Select committee: Financial Services Regulation Committee

Conclusion 146

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)

Since the ring-fencing regime and other threshold requirements do not phase in gradually, they represent a ‘cliff edge’ in which firms growing their balance sheets above a specific size are faced by an abrupt increase in their compliance burden. Richard Davies, Chief Executive Officer of Allica Bank, told us that this disincentivises growth above a certain level: “There is a range of aspects that kick in at £10 billion or £15 billion or 40,000 transactional accounts that are very relevant to this as well, which can lead a lot of firms to not want to get beyond a certain size.” 218 This constraint on firms’ appetite to expand their balance sheet beyond certain regulatory thresholds negatively impacts on the growth of these firms and entrenches the position of the largest firms. The concern that the regulators’ reliance on ‘cliff edges’ inhibits a firm’s ability to grow was echoed in a private roundtable with mid-market and specialist banks. 219 It was suggested by Charles McManus that a “sliding scale” be applied to further smooth the transition. 220

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