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Financial Services and Markets Bill [HL] 2026–27

The Financial Services and Markets Bill [HL] (Bill 152) 2026-27 (PDF) was announced in the Kings Speech on 13 May 2026 as the Enhancing Financial Services Bill, introduced in the House of Lords on 19 May, and had its second reading on 8 June. The bill completed its Lords stages on 15 September and was introduced in the House of Commons on the same day. Its second reading in the House of Commons is scheduled for 10 November 2026.

What does the bill do?

The bill would introduce a broad package of reforms to UK financial services regulation as part of the government’s wider financial services reform agenda. The government says the bill would modernise regulation, support economic growth and business lending, simplify the regulatory system and update consumer protection while maintaining high regulatory standards.

Consumer-facing changes include:

• Reforming consumer credit law: this involves repealing significant parts of the Consumer Credit Act 1974 framework, some of which would be replaced by non-statutory Financial Conduct Authority (FCA) rules.
• Widening access to credit unions, cooperative organisations where members pool their savings to lend to each other.
• Reforming the Financial Ombudsman Service (FOS), which investigates complaints about finance businesses:
  • the bill would require that the ombudsman’s decisions are more closely aligned with FCA rules
  • it would require the FOS to refer matters to the FCA where there may be legal ambiguity in relevant rules or the case has potential wider implications
  • it would prevent consumers from bringing complaints to the FOS if they referred to events more than 10 years old

To consolidate regulation in the sector, and to reduce administrative burden for firms and for regulators, the bill would:

• Abolish the Payments Systems Regulator, transferring its responsibilities to the FCA.
• Give the FCA new responsibilities relating to payment systems regulation and anti-money laundering (AML)/counter-terrorist financing (CTF) regime for non-financial sectors.
• Reduce the number of “regulatory principles” to which the FCA and the Prudential Regulation Authority (PRA) must have regard in day-to-day work.
• Reduce the scope of the Senior Managers and Certification Regime, a framework of conduct, fitness and propriety requirements for people working in authorised financial services firms.
• Amend the requirement on the PRA to make ring-fencing rules. The purpose is to give the regulator more flexibility, in particular to avoid duplication with the resolution regime. The ring-fencing regime requires large banks to separate core retail banking functions from investment banking and other activities, and was implemented after the 2008 financial crisis. The resolution regime applies when banks fail and aims to prevent them causing systemic disruption or being rescued at the taxpayer’s expense.

Stakeholder reactions to the bill

The bill attracted differing responses across the areas it would cover, with the most significant disagreements relating to reforms of the Financial Ombudsman Service (FOS) and bank ring-fencing.

Industry bodies including TheCityUK and UK Finance generally supported the FOS reforms. They argued that aligning FOS decisions more closely with FCA rules would make the regime more predictable and reduce the risk of the FOS effectively creating new regulatory standards through its decisions on individual cases. They also welcomed a formal referral mechanism allowing the FOS to seek the FCA’s views where rules were ambiguous or a case could have wider implications. But consumer groups, including Which? and StepChange, argued that greater alignment with the FCA would limit the FOS’s discretion in deciding complaints based on its assessment of what is ‘fair and reasonable’, which could affect its impartiality and limit consumer access to redress.

While there was little reaction to the bill’s changes to ring-fencing specifically, there has been significant debate on whether the ring-fencing framework should be retained or repealed entirely. Some large banks have argued that the current requirements to separate retail banking from investment banking activities impose costs that outweigh their benefits, and that they overlap with the bank resolution regime (also implemented after the 2008 financial crisis to deal with failing banks). Others, including the Governor of the Bank of England, and Barclays’ chief executive have previously said that ring-fencing remains an important safeguard to maintain financial stability and protect depositors.

Industry organisations broadly welcomed other reforms including the Senior Managers and Certification Regime. They argued that simplifying requirements could reduce unnecessary regulatory burdens for firms while maintaining individual accountability.

Main themes in Lords debate

The bill’s second reading took place on 8 June 2026. The committee stage took six sittings from 22 June to 8 July. Report stage was held on 7 and 9 September and third reading on 15 September.

Peers broadly supported the government’s objective of promoting growth and competitiveness in the financial services sector and the proposed measures to reduce regulatory burden on firms. However, debate often focused on whether the bill struck the right balance with maintaining consumer protection, financial stability and effective parliamentary scrutiny.

Parliamentary scrutiny and delegated powers

A recurring theme throughout Lords’ debates was the role of Parliament in scrutinising the regulation of financial services. Peers raised concerns about provisions transferring regulatory requirements from primary legislation to FCA rules, particularly in relation to consumer credit (such as credit cards, personal loans and overdrafts). Peers also questioned the breadth of some delegated powers where the government had not set out how it would use them. The Lords therefore made a number of amendments, including removing a proposed government power to regulate access to in-person banking services at report stage.

Principles for regulators

Members also debated the objectives and principles that should guide regulators, including proportionality and environmental sustainability, and the extent to which regulators should continue to apply these principles in their day-to-day work as opposed to considering them at a strategic level.

Consumer protection

Members discussed reforms to consumer credit regulation and access to affordable credit and financial services for financially excluded consumers. They also debated the proposed reforms to the FOS, with some arguing that proposals to align FOS decisions more with FCA rules lacked a sufficient evidence base and could limit consumers’ access to redress.

Ring-fencing

Most debate focused on whether the ring-fencing regime should be retained or abolished altogether, rather than on the bill's specific reforms. Some members argued that the regime had become less necessary given the UK's bank resolution regime, the costs of ring-fencing and lack of foreign adoption. Others said it remains an important safeguard for financial stability.

Lords amendments

Non-government amendments

Peers voted to remove what was clause 3 from the bill. This clause would have allowed HM Treasury to make regulations concerning access to in-person banking services following an independent review of access to banking services. This clause generated substantial constitutional concerns about the breadth of the proposed powers. There are indications that the government intends to reintroduce the clause at a later stage, with further detail after considering the recommendations of the review which was expected to report in October.

Further non-government amendments were to:

• remove a Treasury power in clause 50 to make consequential legislative changes by regulations made necessary by other provisions in the bill
• strengthen parliamentary scrutiny of delegated powers in the bill
• require the Treasury to prepare and publish a UK digital assets strategy
• attempt to simplify access to Child Trust Funds and Junior ISAs on behalf of persons lacking capacity
• limit the use of section 166 skilled person reviews, whereby the FCA and PRA may require a regulated firm to obtain an independent report about certain activities which have raised regulators’ concerns

Several amendments proposing more substantial changes to the proposed reforms of the FOS, consumer credit regime and ring-fencing were debated but not agreed.

Government amendments

Following debates at committee stage, the government proposed to retain the requirement that the FCA and PRA consider proportionality and climate and environmental principles in their day-to-day work and reference those considerations in specified publications. The government also introduced amendments to give the Bank of England a new secondary objective to facilitate innovation in payment systems and related services.

Further information on the bill

The bill would extend and apply to England, Wales, Scotland and Northern Ireland. Clause 2 (Credit union common bond) would apply to England, Wales and Scotland.

Bill documents, Hansard records and amendment papers can be found on the parliamentary bill page for the Financial Services and Markets Bill [HL] 2026-27. The House of Lords Delegated Powers and Regulatory Reform Committee has published two reports on delegated powers in the bill.