With its final day as the U.K's top financial regulator drawing close, the Financial Services Authority is going out with a bang. This week, in addition to publishing a business plan and risk outlook for the new Financial Conduct Authority that will replace it on April 1, the FSA enacted new rules that allow smaller banks a better chance at challenging the prominence of Britain's “Big Four.”

The FSA currently regulates the financial services industry in the U.K. The new FCA will supervise the conduct of approximately 26,000 firms across all financial industry sectors and the prudential standards of approximately 23,000 firms not regulated by the Prudential Regulation Authority.

The newly released risk outlook lays out market conditions the new FCA may need to address through its efforts. Among them: continuing to tackle market abuse by taking strong enforcement action to deter future misconduct; ensuring a competitive financial services industry by creating a new Competition Department to embed competition analysis across the organization; continuing to address ongoing misconduct, such as LIBOR, Payment Protection Insurance and interest rate swaps; and carrying forward major policy initiatives such as a Mortgage Market Review and changes to how retail investment advice is offered and overseen.

Other risks identified for the coming year include:

Firms not designing products and services that respond to real consumer needs or are in their long-term interests.

Distribution channels not promoting transparency for consumers on financial products and services.

Over-reliance on, and inadequate oversight of, payment and product technologies.

A shift towards more innovative, complex or risky funding strategies or structures that lack oversight, posing risks to market integrity and consumer protection.

As the hand-off of regulatory powers approaches, the FSA, working with the Bank of England, has also released a policy directive that offers a major overhaul of bank capital standards and is intended to relax barriers to entry for new bank entrants

A longstanding goal for U.K. regulators has been leveling the playing field between smaller banks and its dominant "big four.” Royal Bank of Scotland, Lloyds Banking Group, Barclays and HSBC hold a 75 percent share of the account market. To remedy this, the FSA plan will, in many cases, reduce the timeline for regulatory approval to six months, down from two years, in many cases for applicants who already have capital, liquidity, technology, and key senior appointments in place. Such start-ups will only be required to hold 4.5 percent core tier one capital, as opposed to the 9.5 percent required of larger banks under the Basel III regime.

For some fledgling institutions, lacking the infrastructure of more sophisticated entrants, will be allowed to hold just 5 million Euros, approximately $6.4 million in U.S. dollars, as they work with regulators to build out their infrastructure and management teams.