As the UK government pushes to streamline oversight and cut red tape, the FCA is reassessing its regulatory priorities—potentially absorbing the Payment Systems Regulator in the process.
The UK’s regulatory landscape is under scrutiny as the Financial Conduct Authority (FCA) signals a shift away from large-scale initiatives, aligning with broader government efforts to streamline oversight and reduce economic red tape. Among the most significant potential changes is the proposed abolition of the Payment Systems Regulator (PSR), a move that could fold its functions into the FCA as ministers push for a more consolidated regulatory framework.
Ministers are actively considering scrapping the PSR, the regulator overseeing Britain’s payments infrastructure, as part of a wider review of the country’s 130 economic watchdogs. If approved, the move would align with Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves’ broader regulatory overhaul, aimed at boosting competitiveness and economic growth.
The proposal follows concerns from industry stakeholders and politicians about the effectiveness of the PSR, particularly regarding its handling of fraud reimbursement and its regulatory approach. Critics argue that no other major economy has a standalone payments regulator, raising questions about its necessity. Proponents of the change suggest that integrating the PSR into the FCA would streamline oversight and align financial regulation with international norms.
The FCA’s stance on reducing the regulatory burden comes amid growing political pressure to reassess the UK’s oversight structures. Jonathan Reynolds, the business secretary, recently suggested that the number of regulators should be re-evaluated, reinforcing speculation that further consolidations or abolitions could follow.
Recent high-profile departures, including the resignation of the chair and chief executive of the Financial Ombudsman Service, have signaled a broader shift in the UK’s regulatory landscape. The Competition and Markets Authority (CMA) has also undergone leadership changes, with former Amazon executive Doug Gurr replacing Marcus Bokkerink as chair, following criticism that the CMA had not sufficiently prioritized UK competitiveness.
The push to streamline regulatory bodies is further evidenced by the government’s decision to audit watchdogs such as Ofcom, Ofgem, and Ofwat, all of which received direct instructions from the PM and chancellor to propose ways to cut bureaucracy and encourage growth.
The FCA’s leadership has also emphasized the need to slow the pace of regulatory change. In a recent statement, Nikhil Rathi, CEO of the FCA, indicated that the agency would move away from launching new large-scale regulatory initiatives, focusing instead on refining existing frameworks and delivering targeted interventions where necessary.
This measured approach is designed to provide stability to financial firms, many of which have raised concerns over the volume and speed of regulatory change in recent years. While consumer protection and market integrity remain priorities, the FCA appears set to take a more pragmatic stance on its role in shaping the financial services ecosystem.
While the Treasury has yet to confirm its final decision, the prospect of regulatory consolidation aligns with a broader policy shift under the Starmer government—one that prioritizes economic growth and efficiency over expanding oversight. However, with the payments industry undergoing significant technological transformation, questions remain about whether a single regulator can effectively balance competition, innovation, and consumer protection.
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