On 9 November 2021, HM Treasury (HMT) published a consultation paper on the Future Regulatory Framework Review for financial services. This paper builds on the topics and feedback received to the previous consultation paper from October 2020 and the broader vision for Better Regulation set out in the BEIS consultation from July 2021.

The Consultation closes on 9 February 2022.

The Consultation sets out a number of proposals for the future UK regulatory framework, including:

  • A move to a comprehensive FSMA model in respect of retained EU law – this means that EU retained law with direct effect in the UK (e.g. Regulations and Delegated Regulations) will effectively be deleted from UK statute books and replaced with rules in the FCA and PRA’s respective rulebooks. Removing the EU retained law from legislation will allow regulators to tailor the rules to the UK market in line with their objectives and to save Parliament time and resources that are currently used on considering large volumes of technical provisions.

The proposal is for the government to gradually repeal a significant number of retained EU laws over several years and for the repeal to take effect at the same time as the regulators’ new rules come into force to avoid gaps. The government and regulators will work together closely throughout to ensure transparency and continuity for affected firms and consumers.

  • Designated Activities Regime (DAR) – this is a proposed new regime which will sit alongside the RAO regime and will cover retained EU law activities that are not FSMA regulated (e.g. short selling or margin requirements for uncleared derivatives requirements). Note that it is intended that the DAR framework will not be restricted to retained EU law only and can adapt to future developments, e.g. new types of activity, or where the risks associated with a particular activity change in a way that merits bringing it within the scope of regulation.

The DAR will be a more limited regime than the RAO and will be focussed on the specific designated activities only (and not the wider activities of those undertaking the designated activities). The DAR will mirror the FSMA model for the RAO, in that the government will determine the activities that are in scope via secondary legislation and the regulators will subsequently determine the rules that regulate those activities.

  • A new growth and international competitiveness objective for the PRA and FCA subject to certain climate change considerations – this new objective will sit alongside the FCA and PRA’s existing secondary objectives. The objective would require the regulators to act in a way that (subject to aligning with international standards and so far as is reasonably possible) facilitates the long-term growth and international competitiveness of the UK economy, including the financial services sector.

The Consultation also indicates that alongside this new secondary objective, the government also proposes to amend existing regulatory principles so that such growth must occur in a sustainable way that is consistent with the government’s commitment to achieve a net zero economy by 2050.

  • A number of proposals to ensure accountability, scrutiny and engagement by the regulators with Parliament, government and stakeholders, including:
    • a proposed new statutory requirement for the FCA and PRA to respond to HMT’s annual (or more frequent) recommendations letters and an obligation on HMT to publish the FCA and PRA’s responses and lay them before Parliament;
    • a new power for HMT (anticipated to be used in exceptional circumstances only) to be able to require the FCA and PRA to review their rules, where the government considers that it is in the public interest to do so;
    • a proposed new statutory requirement for the regulators to notify the relevant Parliamentary committee when they publish a consultation on any matter and also to respond in writing to formal responses to statutory consultations from Parliamentary committees;
    • a proposal to place the (currently voluntary) FCA’s Listing Authority Advisory Panel (LAAP) and the PRA Practitioner Panel’s insurance sub-committee on a statutory footing;
    • a statutory obligation on the FCA and PRA to publish their information on engagement with panels and also to provide information on pre-engagement with panels within their public consultations;
    • a statutory obligation for the FCA and PRA to maintain statements on the process for appointing members to the panels. The statement will need to be approved by HMT prior to publication;
    • a statutory requirement for the regulators to publish a framework for their cost-benefit analysis (CBA), including to specify the criteria establishing when CBA is necessary, the methodology involved and how representation at consultation is considered. It is also proposed that a statutory panel should be established to support the regulators in developing their CBA framework; and
    • a requirement for the FCA and PRA to publish and maintain a framework for reviewing their rules.
  • An accountability mechanism for the FCA and PRA to consider the potential impacts on deference arrangements afforded to the UK by overseas jurisdictions and assess compliance with relevant trade agreements when making rules and setting general approaches on supervision. The regulators will be required to consult with HMT on the general anticipated impact on these areas.
  • An indication that general rulemaking powers will be granted to the Bank of England (BoE) over central counterparties and central securities depositories, where the BoE currently only has only limited rulemaking powers. The details of this proposed new framework are not set out in this Consultation and will be provided by HMT in due course.


Marina Reason
Marina Reason
+44 20 7466 2288
Clive Cunningham
Clive Cunningham
+44 20 7466 2278
Karen Anderson
Karen Anderson
+44 20 7466 2404