Select committee: Financial Services Regulation Committee

Conclusion 145

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)

We received evidence that the UK’s ring-fencing regime represents a significant threshold for firms to contend with. The UK’s ring-fencing regime is a statutory requirement unique to the UK, introduced after the Global Financial Crisis, that requires firms with a balance sheet over £25 billion to separate their consumer and SME deposit taking arms from their wholesale and investment arms. 215 Sir Howard Davies told us that the process of ring-fencing incurs significant costs: “That was extremely costly to implement. It adds nothing to financial stability and makes UK banks less competitive.” 216 The City of London Corporation echoed this, adding that ring-fenced banks face increased ongoing costs due to regulatory duplication and are at a competitive disadvantage relative to their international competitors: “The ring-fencing framework is unique to the UK and places a burden on firms—other jurisdictions have decided not to use this approach. In particular, there is a burdensome duplication in relation to resolution and operational resilience requirements”. 217

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