The Enhancing Financial Services Bill, introduced to the House of Lords on 20 May 2026 and trailed in the King’s Speech a week earlier on 13 May, is the structural carriage that delivers most of the Leeds Reforms announced by the Chancellor in 2025. It is not a single change but four. The Payment Systems Regulator is absorbed into the Financial Conduct Authority. The Senior Managers and Certification Regime’s statutory burden is cut by what HM Treasury has put at roughly 50%. The Financial Ombudsman Service’s “fair and reasonable” test is pegged to FCA-rule compliance. And the ring-fencing regime is opened up to updates through PRA rules rather than primary legislation. Read together, the bill makes a single trade: more speed and less regulatory granularity.
Each individual change makes the UK conduct machine faster — one conduct authority instead of two for payments, lighter SMCR documentation, FOS predictability bounded by FCA rules — and less granular: the PSR’s payment-specific conduct lens disappears into a generalist body, individual-accountability evidence is reduced, and the FOS’s discretion to find against rule-compliant firms is narrowed. Those trade-offs are not hidden in the bill text. They are the trade.
PSR → FCA is the structural keystone
The most consequential clause is the absorption of the Payment Systems Regulator. The Bill abolishes the PSR and transfers its functions to the FCA, giving the FCA new objectives and powers to oversee payment systems. This is a structural transfer of statutory remit, staff and powers — not a coordination mandate or a memorandum of understanding between two regulators. HM Treasury consulted on the consolidation in April 2026 after first signalling the move in 2025; the Bill is the legal mechanism.
What changes operationally is the conduct lens. The PSR was built for payments: interchange fees, scheme rules, access requirements, APP fraud reimbursement. Those questions now sit inside a regulator whose default framing is markets and conduct across the entire perimeter. The FCA’s new payments objectives are designed to preserve the substantive work programme, but the institutional centre of gravity shifts from a specialist body to a generalist one. Industry will get one supervisor instead of two; consumer-facing groups have flagged that they also lose a regulator whose entire mandate was payment conduct.
The Bill does not set a hard cut-over date in the introduced text; transitional provisions are expected to be tightened as the legislation progresses through both Houses. Until then, the PSR’s existing rules and supervisory expectations remain in force.
SMCR: certification, conduct rules and statements move to the rulebook
HM Treasury has framed the SMCR change as a roughly 50% reduction in the regime’s administrative burden. The operative move in the Bill is more specific than the headline. The legislation removes from the statutory framework three blocks that today sit in primary law — the Certification Regime, the Conduct Rules requirements and the rules around senior managers’ statements of responsibilities — and hands them to the FCA and PRA to replicate (or not) in their rulebooks. The “50%” is the Treasury’s own estimate of the reduction in firm-facing obligations, not an independently measured figure; it should be read as a Treasury projection rather than a finding.
The substantive shift is that individual accountability moves from a statutory floor to a regulator-set one. The FCA and PRA can in principle keep the regime broadly intact in rules; they can also, equally in principle, cut it back further. Firms remodelling SMCR documentation and assurance budgets should expect a period in which the rulebook design follows the statutory carve-out, not the other way round.
Application deadlines tighten across the board: new firm applications, variations of permission and financial promotion approvals drop from six to four months for complete applications and from twelve to ten months for incomplete ones. Senior manager applications drop from three months to two.
The FOS test moves to “compliance is enough”
The Bill changes the Financial Ombudsman Service’s foundational test. The “fair and reasonable” determination must now be met where the firm has complied with relevant FCA rules. The current position, set by the Financial Services and Markets Act 2000, gives FOS adjudicators latitude to find against a firm even where it followed the rulebook. The new language closes that gap on rule-compliant conduct and, in HMT’s framing, brings adjudication back into alignment with rule-setting.
The Bill also gives the FCA explicit tools to respond to mass redress events, plugging into the operational FOS reset HMT consulted on in March 2026 — including the prospective ten-year long-stop, the mandatory referral path between FOS and FCA on ambiguous rules, and the case-fee recalibration covered in our 2026-05-26 piece on the motor finance window. The bill that contains the FOS test change is the same bill that absorbs the PSR. The redress timing covered last week is one operational expression of what this bill institutionalises.
Ring-fencing: a mechanism, not a final rewrite
Ring-fencing — the regime that requires the largest UK banks to separate retail from investment activities — gets targeted amendments in the Bill, plus a new mechanism: elements of the existing statutory framework can be updated through PRA rules rather than further primary legislation. The substantive thresholds and scope changes the Treasury review flagged earlier in 2026 are therefore not all in the primary bill; the bill creates the procedural channel through which the PRA can land them.
That matters because ring-fencing is the area where the Treasury and PRA have visibly differed on appetite. Routing future change through PRA rules makes the pace of further reform a prudential-supervisor decision rather than a parliamentary one — faster, narrower in scope, and out of public-bill scrutiny.
Competitiveness, consumer protection, and the shape of the trade
The bill sits inside the Chancellor’s competitiveness mandate, and reads as one. Each change reduces friction for firms; each change also narrows a consumer-protection lever — the PSR’s specialist conduct view, individual-accountability evidence under SMCR, FOS discretion. Whether the net consumer impact is positive depends almost entirely on how the FCA and PRA fill the rulebook space the statute is vacating, and how aggressively the FCA uses its new mass-redress tools.
Three things to watch through summer 2026. First, the second reading and committee stage in the Lords, where transitional provisions for PSR absorption will be tested. Second, the FCA and PRA consultations that will populate the post-SMCR rulebook and set the actual ceiling on individual-accountability obligations. Third, the first FOS determinations under the new “fair and reasonable” wording, which will set the practical bar for what “compliance with relevant FCA rules” rules out. The redress machine, as we wrote last week, is being recompiled at speed. This bill is the compiler.
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