FCA FS25/2: A Strategic Shift Toward Simplifying Financial Regulation Post-Consumer Duty

On 25 March 2025, the Financial Conduct Authority (FCA) published Feedback Statement FS25/2, which lays the groundwork for a multi-phase plan to simplify its regulatory framework following the implementation of the Consumer Duty. The initiative comes after widespread calls from firms and stakeholders to streamline the FCA’s rules, reduce unnecessary complexity, and remove duplication. FS25/2 sets out the Authority’s immediate actions, ongoing reviews, and long-term vision to align regulatory requirements with the new outcomes-based approach championed by the Consumer Duty.

Rationale for Change

The Consumer Duty introduced a high and proactive standard of care, designed to ensure that retail customers receive fair value, clear communications, and appropriate support throughout the lifecycle of financial products. This shift to outcomes-focused regulation has prompted the FCA to assess whether some of its long-standing prescriptive rules are still needed, or whether simplification could allow firms to deliver better customer outcomes with greater flexibility.

Many respondents to the FCA’s 2024 Call for Input welcomed the Duty’s flexibility but expressed concerns over the volume and complexity of existing guidance. Stakeholders reported difficulty navigating overlapping rules and legacy documentation, and a desire for clearer expectations. FS25/2 addresses this by outlining a programme focused on four key pillars of reform, each with specific action plans.

Detailed Overview of the Simplification Plan

Reviewing the Foundations

The FCA is beginning with the fundamental structure of its rulebook. One of the central elements of this review is a comprehensive reassessment of definitions used across the Handbook. These include terms such as “retail customer” and “small and medium-sized enterprise (SME),” which currently vary between sectors and have caused difficulties in application and compliance. The FCA intends to harmonise these definitions to make them easier to interpret and more consistent across financial services.

Another core issue under review is the international application of UK conduct rules, particularly in the insurance sector. Currently, UK-based firms serving customers abroad are often required to comply with both UK rules and the laws of the customer’s jurisdiction. The FCA plans to consult on whether its rules should continue to apply in these cross-border situations or whether a more proportionate model is possible, while still maintaining alignment with global standards and international obligations.

The FCA has also launched a mortgage rule review, seeking to remove detailed requirements that overlap with the Duty. This will enable lenders to offer more tailored customer journeys and digital engagement, particularly in areas like remortgaging, affordability assessments, and advice boundaries. Consultations are scheduled for May and June 2025.

Future-Proofing Disclosure

Another major area of reform concerns consumer disclosures, which are often lengthy and overly prescriptive. Stakeholders argue that disclosure rules sometimes obstruct innovation and do not always improve customer understanding.

The FCA is now working to modernise these requirements. In the mortgage market, it will examine how disclosures can be more aligned with digital platforms, consumer preferences, and new sales models. This includes a discussion paper expected in June 2025.

In consumer credit, the FCA will collaborate with HM Treasury on reforms to the Consumer Credit Act. This includes evaluating whether disclosures like the Annual Percentage Rate (APR) are still fit for purpose or should be adapted in light of the Consumer Duty’s emphasis on clarity and fairness.

For retail banking, the FCA intends to allow firms more discretion in how they present product information, including the layout and content of “summary boxes” for savings accounts. Additionally, a new framework is being developed for Consumer Composite Investments, where improved product information could significantly benefit customer understanding.

Reducing the Administrative Burden

One of the FCA’s core goals is to ease compliance costs and reduce administrative load on firms, particularly small and mid-sized firms, without compromising regulatory integrity.

Planned reforms include simplifying the rules governing insurance and funeral plans, such as removing prescribed minimum training hours for insurance staff and giving providers more flexibility on how frequently they assess product value. The FCA also plans to amend reporting obligations linked to the insurance pricing rules and to revisit the reporting requirements on Assessment of Value for asset managers.

Another area under scrutiny is the Client Assets (CASS) sourcebook, which governs how firms manage and reconcile client funds and assets. The FCA is proposing updates to reflect modern industry practices, such as allowing reconciliation based on newer data sources and offering more flexibility around record-keeping, particularly when fund managers issue statements quarterly instead of monthly.

The Authority also intends to revisit training and competence (T&C) requirements, exploring whether the current rules could be streamlined while still ensuring staff remain skilled and capable.

Streamlining Requirements

Finally, FS25/2 outlines a plan to retire outdated or duplicative materials and improve access to regulatory guidance. This includes reviewing all Dear CEO and portfolio letters issued before 2022, with the intention of formally withdrawing them, though they will remain publicly available for transparency. The FCA also aims to eliminate obsolete guidance tied to previous initiatives, such as Treating Customers Fairly, which are now effectively superseded by the Consumer Duty.

To improve regulatory clarity, the FCA will consult later in 2025 on targeted clarifications within the Handbook, including removing references to outdated principles, simplifying investment and borrowing rules for collective investment schemes, and updating non-Handbook guidance.

Importantly, the FCA is also updating the FCA Handbook website, with a beta version launching in summer 2025. Enhancements will include an improved Rule Review Feedback Tool, making it easier for firms to raise concerns or suggest changes to specific rules.

As part of this accessibility effort, the FCA will also publish a dedicated guide for smaller firms in 2025, helping these businesses navigate outcomes-focused regulation in a way that is proportionate and practical for their size and capabilities.

Looking Ahead

FS25/2 signals a clear shift in the FCA’s regulatory philosophy—from one that prescribes, to one that enables. It is not about deregulation, but rather about recalibration. The Authority is moving towards a model that encourages firms to think critically about outcomes, rather than simply ticking compliance boxes.

The FCA has committed to working collaboratively with firms, trade bodies, and consumer organisations throughout 2025. It plans to host a high-level summit in summer 2025, bringing together stakeholders to shape the direction of future reforms. A further progress update will be published in September 2025, detailing the next phase of simplification.

FS25/2 is more than a feedback paper; it is the FCA’s blueprint for transforming how regulation is applied in the post-Consumer Duty era. The message to the market is clear: the rules are evolving, and firms should prepare to evolve with them. Simplification does not mean weakening standards. It means creating a smarter, more coherent regulatory environment that better serves both firms and consumers.

For those operating in financial services, now is the time to review internal compliance frameworks, assess how the Duty is being embedded, and engage with the FCA’s consultations as they are released. The opportunity to help shape the future regulatory landscape is open, and the FCA has invited the industry to take part.

To access FS25/2 in full, visit the FCA's website.