Mansion House 2026 speech: financial system rewiring remains a work in progress

FS Strategy: One Year On report

When it published the FS Strategy in July 2025, the government committed to reporting on an annual basis on progress in delivering on the areas of focus and measures that are outlined.

HM Treasury has published the first such report - a One Year On update - which lists the achievements to date. The report’s foreword highlights that, having undertaken a targeted feedback exercise, industry’s message to government is that delivery is critical for the credibility of the FS Strategy. 

Ring-fencing regime reform: consultations

The Mansion House 2025 speech included a commitment to “meaningful reform” of the UK ring-fencing regime and a review was announced. The outcomes of the review, which was carried out in close collaboration with the PRA and the Bank of England (BoE), were published in May 2026. In broad terms, the government intends to take forward a package of reforms through primary legislation (i.e. provisions in the FSM Bill), secondary legislation and changes to the PRA Rulebook, to make the regime more flexible and responsive. 

In line with this, HM Treasury has published a consultation paper on the proposed measures to be delivered through secondary legislation. The consultation, which closes to responses on 8 September 2026, covers the following aspects of the reforms:

• a New Growth Allowance: this will permit firms to undertake activities otherwise prohibited by the ring-fencing regime up to a limit of 10% of Pillar 1 credit risk risk weighted assets, to support financing for the real economy;
• permitted products: expanding the range of products that ring-fenced bodies (RFBs) are permitted to offer; 
• permitted exposures: expanding the range of counterparties to which RFBs are permitted to have exposures; and 
• pensions: allowing RFB defined benefit  pension schemes to transfer a surplus to other schemes within the wider banking group, subject to conditions.

After considering consultation responses, HM Treasury will publish a draft statutory instrument, with a view to laying the final version in 2027 once the FSM Bill has received Royal Assent.

Separately, the PRA has published a related consultation paper (CP10/26) on changes to the rules on provision of services to RFBs. The PRA is proposing to amend the Ring-fenced Bodies Part of the PRA Rulebook (specifically, by deleting the rules on shared services and related defined terms) and revise connected guidance in Supervisory Statement SS8/16, to provide RFBs with further flexibility in relation to their group service models. 

This consultation closes to responses on 14 October 2026. The PRA intends to finalise the rule and guidance changes in 2027, again, subject to Parliamentary progress of the FSM Bill.

Modernising payment services regulation: consultation

The government is taking forward reforms to the UK’s payment services regulatory framework. These include abolishing the Payment Systems Regulator (PSR) and transferring its functions to the FCA, which will be achieved through provisions in the FSM Bill, as well as other related amendments to the Financial Services and Markets Act 2000 (FSMA). 

Another strand of the modernisation package is HM Treasury’s work with the FCA on innovation in payments and e-money. As part of the Mansion House 2026 package, HM Treasury has set out, in a consultation paper, the government’s proposals to achieve the following:

• updating existing secondary legislation (notably the PSRs and the EMRs) and the approach to delegating responsibility to the FCA for setting certain firm facing requirements;
• addressing areas such as supporting tokenised payments, taking the lead on agentic payments, ensuring reforms support financial inclusion, and considering whether additional measures are required to address new vulnerabilities; and
• the design of the long-term regulatory framework for Open Banking, including the delegation of powers to the FCA under the Data (Use and Access) Act 2025.

The consultation closes on 6 October 2026. Any agreed changes to the existing regulatory framework will be delivered through secondary legislation, with HM Treasury providing more details on implementation at that stage.

Wholesale Digital Markets Champion: Forward Look report for tokenising UK markets

Chris Woolard, the government’s Wholesale Digital Markets Champion (WDM Champion), has published a Forward Look report setting out how the UK could accelerate the adoption of tokenisation and related technologies across wholesale financial markets, as outlined in the government’s Wholesale Financial Markets Digital Strategy, which was published as part of the Leeds Reforms.

The report provides a framework for the UK’s development of a tokenised wholesale financial markets system, with a roadmap identifying immediate industry priorities and supporting actions for HM Treasury, the BoE, the PRA and the FCA. The areas included in the roadmap are primary issuance (including DIGIT - the UK Digital Gilt Instrument); tokenised collateral; tokenised funds; wholesale payment rails for digital markets; legal and regulatory certainty; domestic and international interoperability standards; financial crime compliance and digital identity; tax neutrality; and resilience.

The members of the cross-industry Digital Markets Champion Industry Taskforce (comprising 54 firms currently) will establish nine Action Groups to take forward these priorities over the next 12 months. Further details on the appointment of these groups will be set out by September 2026. The taskforce will drive delivery of live use cases, starting with a repo use case on blockchain.

Views on the report can be provided by 4 September 2026. The WDM Champion’s second report will focus on delivery, setting out achievements at that stage and reflecting on how to capitalise on the progress made.
 

Other tokenisation initiatives

It was noted in the Speech that the Great British Tokenised Deposit (GBTD) project is moving to pilot transactions. The GBTD is participating in the BoE’s Synchronisation Lab, with the aim of delivering the first UK live transactions of tokenised sterling deposits.

In addition, by early 2027, the UK will become the first G7 country to issue a Digital Sovereign Bond, with plans for future issuance to follow.

On a related note, in his Mansion House speech, Andrew Bailey, BoE Governor, commented on the support provided through the Digital Securities Sandbox (DSS) for tokenised asset issuance. He noted that the first DSS participant has just been approved for live activity and that this development will help support the issuance of DIGIT. The BoE will work with HM Treasury to enable DIGIT’s eligibility as collateral in the BoE’s market operations.

Financial Services AI Adoption Plan

The government’s Financial Services AI Champions, Harriet Rees and Rohit Dhawan, have developed a Financial Services AI Adoption Plan (AI Adoption Plan). The AI Adoption Plan is in the form of an independent report that was commissioned by the government (which commissioned similar independent AI adoption plans from the AI Champions in the eight key UK sectors identified in the Modern Industrial Strategy - see our blog post for more information). 

In very broad terms, the AI Adoption Plan highlights key themes and issues, and focuses on recommended actions for government, regulators and industry, to “unlock safe, widespread adoption, improve outcomes for consumers and businesses, and strengthen [the UK’s] position as a global leader in AI-enabled financial services.” 

The recommended actions relate to the regulatory framework; the regulatory perimeter; resilience; skills and talent; agentic payments readiness; and broader considerations for government regarding AI sovereignty and resilience. 

The government has welcomed the AI Adoption Plan, accepted the recommendations and will start to work with regulators and industry on next steps. Importantly, this will involve considering its recommended actions alongside the recommendations set out in the recently published Mills Review on AI and the future of retail financial services, which was commissioned by the FCA (see our blog post for an overview). 

Transatlantic Taskforce for Markets of the Future: Recommendations

The Transatlantic Taskforce for Markets of the Future (TTMF) was established by the UK and US governments in September 2025. The TTMF has published its initial recommendations to advance UK-US financial services collaboration on digital assets and capital markets. The UK-US Financial Regulatory Working Group will report on progress of the delivery of the recommendations. 

The US and UK governments have also issued a joint statement on stablecoins, with the aim of promoting convergence between their respective regimes (where appropriate) and providing “greater confidence and clarity” to market participants in respect of financial innovation.

Critical third parties: first designations

Shortly before the Speech, on 10 July 2026, HM Treasury announced it has designated four major global cloud services and technology providers as critical third parties (CTPs).

The CTP designations, the first under the UK CTP regime, are set out in the Critical Third Parties (Designation) Regulations 2026 and they took effect from 13 July 2026.

The effect of the designations is that the four CTPs will be jointly overseen by the BoE, PRA and FCA under the UK CTP regime, which came into effect on 1 January 2025. CTPs must identify and manage risks to their critical services effectively, and maintain open, timely communication with regulators and the firms that rely on them, particularly during major incidents. 

This regime complements, but does not replace, existing outsourcing and operational resilience rules for regulated firms, which remain responsible for managing their own third-party arrangements including due diligence, risk management and contingency planning.

HM Treasury has noted that further providers may be designated over time where necessary to protect UK resilience.

Financial Services Skills Compact

HM Treasury and the Financial Services Skills Commission (FSSC) have launched the Financial Services Skills Compact (Compact), a government commitment under the FS Strategy. 

The Compact comprises four commitments for signatory firms:

• future-ready UK workforce: upskill all employees in AI and other critical skills over a rolling three-year period;
• new talent: maintain and/or grow structured routes into the organisation;
• responsibility: assign one member of the senior executive team as responsible for closing skills gaps; and 
• annual progress updates: report each year on the Compact’s commitments.

All UK-regulated financial services firms are eligible to sign the Compact. 

Dematerialisation Market Action Taskforce: Implementation Plan

The Dematerialisation Market Action Taskforce (DEMAT) has published the UK Implementation Plan for the Withdrawal of Paper Share Certificates (DEMAT Implementation Plan). This was a key deliverable for the DEMAT (‘Step 1’ under its terms of reference), which was established in October 2025. 

The DEMAT Implementation Plan sets out a roadmap for the government, with industry, to remove paper share certificates as evidence of ownership title and replace them with digital registers. The roadmap will be implemented by the end of 2027 (with legislation coming into force by then), although the specific implementation date has not yet been confirmed.

The government has accepted the recommendations, noting in its response that the DEMAT Implementation Plan represents the first stage in a phased programme to digitise share ownership in the UK. 

AIFM regulatory regime reform

The government is reforming the regulatory framework for alternative investment fund managers (AIFMs), seeking to simplify it to make it more proportionate and streamlined, with core consumer and market protections retained. 

Following a consultation process in the first half of 2025 on legislative amendments relating to AIFM regulation, HM Treasury has now published draft legislation to achieve this - the Alternative Investment Fund Managers Regulations 2026 - with an accompanying policy note. While the consultation received broad support from industry, there were mixed responses to the proposals to change the perimeter for small, registered firms, which HM Treasury has taken into account in the draft Regulations. 

Technical comments can be provided on the draft Regulations by 14 October 2026.

Separately, the FCA is consulting on changes to its AIFM regime rules, through three consultation papers, with a focus on proportionality and making the regime more tailored to UK asset managers.