updated on this process throughout Q2 2025. It will also consider implementing an ongoing review process so that outdated materials are regularly withdrawn going forward.
Targeted clarifications of FCA Handbook materials
Later this year, the FCA plans to consult on measures to address confusing, outdated or potentially conflicting requirements in the Handbook. In addition to retiring specific pieces of outdated non-Handbook guidance, the FCA will address outdated references to Principles 6 and 7, along with the Treating Customers Fairly initiative, and streamline its investment and borrowing powers rules in Chapter 5 of the Collective Investment Schemes sourcebook.
Improving accessibility of the rule review feedback tool
The FCA is launching a beta version of an updated Handbook website this summer. It will make its feedback tool more accessible, allowing firms to submit evidence directly from the Handbook.
Senior Management Arrangements, Systems and Controls
The FCA will also review the Senior Management Arrangements, Systems and Controls sourcebook. Over time, this has expanded significantly, and some respondents find it confusing.
