Treasury sets new innovation mandate for Bank of England payments oversight

The Bank of England is set to receive a new statutory objective to support innovation in payment systems and digital currencies, according to plans announced by the government. This secondary goal will operate alongside the central bank’s primary mandate of maintaining financial stability. The move is intended to ensure the United Kingdom retains its position as a global leader in financial services while driving progress in digital finance.

The changes will be implemented through amendments to the Financial Services and Markets Bill, which is scheduled to head to the House of Lords for scrutiny in September. Under the new framework, the Bank will be required to report annually on its progress against this innovation objective. City Minister Lucy Rigby stated that while financial stability remains the paramount concern, the additional objective will facilitate continued advancement in payments and digital finance sectors.

This regulatory shift follows the Labour party’s election promise to overhaul the payments sector with updated rules to support innovation. Former Chancellor Rachel Reeves previously outlined a National Payments Vision in her 2024 Mansion House address, pledging decisive action to open up banking and support fintech businesses. However, industry observers have noted that progress has been sluggish, with some critics describing the approach as a reshuffle rather than a substantive reform.

The Payments Association, the industry body for the sector, has previously raised concerns about the relationship between the industry and regulators. The group called for the government to ensure the Bank of England holds veto rights over the Financial Conduct Authority. In a related development, the Labour government abolished the Payment Systems Regulator in March, a body that had been established in 2013. David Geale, the managing director of the Payment Systems Regulator, told a Treasury Committee hearing that the formal abolition would not take effect until the first quarter of 2027 at the earliest.

Geale noted that staff had largely been performing the same duties since the announcement of consolidation into the Financial Conduct Authority. He anticipated that further efficiencies would be realised as the integration progresses, noting that the regulator had already achieved savings by not replacing departing senior colleagues. The Payment Systems Regulator’s budget for the year was reported to be 28 million pounds, with expectations that it would come in under that figure. Natalie Lewis, chair of the City and Financial Global’s Payments Regulation and Innovation Summit, acknowledged recent regulatory progress but stated that the industry was still waiting for tangible outcomes.