UK Regulatory Radar

PRA and FCA approaches to growth: The PRA and FCA have written to the Government with updates on their actions to ensure that UK regulation supports economic growth. The letters set out actions already delivered and future initiatives to build on the work done since their initial responses in January 2025.

BoE Financial Stability Report: The December Financial Stability Report from the BoE’s Financial Policy Committee (FPC) found that risks to financial stability have increased during 2025, with global risks still elevated and an uncertain global macroeconomic outlook. Geopolitical tensions, fragmentation of trade and financial markets and pressures on sovereign debt markets are all contributing to these risks. The Committee notes also that geopolitical tensions increase the likelihood of cyberattacks and other operational disruptions. The report calls out valuations for risky assets, particularly for technology companies focused on AI, as “materially stretched”, heightening the risks associated with any asset price correction. Against this backdrop however, the banking sector remains resilient and able to support growth. For more on the results of the Bank Capital Stress Test (BCST) and the FPC’s Bank Capital Review see below.

System-wide exploratory scenario (SWES): The BoE has launched its second system-wide exploratory scenario (SWES) exercise. This iteration will focus on how the private markets ecosystem operates under stress and the potential implications for UK financial stability and the UK real economy. The exercise will be run in collaboration with a group of banks, insurers and alternative asset managers (AAMs) that are active in these markets. Engagement with firms and analysis will take place over 2026 with a final aggregate-level report to be published in early 2027.

Guidelines on the BFSA: The PRA and FCA have jointly published guidelines to assist firms considering providing services under the Berne Financial Services Agreement (BFSA). The BFSA will make it easier for UK and Swiss financial services firms to do business in each other's country. The guidelines are intended to clarify expectations, outline operational considerations, and help to ensure compliance with relevant regulatory standards. The BFSA will take effect on 1 January 2026.

Review of mutuals landscape: The PRA and FCA have issued a joint report setting out a vision for sustainable growth for mutuals: building societies, credit unions and mutual insurers. The measures outline aim to reduce regulatory burden while maintaining resilience, fostering competition and supporting the government’s ambition to double the size of the mutuals sector. Key initiatives include removing the Building Societies Sourcebook to level the playing field with banks, simplifying responsible lending and advice rules, and launching a Scale-Up Unit and Mutual Societies Development Unit to support growth. For insurers, the regulators have committed to issuing guidance to clarify Part VII transfer processes for friendly societies. In early 2026, the FCA will also start looking at broader legacy issues in the life insurance and pensions market to reduce any regulatory barriers – this includes responding to the challenges of applying certain parts of COBS 20 rules to with-profits funds. 

Financial crime risk assessment processes and controls: The findings of the FCA’s multi-firm review of financial crime Business-Wide Risk Assessment (BWRA) and Customer Risk Assessment (CRA) processes centre on how firms identify, assess, understand, mitigate and effectively manage risk. The review highlights good and poor practice which the FCA expects firms to consider. 

Bank capital requirements: The BoE’s FPC has released its assessment of bank capital requirements in a “Financial Stability in Focus” report published alongside the December 2025 Financial Stability Report. The report considers the evolution of bank capital requirements since 2015, compares UK and international capital requirements, and looks at the banking system’s ability to support the UK economy. The FPC concludes that it is appropriate to reduce the benchmark for system-wide Tier 1 capital requirements from 14% to 13% of risk-weighted assets (RWAs), equivalent to a Common Equity Tier 1 (CET1) ratio of around 11%. This updated assessment, reflecting the banking system's resilience and improvements in risk measurement, aims to provide banks with greater confidence to support lending to the UK economy. In further work, the FPC will focus on enhancing the usability of regulatory buffers – to reduce firms’ reluctance to use them in periods of stress – and will review the implementation and practical operation of the leverage ratio in the UK.

Building Society Sourcebook: The PRA has published PS26/25 confirming the removal, effective immediately, of SS20/15 (the “Building Societies Sourcebook”) in its entirety. PS26/25 finalises proposals set out in CP11/25 with no changes. The PRA judges that it is appropriate to remove SS20/15 (i) as it is no longer consistent with PRA’s broader policy approaches e.g. around level playing field, (ii) as risk management in the sector has become more sophisticated and (iii) to support competition and growth in the UK.

Leverage ratio: The PRA has confirmed changes to the retail deposits threshold for the application of the leverage ratio requirement. PS22/25 increases the threshold from £50 billion to £75 billion and introduces a three-year averaging mechanism for the calculation of firms’ retail deposits. PS 22/25 provides feedback to responses the PRA received to CP2/25. The final policy and rules are relevant to Capital Requirements Regulation (CRR) firms and CRR consolidation entities on an individual, consolidated, and where applicable, sub-consolidated basis.

Depositor protection: PRA PS24/25 sets out final amendments to the depositor protection framework. Following feedback to CP4/25, the deposit protection limit will be increased to £120,000, rather than £110,000. In line with the consultation proposals, the limit applicable to certain temporary high balance (THB) claims will increase from £1 million to £1.4 million, and firms will be required to update disclosure materials and deposit compensation information. The new deposit protection and THB limits will apply from 1 December 2025 for firm failures occurring on or after that date. Firms are also required to update their single customer view (SCV) systems to reflect the new limits by the same date. They will then have up to six months to make changes to disclosure materials – by 31 May 2026.

Life Insurance Stress Test (LIST) results: The 2025 LIST aggregate results are out: insurers remain well capitalised under the severe but plausible scenarios. Life insurers began from a strong starting point of 185% and after the core scenario had post-stress aggregate solvency coverage of 154%, demonstrating their financial resilience in a severe market shock. Even after the subsequent exploratory exercises that are designed to test potentially systemic issues such as asset concentration and FundedRe recapture, insurers demonstrated strong solvency coverage of 153% and 144% respectively. This indicates that these risks are not as systemic as the PRA may have initially suspected. For the first time individual firm results were also published and further detail can be found here.

Alternative capital for life insurers: The PRA is consulting on UK life insurers' access to alternative sources of capital beyond traditional equity and debt. Discussion Paper (DP) 2/25 sets out the PRA’s preliminary views and seeks input on possible policy changes that would enable life insurers to transfer specific portions of risk to capital markets. The PRA is open to a variety of structures based on the Insurance Special Purpose Vehicle (ISPV) framework, Significant Risk Transfers (SRTs) in banking, side cars and/or other proposals. The DP also outlines the principles that will be important to the PRA when reviewing such transactions and their impact on the ceding (re)insurer. The objective of the consultation is to support sustainable growth, innovation and policyholder protection in the UK life insurance sector.

Regulatory reporting: The PRA has released Version 2.0.2 of the Bank of England Insurance Taxonomy, setting out the technical implementation of the reporting requirements. This update replaces v2.0.1 and introduces technical enhancements such as validation fixes and data point model (DPM) changes. The Insurance Taxonomy v2.0.2 will be effective from 1 January 2026, for reporting with a reference date on or after 31 December 2025.

Innovation in insurance: Shoib Khan, Director of Insurance Supervision at the Bank of England, delivered a speech outlining how the PRA fosters innovation in the insurance sector. The speech covered numerous areas where the PRA is supporting innovation. On the Matching Adjustment Investment Accelerator (MAIA), Khan noted that the PRA has seen a flurry of interest from annuity-writing firms. The PRA is also working with government and industry to build a captives regime. The PRA's vision is for a regime that: (1) is responsive in terms of authorisation, (2) has proportionate capital and oversight requirements, and (3) is flexible in terms of responding to different business needs and the classes of risk that could be ceded. A PRA consultation will be published next summer, with a regime target delivery date of mid-2027.

Consultation on Solvency II reporting and disclosure: The PRA is consulting (CP22/25) on proposed post-implementation amendments to UK Solvency II reporting and disclosure requirements. The proposals aim to address firm feedback, clarify inconsistencies, correct errors and make targeted adjustments to mitigate specific risks. CP22/25 follows reforms implemented at the end of 2024. Key changes include amendments to some reporting templates, new requirements for third-country insurance branches to report projected FSCS liabilities and the migration of Matching Adjustment Asset and Liability Information Return (MALIR) templates from Excel to XBRL format. These changes will require firms to carry out system updates. The changes are proposed to apply for reporting reference dates on or after 31 December 2026.

Insurance rules simplification: The FCA has released final rules (PS25/21) on the simplification of conduct rules for insurers and funeral plan providers. Key changes include a new definition of "large commercial customer", a broadened exemption from conduct rules for 'bespoke contracts”, removal of 15 hour CPD requirement, greater flexibility on product design/approval and the frequency of product reviews, and options for co-manufacturers to select a lead firm for product governance compliance. The rules come into force immediately but are optional for firms. Some industry participants have expressed disappointment that a decision on exempting non-UK insurance customers from the scope of the Consumer Duty has been delayed pending a further consultation in H1 2026 – this will be run in parallel with a wider consultation on changes to the Duty.

UK’s short selling regime: The FCA's CP25/29, proposes changes to the UK's short selling regime to create a more efficient, effective, and coherent regulatory framework. The proposals include adjustments to the rules around position reporting, covering, market maker exemptions, and the scope of instruments subject to the regime, together with an operational shift to machine readable, more automated processes.

FCA consolidation review: The FCA has published the findings of its review into consolidation in the financial advice and wealth management sector. Overall, the FCA found that firms were better placed where they had clear group structures with strong governance, sufficient resources and considered risks and capital and liquidity needs across all entities. Situations where firms were perceived as being more likely to cause harm included groups which are not prudential consolidated, where group debt arrangements could weaken the resilience of regulated entities, and where compliance and governance infrastructure fails to keep pace with growth. The FCA is expecting relevant groups to compare the FCA’s findings against their arrangements and act where needed.

MiFIR transaction reporting: In CP25/32, the FCA proposes changes to the UK MiFIR reporting regime, including removing reporting obligations for 6 million financial instruments which are only tradeable on EU trading venues, removing FX derivatives from the scope of reporting requirements, and reducing the default back reporting period from 5 to 3 years. Once changes are agreed in the second half of 2026, there is likely to be an implementation period of 18 months. The FCA will also establish a cross-authority and industry working group to streamline transaction reporting across UK MiFIR, EMIR and SFTR in the longer term.

Equity Consolidated Tape: After extensive discussion , the FCA is consulting on a framework for an equity Consolidated Tape (CT) in the UK. The regulatory framework aims to ensure the consolidated tape provider (CTP) sells the equity data at a competitive price and using simple licensing structures. It will also establish obligations for trading venues and approved publication arrangements (APAs) to provide information to the CTP. The proposed tape would include both post-trade data and attributed best pre-trade bid offer data. The FCA is aiming to get the tape operational in 2027. Concurrently, the FCA have filed an application with the High Court to lift the suspension on the bond consolidated tape contract award so it can move forward with delivering the bond CT and defending the legal challenge in parallel.

UK EMIR Intragroup Regime: In CP25/30, the FCA is proposing a permanent regime that will replace the Temporary Intragroup Exemption Regime (TIGER) that allows UK counterparties to apply for intragroup exemptions under UK EMIR when trading OTC derivatives with group entities in non-equivalent jurisdictions. The FCA’s proposals include measures to streamline requirements and simplify its Binding Technical Standards. This is alongside HMT’s draft statutory instrument amending UK EMIR.

T+1 settlement: The government has published a draft Statutory Instrument and related policy note, to amend UK CSDR and make T+1 the standard settlement cycle in the UK from 11 October 2027. 

CCP stress test results: The results of the BoE’s 2025 Central Counterparty (CCP) Stress Test confirmed that UK CCPs have sufficient pre-funded resources to absorb losses stemming from the simultaneous default of multiple members during an extreme global slowdown scenario. The test, the fourth such exercise, also included exploratory internal analysis that reflected UK CCPs capacity to withstand a wider range of extreme market movements and potential breakdowns in historical correlations

Fund liquidity management consultation: The FCA is consulting on revising its fund liquidity management rules and guidance to take account of IOSCO’s 2025 updates to its recommendations. The proposals aim to make the liquidity management arrangements of UK UCITS and NURS more robust and ensure that managers have effective anti-dilution arrangements in place. A further consultation on AIFMD reforms, will follow in 2026, touching on AIF liquidity management and leverage rules.

FOS annual plan and budget: The FOS is consulting on its plans and budget for 2026-2027. It forecasts that it will resolve 245,000 complaints (10,000 more than 2025/2026) and proposes to increase case fees and levies in response to inflationary challenges. The case fee would increase from £650 to £680, the recently implemented fee for professional representatives from £250 to £260 and the compulsory jurisdiction levy from £70m to £86m.

Motor finance commission: Following feedback that extensive market-wide data analysis and preparation for a smooth scheme implementation will require more time, the FCA extended the deadline for its motor finance redress scheme consultation to 5pm on 12 December 2025. It now expects to publish final rules in February or March 2026. Read more on the scheme here. The FCA has also extended the time that firms have to send final responses to all relevant discretionary commission arrangement (DCA) complaints and non-DCA commission complaints. However, the extension will end on 31 May 2026 rather than 31 July as consulted upon in CP25/27.

Credit building products: The FCA has raised concerns about credit building products that report a customer’s regular payments to Credit Reference Agencies (CRAs), finding little evidence these products significantly improve credit scores for the majority of consumers. Other potential risks identified included the misrepresentation of a customer's financial circumstances, which could inadvertently lead to access to unaffordable credit. These products are especially unlikely to benefit those facing financial difficulties as they are less likely to positively impact credit scores. The products reviewed report a customer’s regular payments to CRAs with the aim to ‘build’ their credit score or history and typically do not involve regulated credit. Although these products are unregulated, the review was undertaken due to their close ties to the broader credit market and target market. Products or features often described as credit builders like low-limit credit cards, rent reporting services, or services explaining how your credit file works, were out of scope of the review.

Financial Inclusion Strategy: HMT's new Financial Inclusion Strategy sets out a national framework to widen access to financial services for excluded and underserved groups. Developed with regulators, consumer bodies and Fair4All Finance, the strategy seeks to tackle structural barriers such as identification, digital access and affordability. It reframes inclusion as both a social objective and a test of financial services culture, aligned with the FCA’s Consumer Duty principles of fairness, value and good outcomes.

CFD fair value review: The FCA has warned Contracts for Difference (CFD) firms to provide fair value, after its review found some firms were not meeting Consumer Duty requirements in delivering fair value to consumers. While some good practices were observed, such as simplifying fee structures and the strengthening of appropriateness testing, significant areas for improvement were identified with limited consideration of costs paid by consumers, insufficient changes to products or services, and inadequate disclosure of significant charges and ineffective vulnerable customer monitoring.

Consumer Composite Investments (CCI): The FCA has published a policy statement with final rules for the UK CCI disclosure framework, replacing the regime that was inherited from the EU (i.e. PRIIPs KIDs and UCITS KIIDs). The new regime centres around the introduction of a “product summary” document that the FCA considers will be more flexible, proportionate and engaging for consumers. The optional transition period begins from April 2026 before the full regime goes live on 8 June 2027.

Client categorisation and conflicts consultation: The FCA is consulting on changes to its client categorisation framework and conflicts of interest rules.

• Under the categorisation proposals, the FCA plans to amend the rules for elective professional clients by removing the existing quantitative test, introducing a new route for very wealthy individuals to opt out of retail protections, and improving the way the qualitative assessment works. It plans to use the Consumer Duty as a safeguard to ensure opting up is only done in clients’ best interests. In addition, the FCA proposes to simplify the per se professional client category criteria.
• The FCA is also proposing to rationalise its existing rules on conflicts of interest to make them clearer and more proportionate as part of its wider simplification agenda.

Access to retail investments: The FCA has launched a discussion paper inviting views on how consumer access to investments could be expanded and how the regulatory regime could be reformed. The paper includes a wide range of questions, from the regulatory treatment of specific products, to improving consumers’ understanding of protections and limits when investing and considering the adequacy of the FCA’s approach to financial promotions and the appropriateness test. The FCA will consider feedback and may consult on the issues covered in the paper in due course.

FCA statement for manufacturers under the Consumer Duty: The FCA has released a statement updating on its work and clarifying regulatory expectations for firms working together to manufacture products or services under the Consumer Duty. A wider consultation on changes to rules on the application and requirements of the Duty, including through distribution chains, is planned for 2026. This statement does not relate to FCA expectations for the insurance sector where distinct considerations apply under PROD 4.

Complaints reporting: The FCA has released final rules and guidance (PS25/19) for improving the complaints reporting process. The changes are intended to streamline and modernise the system, enhance data quality and reduce reporting burdens. They include a single consolidated complaints return, 6-monthly reporting cycles, permission-based reporting, simplified nil returns, removal of group reporting and new requirements for identifying vulnerable customers. Firms have 12 months to make the changes, with the first six monthly reporting period being 1 January to 30 June 2027.

Final rules on targeted support: The FCA has published its policy statement on ‘targeted support’. This follows on from two consultations (CP 25/17 and CP 25/26) and was published just after a wider package of FCA reforms and government initiatives that aim to boost retail investment. The new regime, expected to go live from 6 April 2026, has the potential to be transformational for the industry and for consumers who may not be able to access or afford advice today. In parallel, the government has confirmed that it has decided to proceed with legislative change to enable the implementation of targeted support.

BoE Stablecoin consultation: the Bank of England has published its revised proposed rules for systemic stablecoin issuers following industry feedback on its initial proposals. The proposals outline the factors which will be used to determine whether an issuer is systemic, the minimum proportion of backing assets issuers will be required to hold and the limits to be imposed on individuals and businesses. In the paper, the BoE emphasises its low appetite for a significant shift away from settlement in central bank money towards settlement in privately issued money but maintains that it is open to stablecoins supporting innovation in wholesale markets. A joint paper, detailing the design of the joint regulatory framework, is to be published by the Bank and the FCA in 2026.

FCA partners with Singapore to drive growth and AI innovation: The FCA has announced a strategic partnership with the Monetary Authority of Singapore to advance safe and responsible AI innovation. The collaboration will support firms in both markets to scale more effectively and will include joint testing, regulatory insight exchange and shared industry events. The FCA will also establish its first presence in Singapore through a Financial Services Attache at the British High Commission, forming part of a broader expansion into priority markets. These moves strengthen global regulatory ties and reinforce the UK’s ambitions for growth and cross-border innovation.

Regulating ESG rating providers: The FCA has welcomed draft legislation that will bring ESG ratings providers within its regulatory remit. For more information, see the article above. 

Climate risk management: The PRA has published PS25/25 and SS5/25 on enhancing banks’ and insurers’ approaches to managing climate-related risks. SS5/25 replaces SS3/19, effective from 3 December 2025, and the updated expectations will require significant uplift to firms’ existing approaches. Firms have until 3 June 2026 to complete a gap analysis on their current approach versus the final expectations and develop a “credible and ambitious” remediation plan. For more information see the article above.

Regulating ESG rating providers: The FCA has welcomed draft legislation that will bring ESG ratings providers within its regulatory remit. It is also consulting until 30 March 2026 on its proposed approach to regulating providers, focusing on clear, proportionate rules for transparency and governance. Final rules are expected in Q4 2026, and the new regime will come into effect from June 2028. For more information on how UK and EU approaches compare, see the article above.

New payments strategy: The Payments Vision Delivery Committee (PVDC) has published its strategy establishing the strategic outcomes for future retail payments infrastructure, which has been informed by, and builds upon, the three pillars of the National Payments Vision: innovation; competition and security. The PVDC’s five outcomes seek a retail payments infrastructure that promotes innovation and competition, offers consumers and businesses a wide choice and cost effective payment options, provides seamless interoperability, and strong financial crime protection.

APP fraud data: Reflecting on the year since its reimbursement requirement came into effect, the PSR has outlined how the regime has helped protect victims of APP fraud and incentivised firms to prioritise fraud prevention. Data indicates consistent, positive outcomes for consumers with high reimbursement rates for APP scams with £112m reimbursed, increased claims response times and a 15 percent reduction in claims volumes, indicating improved fraud prevention by firms.

Confirmation of Payee: One year on from the completion of the Confirmation of Payee (CoP) system phased roll out, the PSR reports that over 99 percent of organisations initiating Faster Payments transactions in the UK are now providing CoP checks. The PSR continues to monitor a small group of firms that still don’t have a CoP system and are working with them to deliver compliance. The report also sets out key messages and information on compliance that all directed parties should note. These include the need for proactive communication and transparency with the regulator, and the importance of ensuring compliance with all PSR obligations before launching any new products or business activities.

Dashboard readiness: A large scale TPR engagement exercise has revealed significant progress has been made to improve data quality in preparations for pensions dashboards. However, some schemes have more to do to get their member data ready for pensions dashboards in less than a year’s time. Key findings included value data being overlooked, informal or fragmented improvement plans, variations in the oversight, differences in suitability of data controls, and historical underinvestment in data management. In response to the findings, TPR wants trustees to treat member data as their most important strategic asset, and has issued revised guidance to support schemes to achieve better data management capability.