HMT consults on policy approach to consolidating the UK PSR within the UK FCA

HM Treasury (HMT) has published a consultation paper "A Streamlined Approach to Payment Systems Regulation" seeking views on its proposals on the consolidation of the UK Payment Systems Regulator's (PSR) functions within the UK Financial Conduct Authority (FCA). The move, announced in March as part of the UK government's broader Regulatory Action Plan, aims to simplify the regulatory framework to help support growth, better manage burdens on businesses and minimise overlaps between regulators' responsibilities. Under the proposal, the FCA will assume the PSR's responsibilities, including on promoting competition and innovation, and supporting consumer protection in payment systems. Transitional work is already underway, and the consultation now sets out the government's proposed policy approach.

Key things to note include:

• HMT intends to align the PSR's functions within the FCA's existing framework under the Financial Services and Markets Act 2000 (FSMA 2000), to the extent this is practicable. Where full integration is not feasible, the relevant functions are expected to be set out in a new part of FSMA 2000.
• Transferring the PSR's functions to the FCA will not result in new categories of persons being brought in scope of payment systems regulation. Instead, the FCA's payment systems regulatory regime would apply to the same categories of persons as the PSR's regime in the Financial Services (Banking Reform) Act 2013 does today, namely payment system operators, infrastructure providers and payment service providers.
• The FCA will retain its current conduct and prudential regulatory roles, including its existing oversight of payment services and e-money legislation as it does today. The UK government is not seeking to alter these functions, or expand or reduce the FCA's remit in relation to these functions, as a consequence of integrating the PSR into the FCA. This means that conduct and prudential regulations that currently exist under FSMA 2000, the Payment Services Regulations 2017 and the Electronic Money Regulations 2011 will not apply to any new category of person as a result of integrating the PSR into the FCA.
• HMT does not intend to introduce new regulated activities in connection with payment systems regulation following the transfer of PSR functions to the FCA. Regulation will continue to be based on which payment systems HMT designates.

The consultation specifically focuses on core design decisions for this new regulatory setup, including: (i) the FCA's role in relation to other public authorities; (ii) its future objectives and powers concerning payment systems; and (iii) other key structural features of the framework. Notably, the UK government is seeking feedback only on these core design aspects, not on all issues related to the consolidation. The deadline for responses is 20 October, with legislation to follow when Parliamentary time allows. On the same day, the FCA has also published a statement in response to the launch of the consultation, welcoming the proposals and highlighting the importance of clear regulatory responsibilities and collaboration with the PSR, the Bank of England and the government to deliver this shared vision. You may also like to read our opinion piece "UK Payment Systems Regulator to be abolished - what's next?" which explores key considerations and potential impacts of the transition.

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