Regulatory drivers and trends for financial services in 2026

December 2025

As we approach the end of the year, KPMG’s Regulatory Insight Centre looks ahead to 2026 and likely regulatory drivers and trends in financial services. Following an unpredictable 2025, 2026 is shaping up to be another year of change and shifting regulatory dynamics for the sector.

Broader structural forces will continue to reshape the financial services landscape, including:

Geopolitical uncertainty, coupled with rapidly changing trade policy;
Sluggish economic performance and increased government pressure on financial services regulators to support growth and competitiveness;
Changing demographics, including aging populations and shortfalls in pension provision;
Technological innovation, with the potential to fundamentally change how work, saving and investing is done, but also adding new risks into the ecosystem.

Based on regulatory mandates and priorities, the external environment and government ambitions, we expect the following overarching themes to have a strong influence on the regulatory agenda in 2026 and beyond:

Increasing interconnectedness of the financial system: Scrutiny of non-banks (asset managers, insurers and pension funds) and their interaction with the banking sector and real economy will be further heightened. With potential impacts on financial stability of significant concern, members of the Financial Stability Board (FSB), including the Bank of England, will seek to draw conclusions on specific issues in the private credit sector, whilst efforts to increase transparency around private markets asset classes will continue. Meanwhile, conduct regulators are monitoring developments as retail investors’ participation accelerates.
AI adoption: The initial momentum around AI-specific regulation has fallen away as policymakers and regulators come under pressure to not stifle the economic benefits that AI could bring. This means that FS firms could scale up the use of AI to offer innovative services, boost efficiency and reduce costs within existing regulatory frameworks. Regulators have offered guidance and are keen to understand firms’ governance of AI. They are also offering regulatory sandboxes to support innovation and try to ensure that regulation evolves in step with the technology.
Developments in digital assets: The use and regulation of digital assets continue to evolve. The possibility of a ‘multi-moneyverse’ is emerging in which different forms of money including traditional and tokenised commercial bank deposits, stablecoins and central bank money would be freely exchangeable. Central banks and regulators are supportive of the benefits this could offer, such as cheaper cross border payments, but are monitoring possible wider impacts including those on monetary policy and lending markets. They are also exploring regulatory barriers to the tokenisation of traditional financial instruments and alternative asset classes.
Boosting capital markets and retail investment: Government and regulatory action will continue to focus on the role of pensions, attracting investors and turning the UK and EU populations from savers into investors. New regulatory frameworks such as targeted support and a national awareness campaign in the UK, coupled with revisions to existing requirements, aim to turn talk into action. Tax policy could also have a significant influence on the attractiveness of products and services.
Technology (ICT) and cyber risk: In the wake of recent cyber attacks and outages across the wider economy, regulators will continue to ramp up their focus on technology and cyber resilience, with potential implications for FS transformation programmes. The potential for adverse impacts to customers, the wider financial system and firms themselves make resilience a basic requirement for doing business and a key enabler of sustainable growth.
Sustainability initiatives: Although diverse political agendas have introduced additional complexity to the sustainability landscape, particularly for firms with cross-border activities, UK and EU governments are still prioritising targeted sustainability initiatives. Policymakers are now focused on refining and streamlining disclosure regimes to make them less burdensome and more decision-useful for FS firms and investors. They are also seeking to ensure that climate and nature-related risks are appropriately identified and managed, and do not adversely impact the financial or operational resilience of the sector.

Trends already observed in the regulatory landscape that look set to continue:

Regulatory fragmentation: Despite the existence of global standards, the prospect of harmonisation is dwindling as local implementation approaches diverge, largely driven by domestic growth and competitiveness pressures. This looks set to continue. Looking ahead, policymakers are more likely to work with like-minded peers in specific areas of mutual interest, rather than seek global consensus.
Emphasis on reducing regulatory burden: We expect to see continued efforts to remove duplication and streamline UK and EU regulatory frameworks, whilst preserving red lines, for example around the stability and soundness of banks and insurers.
Focus on what matters most: We are likely to see regulators adopting increasingly targeted approaches as they seek to be more predictable, purposeful and proportionate. This will include a greater appetite for informed risk rather than seeking to eliminate risk entirely.
Expansion of the regulatory perimeter: Regulators are steadily widening the regulatory perimeter to capture firms and activities that have grown increasingly important to and intertwined with the financial services ecosystem but have to date been beyond their oversight. This includes critical third-party providers (CTPs), buy-now-pay-later firms, ESG ratings providers and cryptoasset firms.