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Overview of the year ahead

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Overview of the year ahead

Part of our report

Financial services horizon report 2025
Published Date
Dec 31 2024
The financial services legislative and regulatory priorities of new governments around the world are starting to crystallise as we enter the dawn of a new year. Across the U.K. and EU, consistent themes are competitiveness and growth, innovation, and sustainable finance. As against this, in an increasingly polarised geopolitical environment, protectionism and fragmentation continue to be of concern.

Please note that this document does not seek to cover all regulatory developments planned for 2025 and speaks to matters known as of 31 December 2024. It does not consider changes planned for the insurance or pensions sectors. Equally, the timing of a number of updates remains uncertain, and in some instances, we are unable to identify when in 2025 they are anticipated. Furthermore, any expected date is subject to change and parliamentary time.

U.K.

In the U.K., the Labour government published their plan for financial services in January 2024, pre-election. They recognise the importance of the financial services industry and promise to “unashamedly champion” the sector as “one of the U.K.'s greatest assets”. They aspire to a regulatory framework that “will be stable and predictable, and guided by a set of priorities crucial to the success of the sector: efficient, proportionate, incremental, and coordinated across government. That must also mean a balance between consumer protection, competitiveness and financial stability in defining our policy agenda”.

Their vision is based on six policy priorities: (i) inclusive growth, scaling regional financial centres alongside London and Edinburgh hubs; (ii) enhancing the international competitiveness of the sector, strengthening international engagements and building a more collaborative relationship with the EU; (iii) reinforcing consumer protection (including regulation of the “Buy-Now, Pay-Later” (BNPL) sector) and financial inclusion; (iv) leading the world in sustainable finance; (v) embracing innovation and fintech as the future of financial services; and (vi) reinvigorating capital markets.

On 14 November 2024, Rachel Reeves, the U.K. Chancellor, set out a package of reforms in her Mansion House speech. The reforms aim to drive growth and competitiveness in financial services. Ms Reeves stated that the regulatory changes post-financial crisis created a system which sought to eliminate risk-taking.

This “has gone too far” and has led to unintended consequences. Ms Reeves hopes to maintain the U.K.'s high regulatory standards while rebalancing elements of the regulatory system to drive economic growth and competitiveness. We have already seen some evidence of the new attitude to risk-taking through various concessions in the consultation process for the implementation of Basel 3.1. It is not yet clear how the new attitude to risk-taking will translate into market and conduct regulation.

EU

Following the European elections in June 2024, the European Council set out its priorities in the 2024–2029 EU strategic agenda. This serves as inspiration for the European Commission's political priorities. Amongst these strategic priorities is "a prosperous and competitive Europe". The President of the Commission determined seven priorities for the 2024–2029 mandate of the European Commission which include: (i) a new plan for Europe's sustainable prosperity and competitiveness; and (ii) a global Europe: Leveraging power and partnerships, reforming the international system to make it fit for today’s world. 

What each of these developing priorities means in practice is a matter of great interest to the financial markets and market participants but the industry is buoyed by the increasing focus on competitiveness and growth.

Competitiveness and growth

U.K.

The financial services sector has been identified by the government as one of eight growth-driving sectors. In November 2024, HMT published a call for evidence designed to support the development of the financial Services Growth & Competitiveness Strategy. Once developed, the strategy will serve as the central guiding framework through which the government will deliver sustainable, inclusive growth for the financial services sector and secure the U.K.’s competitiveness as an international financial centre. It should further support the secondary objective of the regulators, introduced by the Financial Services and Markets Act 2023, to facilitate the international competitiveness of the U.K. economy and its growth over the medium to long term. The strategy will be published in Spring 2025.

EU

Mario Draghi, former European Central Bank President, was tasked by the European Commission to prepare a report of his personal vision on the future of European competitiveness. The report, published in September 2024, looks at the challenges faced by the industry and companies in the Single Market. It identifies three main areas for action to reignite sustainable growth and the three main barriers. The first area for action is described as the most important and urges the EU to close the ‘innovation gap’ with the US and China.

The second area identified for action is a joint plan for decarbonisation and competitiveness, and the third and final area looks to increase security and decrease dependencies. The report discusses the barriers to growth and a strategy for moving forward. Its findings will contribute to the Commission's work on a new plan for Europe's sustainable prosperity and competitiveness.

International relations

U.K./EU engagement

The second meeting of the Joint EU-U.K. Financial Regulatory Forum between the EU and the U.K. took place in May 2024. The published report of the meeting records that both sides emphasised the benefit and importance of structured regulatory cooperation between the EU and the U.K.. The third forum is expected to take place in February 2025.

Labour reports no plans to seek to rejoin the EU, instead it wants to “reset the relationship” and “work to improve the U.K.'s trade and investment relationship with the EU, by tearing down unnecessary barriers to trade”. Amongst the aspirations is the mutual recognition of professional qualifications. Labour has said that it is committed to implementing post-Brexit agreements made under the previous government, including the Windsor Framework.

U.K./Swiss mutual recognition agreement

Progress on the Berne Agreement, the U.K./Swiss Mutual Recognition Agreement continues, albeit slowly. This agreement, concluded in December 2023, seeks to set sectors where the U.K. and Switzerland will mutually recognise each other's domestic laws and regulations on financial services, making it easier for providers to each of the two markets to do business with corporate and high net worth clients in the other. The agreement must be ratified by both the U.K. and Swiss parliament before it can come into force. It was submitted to the Swiss parliament on 4 September 2024.

On 15 October 2024, the first formal meeting between U.K. and Swiss finance ministers since the negotiations of the Berne Agreement concluded took place. The discussions emphasised close, ongoing U.K. and Swiss cooperation in financial services and focused on several key themes, including: (i) economic outlook and financial stability, (ii) the Berne Agreement, (iii) sustainable finance, (iv) artificial intelligence (AI) and innovation and (v) capital markets. The next meeting will take place in H2 2025. The ambition reported by both sides is to complete implementation of the Berne Agreement as soon as possible, by the end of 2025 at the latest.

When the Berne Agreement was concluded, HMT describe it as “a ground-breaking pact on financial services cooperation”. It stated that a finalised mutual recognition agreement between the two countries could act as a template for cross-border wholesale financial services between the U.K. and other countries.

Please note that this report does not seek to cover all regulatory developments planned for 2025 and speaks to matters known as of 31 December 2024. It does not consider changes planned for the insurance or pensions sectors. Equally, the timing of a number of updates remains uncertain, and in some instances, we are unable to identify when in 2025 they are anticipated. Furthermore, any expected date is subject to change and parliamentary time.
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