UK Regulatory Radar

2026 H1 Systemic Risk Survey: The BoE has published the results of its H1 Systemic Risk Survey. The survey captures responses from executives responsible for firms’ risk management or treasury functions across UK banks and building societies, large foreign banks, asset managers, hedge funds, insurers, pension funds, large non-financial companies and central counterparties.

Respondents remained confident in the stability of the UK financial system, reporting a similar level of confidence compared to the 2025 H2 survey. The perceived probability of a high-impact event affecting the UK financial system over the short term was at a similar level compared to the 2025 H2 survey, but lower over the medium term. However, it is worth noting the survey period was 19 January to 16 February 2026, before the Iran conflict began to unfold.

Geopolitical risk and cyberattack remained the two sources of risks most frequently cited by participants. They were also considered the most challenging risks to manage and the most likely to materialise. Geopolitical risk reached the highest levels recorded to date in the survey. There was an increase in participants citing AI risk as the most challenging to manage and the most likely to materialise.

Senior Managers and Certification regime reform: The PRA and FCA have confirmed a series of reforms to streamline the Senior Managers and Certification Regime (SM&CR). The government will make legislative changes to remove the Certification Regime from primary legislation (to be replaced by a more proportionate approach), reduce the number of senior management functions that require regulator pre-approval and introduce other measures including streamlining conduct rules.

In parallel the FCA and PRA have published PS26/6 and PS12/26 confirming a series of changes to the SM&CR. Given strong stakeholder support for the PRA and FCA’s proposals, they will be implemented largely as consulted upon subject to minor adjustments and clarifications. Firms will be given more time to submit senior manager applications in cases of unexpected or temporary changes and the requirement to certify individuals for multiple overlapping functions will be removed. Most changes took effect on 24 April, however improvements to regulatory reporting and processes will apply from 10 July 2026.

Customer due diligence review: The FCA has published the findings of its 2025 multi-firm review of Customer Due Diligence (CDD), Enhanced Due Diligence, and ongoing due diligence controls. The findings highlight strengths and weaknesses in the comprehensiveness and understanding of due diligence policies and procedures, the effectiveness of CDD processes and the quality of compliance monitoring and audit.

Modernising payments services regulation: HMT has announced a new package of measures including consulting soon on consolidating rulebooks for stablecoins, tokenised deposits and traditional payment services into a single framework, exploring how payments services regulation should adapt to payments conducted by AI agents, and providing the FCA with new powers to regulate Open Banking. HMT also confirmed the appointment of Chris Woolard CBE as the government’s new Wholesale Digital Markets Champion and plans to consolidate the PSR within the FCA.

OFSI Strategy for 2026-2029: The recently published strategy from the Office of Financial Sanctions Implementation (OFSI) outlines an ambitious plan to ensure UK financial sanctions remain effective, resilient and impactful, addressing evolving circumvention threats and the increasing use of sanctions over the next three years. The strategy aims to achieve three key outcomes:

• An enhanced understanding of threats, grounded in robust data analysis.
• Provision of high-quality support for licensing, enforcement and compliance activities.
• Development of strong partnerships with industry stakeholders, across government bodies, and at an international level.

From 2026 to 2029, OFSI will evolve its delivery approach based on four clear pillars – Promote, Enable, Respond and Change – to maximise its impact across all operations.

PRA Business plan 2026/2027: Please refer to the banking and insurance sections below.

PRA Business Plan: The PRA’s 2026/27 business plan sets out its strategic priorities for the next two years including a recap of supervisory priorities and the actions it is pursuing to advance UK competitiveness and growth. For insurers, the business plan notes that the PRA will continue to consider policy measures on funded reinsurance ‘over the coming year’ [as of 29 April – this is now out], with a consultation on policy approach in 2026/7. Beyond FundedRe, the plan largely reinforces existing insurance priorities including continued supervisory and policy work on alternative capital for life insurers, DyGIST, captives, implementation of the PRA’s updated climate risk expectations, and cyber, ICT and operational resilience.

PRA Business Plan: The PRA’s 2026/27 business plan sets out its strategic priorities for the next two years including a recap of supervisory priorities and the actions it is pursuing to advance UK competitiveness and growth. For insurers, the business plan notes that the PRA will continue to consider policy measures ‘over the coming year’, with a consultation on policy approach in 2026/7. Beyond FundedRe, the plan largely reinforces existing insurance priorities including continued supervisory and policy work on alternative capital for life insurers, DyGIST, captives, implementation of the PRA’s updated climate risk expectations, and cyber, ICT and operational resilience.

Simplifying the advice rules: The FCA is consulting on simplifying aspects of the rules on financial advice. See the article above for more.

Multi-firm review on market soundings in UK equity capital markets: The FCA conducted the review to see whether market soundings were affecting market quality. It found that, although trading volumes fell by an average of 15% during the market sounding period, there was no material impact on other market quality metrics such as effective and quoted spread and market depth. The FCA has reminded firms that the risk of inside information leaking may increase as the scale of a market sounding grows. Firms may wish to consider whether their policies and procedures appropriately consider the scale of their market soundings.

Short Selling Regime: The FCA published policy statement (PS26/5) following its review of the short selling regime. To allow sufficient time to implement the new regime alongside operational changes, the updated regime will be implemented in two phases. Phase 1 on 13 July 2026 includes:

• Implementation of the new short selling rules and the final Statement of Policy.
• Changes to the FCA’s systems to facilitate the disclosure of new aggregate net short positions (ANSPs).
• The reportable shares list.

Phase 2, on 30 November 2026, includes an update to the system for position reporting to facilitate persons uploading and submitting multiple submissions in a single ‘bulk submission’. To support the implementation of the new regime, the FCA has published a summary of the operational changes being introduced.

Primary Market Bulletin 62: The FCA’s latest bulletin:

• Describes some of the key features of its decision in a recent misleading statements case under MAR and the Listing Rules and Principles
• Outlines its concerns about potentially manipulative investment approaches.
• Summarises its review of sponsors’ work on the modified transfers process.  

FCA good and poor practice: The FCA has reviewed firms’ annual operational resilience self-assessments and shared observations and insights on how they are continuing to strengthen their operational resilience one year on from the end of the operational resilience transition period on 31 March 2025. By that date, firms were required to have completed mapping and testing to demonstrate their ability to remain within impact tolerances for each of their important business services (IBSs). The FCA notes examples of good practice and areas where further improvement is needed and is engaging directly with firms on its findings. Key observations include:

• More focus is still needed on understanding the resilience posture of non-technology assets supporting an IBS;
• Scenario tests may not be severe enough for some firms, potentially resulting in no vulnerabilities being identified that would prevent them from recovering within impact tolerances;
• Limited details are being tracked or reported to boards on vulnerability remediation;
• There is limited testing of communications strategies and plans; and
• There is limited evidence of new governance being embedded into BAU, where IBS owners are engaged or where the IBS lens becomes the primary reporting lens.

Motor finance taskforce: The FCA, SRA, ICO, and ASA have launched a joint taskforce to combat poor practices by claims management companies (CMCs) and law firms in handling motor finance claims. This collaboration is intended to support enhanced intelligence sharing and take co-ordinated action against issues such as misleading advertising, meritless claims, multiple representation, and unfair exit fees, ahead of the FCA's final motor finance compensation scheme announcement. For more on the FCA’s motor finance commissions redress scheme, see the article above.

Vulnerability data handling: The FCA and the ICO have released a joint statement clarifying how firms should handle the data of customers in vulnerable circumstances (CiVC). The regulators confirm that UK data protection laws do not prevent firms from sharing or using customers' personal information where appropriate and necessary to safeguard vulnerable individuals but must be done in compliance with GDPR principles. The statement includes examples of relevant lawful bases under GDPR Article 6 that could enable processing and sharing of CIVC data. The FCA expects firms to understand characteristics of vulnerability within their customer base, enable customers to disclose their needs, have support systems capable of flexing to accommodate CiVC needs and be able to demonstrate compliance with GDPR.

Inactive appointed representatives: The FCA has raised concerns about inadequate oversight of inactive appointed representatives (ARs), warning that this could lead to consumers being misled and harmed. Supervisory work on inactive ARs has highlighted areas for improvement including deficiencies in AR regulated revenue reporting, a lack of engagement with inactive ARs by principals, insufficient monitoring of customer-facing materials and cases where AR agreements did not meet regulatory requirements. The FCA expects principals to appropriately oversee ARs, ensure revenue is reported correctly and any inactivity explained, and undertake timely monitoring of AR relationships.

AI Consortium February 2026 minutes: Minutes from the third meeting of the BoE/FCA-convened AI consortium (AIC) reflect updates from four workshops examining risks arising from AI adoption in financial services. Discussions on concentration risk focused on dependencies on a small number of AI providers, limited visibility over model changes and supply chain transparency. Other workshops considered the governance of high-impact AI edge cases, approaches to explainability and transparency for generative AI, and how AI may affect contagion and stress transmission through increased speed, automation and shared infrastructure. The AIC also discussed emerging trends linked to returns on AI investment, including reliance on third parties, governance capacity across firm sizes and the importance of internationally aligned regulatory approaches.

BoE/FCA commitment to action on AI: In a response published by the Treasury Committee, the BoE confirmed that it will test the use of AI agents in financial trading markets focusing on the risk of correlated behaviour or herding. This follows the Committee’s recommendation for AI specific stress testing and signals a more proactive supervisory approach to understanding system AI risks. In its response, the BoE notes that the FPC will continue to monitor the use and effectiveness of the Critical Third Parties Regime in supporting financial stability. Separately, the FCA confirmed that it will share examples of good practice to support firms in applying AI within existing regulatory requirements.

FCA consultation on UK’s future crypto regime: The FCA is consulting until 3 June on proposed guidance to clarify how firms may be affected by the UK’s future crypto asset regulatory regime ahead of regulation coming into force from October 2027. The guidance sets out the FCA’s interpretation of which crypto asset activities fall within scope, including issuing qualifying stablecoins, operating trading platforms, dealing and arranging, safeguarding and staking. It is intended to support firms in understanding the regulatory perimeter and preparing for authorisation which opens in September 2026. The consultation complements a series of near-final rule consultations with policy statements due this summer and a final perimeter guidance statement later in 2026.

Open finance vision: The FCA has published a roadmap setting out its plans to move open finance from vision to delivery by 2030. In 2026 , the FCA will prioritise exploring how open finance can help small and medium-sized enterprises (SMEs) improve access to credit and speed up loan applications. It will also examine how open finance can help consumers manage and improve access to mortgages. The FCA will work with HM Treasury on options for a regulatory framework for open finance by the end of 2027. Firms will be supported to introduce open finance products sooner where they are already able to access data and appropriate permissions are in place.

PSR work programme 2026/27: The PSR has published its 2026/27 work programme, outlining its focus on tackling high card fees, maintaining robust protections against Authorised Push Payment (APP) fraud, and fostering innovation and competition within UK payments. This plan aims to build on existing reforms, address market inefficiencies, and support the National Payments Vision in collaboration with the Bank of England, FCA, and HM Treasury.

Payment systems regulation: HMT has published the outcome of its consultation on a streamlined approach to payment systems regulation. There was widespread support of HMT’s plans to consolidate the PSR within the FCA, and the government intends to proceed as per the consultation. The changes will see the FCA take on the PSR’s responsibilities, including for promoting competition and innovation in payment systems and the services provided by payment systems, as well as supporting the interests of consumers and businesses. These changes require primary legislation which will be brought forward when Parliamentary time allows. Ahead of this, the PSR and the FCA are taking steps to enhance how they coordinate activities and ensure operational readiness for implementing the integration. This work is part of a package of measures announced by HMT on the future of payments regulation (see cross sector updates).