City Watchdog Retreats on Consumer Duty Following Reeves’ Regulatory Push

The Financial Conduct Authority (FCA) has made a significant move to ease recently introduced consumer regulations after pressure from Chancellor Rachel Reeves to cut back on burdensome red tape. The watchdog, led by chief executive Nikhil Rathi, is set to relax elements of the consumer duty rules that first came into effect in 2023, a move anticipated to reduce operational headaches for thousands of firms in the Square Mile.

Originally designed to offer savers greater protection and block excessive charges, the FCA’s consumer duty aimed to ensure clearer standards across the financial sector. However, the rulebook’s complexity and the cost of compliance have reportedly weighed heavily on banks, large stockbrokers, and wealth management firms, sparking discontent throughout the City.

Chancellor Reeves has openly expressed concern that these regulatory demands were limiting the competitiveness of UK businesses and hindering economic growth. She called for a more streamlined regulatory approach to support Britain’s ambitions as a global financial centre and encourage calculated risk-taking in financial services.

Mr Rathi confirmed in correspondence this week that scaling back the consumer duty guidelines would aid Ms Reeves’ efforts to enhance the UK’s financial standing and relieve fiscal pressures. The relaxed rules are expected to benefit institutions dealing predominantly with professional traders, those handling wealthy clients, and firms serving non-UK customers. There are also plans to remove the requirement for every board to have a dedicated “consumer duty champion”.

The changes follow a period of tension between the Treasury and top City regulators, including recent leadership changes within the Financial Ombudsman Service (FOS) and the Competition and Markets Authority. Reeves’ intervention highlights a broader governmental agenda prioritising growth, flexibility and a proportionate approach to oversight in the financial sector.

The FCA maintains that the revised consumer duty will continue to protect consumers by blocking unfair charges and making it easier for customers to switch products or exit services. However, the hope is that by slashing unnecessary bureaucracy, the UK can keep its status as one of the world’s most attractive destinations for financial firms, paving the way for new business and innovation in the industry.