Select committee: Financial Services Regulation Committee

Conclusion 102

2nd Report - Growing pains: clarity and culture change required - An examination of the secondary international competitiveness and growth objective Published 13 Jun 2025

Financial Services Regulation Committee FCA and PRA’s secondary competitiveness and growth objective All items in this report Report on parliament.uk ↗ Inquiry on parliament.uk ↗

Conclusion (the committee's words)

Several witnesses highlighted the success of the FCA’s Regulatory Sandbox in allowing firms to develop new products in a closely supervised environment and recommended that the FCA build on this success. 164 TheCityUK told us that: “The FCA’s sandbox has been effective to date and they recognise the need to expand the scale of sandboxes”, 165 but added that the Regulatory Sandbox “is now 10 years old and the FCA should work with the industry to develop successor programmes.” 166 Innovate Finance described the Bank of England and the FCA’s joint Digital Securities Sandbox as a “good example of excellent pro-innovation joined up approach”. 167 Innovate Finance praised the approach taken by the Bank of England and the FCA to operating the Digital Securities Sandbox, which it described as allowing: “… the regulators (FCA and Bank of England) to get in the sandbox and experiment with the regulatory rule book—with powers for the regulator to turn regulatory controls on and off. This is genuine collaboration and innovation, which enables the regulatory framework to be tested and developed in real time as new services and products are tested. We would encourage this to become the norm.” 168

From: Financial Services Regulation Committee, 2nd Report - Growing pains: clarity and culture change required - An examination of the secondary international competitiveness and growth objective, 13 June 2025

Government response

The government responded to the whole report on 3 September 2025 (deadline 3 September 2025).

Summary written by Accountability Index from the government's response. It is not the government's own words.

The government says there is "strong alignment" between the Committee's recommendations and its July 2025 Financial Services Growth and Competitiveness Strategy, agreeing with many recommendations while declining some, including a new compliance cost study and a review of the secondary objective metrics.

On compliance costs (Recommendation 1), the government agrees burdens should be proportionate but "does not intend to commission a new study" "at this time", to avoid duplicating its baselining exercise; it will consider next steps once that work is complete.
On secondary objective metrics (Recommendation 11), the government "does not plan to undertake a further review at this time", citing the granularity of the existing metrics, but says it will continue to monitor the regulators' progress.
On regulatory overlap (Recommendation 2), the government will "consult on the detail" of consolidating the PSR within the FCA and legislate "as soon as possible", but says it would not be "practical or proportionate" to review all financial services legislation and regulator rules in detail.
On reporting to the Committee (Recommendation 15), the government says it cannot "commit to producing specific research" but will provide an update on its work to the Committee within twelve months.

Read the government's response ↗ Report an error