Educational, not advice. This article explains the Enhancing Financial Services Bill announced at the 2026 King’s Speech and what it changes for ordinary consumers of UK financial services. Savvy Investor Guide is not authorised or regulated by the Financial Conduct Authority. Nothing here is personal financial advice or legal opinion on the merits of the legislation. Where a decision affects your finances, consider speaking to a regulated independent financial adviser.
What this article covers: The five main components of the Enhancing Financial Services Bill announced at the 2026 King’s Speech (13 May), what each one means in practical terms for consumers, the open questions on APP fraud reimbursement that the bill raises, and the timeline for the changes taking effect.
What it does not cover: The political debate about whether the bill is good policy. Bill text and parliamentary scheduling beyond what was publicly stated at the State Opening. Sector-specific consequences for regulated firms (this article is consumer-focused; legal and compliance professionals have specialised analysis elsewhere).
On 13 May 2026, the King’s Speech at the State Opening of Parliament included a piece of legislation called the Enhancing Financial Services Bill. It is presented as part of the government’s “Leeds Reforms” package, aimed at simplifying UK financial regulation, and combines five distinct strands that have been moving separately for the past year. For ordinary consumers, the bill changes the architecture of who regulates payments, how the Financial Ombudsman Service handles complaints, the senior accountability regime for regulated firms, the rules governing how banks separate retail and investment activities, and the rules under which credit unions operate. Here is a plain-English read of what each change is, what it means for you, and the things to watch as the bill makes its way through Parliament.
In short
- The Enhancing Financial Services Bill was announced at the 13 May 2026 King’s Speech. No firm parliamentary timetable yet.
- Five strands: Payment Systems Regulator absorbed into the FCA; FOS reform codified in law; SMCR Phase 2 (senior accountability regime simplification); ring-fencing regime updated; credit union expansion.
- For most consumers, the day-to-day experience does not change immediately. The bill is regulatory architecture, not consumer-facing product rules.
- The FOS reform matters most for consumers who complain about financial firms. Two shifts: a new “FCA-rule-compliant equals fair” presumption (raising the bar for upholding complaints against firms that followed the rules); a 10-year absolute time limit for new complaints.
- The PSR-FCA merger raises a live debate about the APP fraud reimbursement regime, which was largely a PSR creation. Consumer advocates worry the protections may be diluted; the Treasury says they will be preserved.
- The credit union expansion opens up an alternative-banking lane for more consumers, particularly those on lower incomes or with thin credit files. Sits inside the government’s stated ambition to double the size of the UK mutual and co-operative sector.
- Announced alongside: the Small Business Protections (Late Payments) Bill, which caps payment terms at 60 days and sets a statutory 8% above base interest on overdue invoices. Separate bill, same legislative slot.
- Timeline: Phase 1 of SMCR reform already published (22 April 2026). The rest of the bill needs to pass Parliament; expect first changes to take effect 2027-28.
What was announced
The State Opening of Parliament on 13 May 2026 set out the government’s legislative programme for the session. Financial services featured prominently within the broader “Leeds Reforms” package, named after the regional growth strategy that the bill is intended to support. The Enhancing Financial Services Bill bundles together five strands that have been moving separately through consultation, policy statements, and political signalling over the past year. The bundling itself is procedurally significant: it allows the changes to progress as a single piece of legislation rather than five separate bills, which means a faster parliamentary path but also less scrutiny per strand.
The bill text itself has not yet been published. The contents below are based on the State Opening announcement, the briefing notes released alongside it, and the previously-published consultation responses and policy statements that the bill builds on. Some details will sharpen when the bill is formally introduced.
Strand 1: PSR absorbed into the FCA
The Payment Systems Regulator was established in 2015 as a subsidiary of the FCA to oversee the UK’s payment systems specifically (Faster Payments, BACS, CHAPS, Visa, Mastercard, Pay.UK). It has independent powers and a separate budget. Under the bill, the PSR will be formally absorbed into the FCA, with the FCA inheriting the payment-systems mandate as a dedicated function inside the wider regulator.
What changes for consumers: Not much, in the day-to-day sense. The protections, rules, and consumer-facing services run by the PSR (the contactless payment limits, the rules on bank transfer timings, the Authorised Push Payment fraud reimbursement regime, the open banking governance) all continue under FCA stewardship. The interface most consumers interact with is their bank, not the regulator, and the bank’s obligations do not change overnight.
The live debate: Consumer advocates including the Transparency Task Force have raised concern that the APP fraud reimbursement regime, which was substantially a PSR creation and is currently delivering meaningful protection to victims of bank-transfer fraud, may be diluted under FCA stewardship. The FCA has a broader remit and a wider set of competing priorities, and the worry is that payment-fraud protection could become one item among many rather than a central focus. The Treasury has stated that the substance of the protections will be preserved. How the merger is implemented in practice (whether the FCA retains a dedicated payments directorate, what governance structure replaces the PSR’s independent board) is the detail to watch.
If you are an APP fraud victim or complainant now: The current rules and reimbursement processes continue. Nothing changes until the bill becomes law and the FCA implements the new arrangements, which is unlikely to be before 2027.
Strand 2: Financial Ombudsman Service reform
The Financial Ombudsman Service handles complaints from consumers about financial firms when the firm has not resolved the complaint to the consumer’s satisfaction. It is free for consumers, makes binding decisions up to financial limits, and has been a significant route to compensation in cases ranging from PPI mis-selling to motor finance and from authorised push payment fraud to insurance disputes.
The bill codifies two changes to FOS that have been in consultation since March 2026.
The “fair and reasonable” test
Under current law, FOS decides complaints by reference to what is “fair and reasonable in all the circumstances of the case”. This wording gives FOS substantial discretion, beyond strictly applying FCA rules: even a firm that has technically complied with the relevant FCA handbook chapter can have a complaint upheld against it if FOS judges the outcome unfair.
The bill adjusts the test so that, where a firm has complied with the relevant FCA rules at the time of the conduct complained about, the firm is treated as having acted fairly. FOS retains discretion in cases involving conduct outside the FCA’s specific rules or where there is genuine ambiguity in how the rules applied. But the broad principle moves: rule-compliant conduct is presumptively fair.
For consumers, this is a meaningful tilt. It makes complaints against firms that “did everything by the book” harder to win. Past episodes where FOS upheld large numbers of complaints despite firms arguing they had complied with the relevant rules (the PPI mis-selling cases, parts of the motor finance saga, some interest-only mortgage complaints) become harder to repeat under the new test. Whether this is good or bad depends on your view: it protects firms that follow the rules from retrospective second-guessing; it removes a backstop that has produced material compensation for consumers in past episodes.
The 10-year absolute time limit
Currently, FOS has a discretionary cut-off based on the six-year general limitation period from the Limitation Act 1980, with case-by-case extensions for late-discovered issues (the “three-year-from-knowledge” extension). In practice, this has meant some very old complaints have been admitted, particularly where the issue could not reasonably have been known at the time.
The bill introduces a 10-year absolute time limit from the date of the conduct complained about. The FCA retains discretion to extend this in exceptional cases. The practical consequence for consumers is that very old complaints become harder to bring; the practical consequence for firms is more certainty about the period over which their past conduct can come back as a complaint.
FOS itself remains independent of the FCA (an early consultation proposal to make FOS an FCA subsidiary was dropped). The Chief Ombudsman gains explicit overall responsibility for consistency of FOS decisions across types of case, which is intended to reduce “decision lottery” outcomes.
Strand 3: SMCR Phase 2
The Senior Managers and Certification Regime is the FCA framework that holds individual senior staff at regulated firms personally accountable for compliance and conduct failings. It was introduced in stages after the 2008 financial crisis and is widely seen as one of the structural improvements that the crisis prompted.
SMCR Phase 1 simplification was already published by the FCA on 22 April 2026, including reductions in the number of certification staff at affected firms and reduced documentation burdens on smaller firms. Phase 2 in the bill goes further: simplifying the senior manager approval process, narrowing some of the individual liability provisions, and removing duplicate certification processes for staff at firms with multiple regulated entities.
For consumers, the direct impact is minimal. SMCR operates inside regulated firms; it does not change product rules or complaint routes. The indirect effect is on the regulatory “tone” inside firms: industry observers will argue about whether SMCR simplification dilutes accountability or removes unnecessary bureaucracy without weakening protection. Consumer-facing rules (the Consumer Duty introduced in 2023, the FCA’s product governance rules) are not affected.
Strand 4: Ring-fencing regime updated
The ring-fencing regime, introduced after the 2008 financial crisis, requires the largest UK banks to separate their retail banking business (deposits, mortgages, small business lending) from their investment banking business (trading, derivatives, capital markets). The intent was that if a bank’s investment arm got into trouble, the retail arm could be insulated from the consequences.
The bill updates the ring-fencing rules to expand the activities that ring-fenced banks can carry out, with the stated aim of unlocking more business lending. Specifically, the rules around what counts as “retail activity” inside the ring-fenced bank are loosened, allowing ring-fenced banks to lend to slightly larger businesses than before and to engage in some hedging activity on behalf of their retail customers.
For ordinary consumers, no direct change. Your current account, savings account, and mortgage all sit inside the ring-fenced part of the bank already and are unaffected. For business customers, particularly SMEs that have struggled to get bank lending in recent years, the changes are intended to make more lending available. The trade-off is the slightly weakened insulation between retail and investment activities; the bill argues that other crisis-era reforms (capital requirements, the Bank Recovery and Resolution Directive, FSCS deposit protection) now provide that insulation through different mechanisms.
Strand 5: Credit union expansion
Credit unions are member-owned financial cooperatives, regulated by the FCA. They provide savings and loan services to their members, typically focused on a community, employer group, or geographical area. In the UK they are smaller and less prominent than in the US or Ireland, but they have grown materially in the last decade as an alternative to mainstream banking for people on lower incomes, those with thin credit files, and communities under-served by high-street banks.
The bill expands the categories of person who can become a member of a credit union, broadens the range of services a credit union can offer (including some forms of mortgage lending and small business lending), and simplifies the regulatory framework for the sector. The FCA’s Consumer Duty applies to credit unions as it does to banks, so the consumer-protection floor remains intact.
The strand sits inside a stated government ambition to double the size of the UK mutual and co-operative sector. The bill’s specific provisions on credit unions are the first concrete step toward that target; further measures on co-operative banking, building societies, and mutual insurers are signalled but not yet drafted. For consumers, the practical upshot is that the alternative-banking lane is being widened deliberately rather than left to find its own level.
For consumers, this is the most positive strand of the bill. It opens up an alternative-banking lane for people who do not have a comfortable relationship with the mainstream banking sector or who actively prefer a member-owned model. Credit unions tend to offer reasonable savings rates, capped-fee loans, and a more relational customer experience than high-street banks. Whether this lane scales materially under the new rules depends on how individual credit unions choose to expand and on the regulator’s appetite for permitting new lending products.
Announced alongside: the Late Payments Bill
The State Opening also introduced a separate piece of legislation: the Small Business Protections (Late Payments) Bill. It is not part of the Enhancing Financial Services Bill, but it sits in the same legislative slot and applies to a broader set of small business owners.
The bill proposes two main protections for SMEs and freelancers invoicing larger businesses:
- 60-day maximum payment terms on business-to-business invoices, with limited carve-outs for genuinely complex contractual arrangements. Today’s standard is broadly 30 days but is routinely stretched to 90 or 120 by larger payers who have the bargaining power to dictate terms.
- Statutory 8% above Bank of England base rate on any invoice paid after the 60-day deadline. Today’s late-payment interest under the Late Payment of Commercial Debts (Interest) Act 1998 is 8% over base, but the new bill removes the contractual carve-outs that have allowed many payers to suppress or waive the entitlement.
For sole traders, freelancers, and SME owners, who make up a meaningful share of Savvy Investor Guide’s readership, this is the most tangible item from the 13 May announcements. Cashflow is the dominant constraint for most small businesses, and a contractually-enforced 60-day cap with automatic statutory interest above it is a material protection. The bill needs to clear Parliament first, with the typical legislative path running through summer 2026 and into 2027 before practical enforcement begins.
Timeline: when does any of this take effect?
The bill is at the start of its parliamentary journey. The State Opening announcement starts the legislative process; the formal bill text is published in the weeks after the announcement; first reading, second reading, committee, report, and third reading then follow in both Houses, with consideration of amendments between them. For a substantial bill like this, the realistic timetable is:
- Summer 2026: Bill text published. First and second readings.
- Autumn 2026 to spring 2027: Committee stage, including detailed line-by-line scrutiny. This is where consumer-advocacy groups will be lobbying on the APP fraud reimbursement details, FOS reform safeguards, and credit union expansion scope.
- Mid-to-late 2027: Royal Assent likely, assuming no major reversals.
- 2027 onwards: Regulator implementation, FCA rule-making, transitional provisions. Different strands will take effect at different times.
Some elements may not need primary legislation and can move faster. SMCR Phase 1 simplification is already in force from 22 April 2026. Parts of the FOS reform may be implemented via FCA rule changes rather than waiting for the bill to pass.
Sidebar: the 19 May FCA Regulatory Initiatives Grid (10th Edition)
Alongside the King’s Speech bundle, the FCA’s twice-yearly Regulatory Initiatives Grid was updated on 19 May 2026. The 10th Edition captures several items that run in parallel to the Enhancing Financial Services Bill rather than inside it:
- DEPP penalty policy update. The FCA’s enforcement-penalty framework is being revised, with a new threshold for “serious financial hardship” discounts and a minimum initial fine for market abuse cases. Consumer relevance is indirect (it shapes how aggressively the FCA fines bad actors), but the deterrent effect matters for product mis-selling and finfluencer enforcement.
- IFPR review. The Investment Firms Prudential Regime review may align with the broader COREPRU (Consolidated Resolution and Prudential Requirements) framework. Affects how investment platforms and brokerages are capitalised; indirect consumer effect via firm stability.
- Financial Crime Guide consultation (September/October 2026). Updated FCA guidance on financial-crime controls, with crypto firms explicitly in scope. Cross-links to the UK crypto regime CP26/13 (consultation closes 3 June 2026) covered in our crypto regulation guide.
- Non-financial misconduct SMCR extension to non-banks. PS26/6 (published 22 April 2026) extends non-financial misconduct rules from banks to non-bank financial services firms with effect from 10 July 2026. This is the SMCR Phase 1 commencement referenced in Strand 3 above; the Reg Init Grid confirms the implementation date.
The Grid is the FCA’s forward-look document. Treat it as the regulator’s roadmap rather than a binding commitment; items move in and out as priorities shift. Source: FCA: Regulatory Initiatives Grid; secondary coverage at RegulationTomorrow: 10th Edition published.
What this means for you in 2026
For the rest of 2026, the practical effect on most consumers is small. Your existing protections, complaints routes, and product rules continue as they are today. The bill represents the medium-term direction of travel rather than an immediate change.
Specific situations to bear in mind:
- If you are considering a complaint: The current FOS regime still applies. The new “rule-compliant equals fair” test only takes effect once the bill is law and FOS has updated its decision-making framework, probably 2027 at the earliest. Time-barred complaints are still subject to the current six-year-plus-knowledge-extension test, not the new 10-year absolute limit.
- If you are an APP fraud victim: The current PSR-led reimbursement regime continues to apply. Watch for any changes to the FCA’s implementation of payment-fraud protection as the merger progresses.
- If you are looking for a savings or loan provider outside the mainstream banking sector: The credit union route is already available and will likely become more useful over the next 18 to 24 months as the bill expands membership and service options.
- If you are a small business owner seeking finance: The ring-fencing changes may improve lending availability over the medium term, but the change is mechanical and the actual impact depends on how banks choose to deploy the new flexibility.
- If you are a sole trader, freelancer, or SME invoicing larger payers: Watch the separate Small Business Protections (Late Payments) Bill (60-day cap, statutory 8% above base on late invoices). Today’s protections remain in force; the strengthened regime will apply once that bill passes, probably in 2027. Until then, the existing Late Payment of Commercial Debts (Interest) Act 1998 still entitles you to 8% above base on overdue invoices, even if the entitlement is routinely under-claimed in practice.
FAQ
Does the bill affect my existing complaints with the FOS?
No. Complaints already in the FOS process at the time the bill passes will be assessed under the rules that applied when the conduct occurred. The new “fair and reasonable” framework applies to complaints filed after the new rules take effect; the new 10-year absolute time limit applies to complaints filed after the new rules. Both transitional provisions will be set out in detail when the bill becomes law.
If the PSR is absorbed into the FCA, does that mean APP fraud reimbursement stops?
No. The Treasury has stated that the substance of the APP fraud reimbursement regime will be preserved under FCA stewardship. The regime is currently set out in PSR rules; under the merger, these rules transfer to the FCA. Consumer protections continue as before. The live debate is about whether the FCA will give payment fraud protection the same priority that the PSR did, and how the governance of the regime is structured inside the FCA. For now, all existing reimbursement processes continue to apply.
I have a 10-year-old complaint I want to bring. Can I still bring it?
Under current rules, complaints older than six years are admissible only if you discovered the issue (or could reasonably have discovered it) within the past three years. That is the rule that applies today. Once the bill takes effect, a new 10-year absolute time limit will apply. For complaints that are clearly within both the current rules and the proposed new 10-year limit, there is no urgency. For complaints that are currently within the rules but would be outside a 10-year absolute limit, filing sooner rather than later reduces the risk of being time-barred.
Will the rules on contactless limits, payment timings, or open banking change?
Not as a direct consequence of the merger. These rules will transfer from the PSR to the FCA. Any future changes will be a matter for FCA rule-making and consultation, not for the merger itself. Open banking governance is being reviewed separately, alongside an ongoing transition of the Open Banking Implementation Entity’s functions to a new structure under the wider FCA-led financial data strategy.
How do I find a credit union near me?
The Association of British Credit Unions (ABCUL) at abcul.org publishes a credit union finder. Find Your Credit Union at findyourcreditunion.co.uk is another route. Eligibility is usually based on where you live, where you work, or which “common bond” community you belong to; check eligibility before applying.
Will the bill change cash ISAs, pension rules, or the ISA allowance?
Not directly. ISA rules, pension rules, and HMRC tax-wrapped savings products are governed by separate legislation and HMRC rule-making. The Cash ISA cap change (£20,000 to £12,000 for under-65s from April 2027) was announced separately at the Autumn Budget 2025 and is not part of this bill. For Cash ISA detail, see our Cash ISA cap 2027 guide.
When will I know more about the bill’s detail?
The bill text is usually published a few weeks after the King’s Speech. Once published, the explanatory notes that accompany the bill will set out the full mechanics of each strand. Consumer-facing impact assessments are typically released alongside. Watch for Treasury and FCA consultations through summer 2026 on specific elements. Savvy Investor Guide will cover the substantive consumer changes as they crystallise.
The Savvy Investor’s take
The Enhancing Financial Services Bill is a regulatory-architecture bill rather than a consumer-rules bill. For most ordinary consumers, the day-to-day experience of dealing with banks, building societies, payment apps, and insurers will not change in any visible way as a direct result of this legislation.
The two strands that will quietly shape consumer outcomes are the FOS reform and the PSR-FCA merger. The FOS reform tilts the system in favour of firms that follow the rules, at the cost of removing a backstop that has historically delivered compensation in episodes where rule-compliance and fairness diverged. The PSR-FCA merger consolidates oversight under one regulator, which is a real efficiency, but raises legitimate questions about whether payment-fraud protection will retain the same focus inside a broader FCA.
For ordinary consumers, the practical takeaways are: existing protections continue through 2026; the credit union expansion is a small but genuine gain for people seeking alternatives to high-street banking; and any old complaint that is currently within the rules but might fall outside a future 10-year absolute limit is worth filing sooner rather than later. For the meaningful minority of readers who run small businesses or freelance, the co-announced Late Payments Bill will, if it passes, finally put real teeth into the standard B2B payment timetable.
The substantive debate will happen in committee through autumn 2026, when consumer-advocacy groups press for safeguards on APP fraud reimbursement, FOS reform, and credit union conduct. The shape of those safeguards will determine how the bill actually lands for consumers. The headline announcement at the State Opening is the beginning of the conversation, not the end of it.
Information, not advice. This article describes the Enhancing Financial Services Bill as announced at the State Opening of Parliament on 13 May 2026, and what each strand may mean for consumers. The bill text had not been published at the time of writing; details may change before Royal Assent. Savvy Investor Guide is not authorised or regulated by the Financial Conduct Authority and does not provide regulated financial or legal advice. For decisions tied to your circumstances, speak to a qualified, FCA-authorised adviser or to MoneyHelper.
Key sources
- UK Parliament: State Opening of Parliament 2026, 13 May 2026.
- GOV.UK: Financial Ombudsman Service reform announcement.
- FCA PS26/6: Senior Managers and Certification Regime review.
- Financial Ombudsman Service (current complaints process).
- Payment Systems Regulator: APP scams (current reimbursement regime).
- Savvy Investor Guide: Cash ISA cap 2027 guide; FCA CMC review on car finance.
- MoneyHelper for free, government-backed money guidance.
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