Issue 058 — July 2026
The new issue of UK Regulatory Radar brings you the latest regulatory updates impacting financial services in the UK.
Follow the links below for our latest insights and scroll down for a round-up of sector-specific developments.
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UK Financial Services Growth and Competitiveness Strategy: The government has published an update on its strategy, setting out its achievements and planned next steps. For further analysis and a round-up of progress since the Leeds Reforms, see our article here.
July 2026 Financial Stability Report: The BoE Financial Policy Committee’s latest Financial Stability Report (FSR) finds that some previously identified vulnerabilities persist, for example in risky asset valuations, sovereign debt markets and risky credit markets, including private credit. The FPC also notes that the Iran conflict has had a material impact on the global risk environment and that rapid advances in frontier AI technologies have increased financial stability risks related to cyber and operational resilience. However, the UK banking system remains appropriately capitalised with high levels of liquidity. For more on the accompanying Financial Stability in Focus report, see Banking.
FCA consultation on the remuneration regime for solo-regulated firms: In CP26/27 the FCA is proposing to streamline the remuneration-related requirements for solo-regulated MiFID firms and fund managers. It plans to replace the three existing remuneration codes across these three firm types with a single consolidated code. In addition, the changes would bring about a more outcomes-focused regime, greater flexibility for firms and redesigned scope so that the regime focuses on firms that pose greater risks to consumer and markets.
FSIF: The bank capital framework: As part of the July Financial Stability Report, the FPC also published a Financial Stability in Focus (FSIF) on the bank capital framework. The FPC is seeking to modernise the framework, to help ensure that it is simpler, more effective, more proportionate and better calibrated to the risks in today’s financial system, while also ensuring that the UK banking system remains resilient and able to support the economy when it needs it most. The FSIF recaps on the FPC’s two priority areas: the usability and releasability of capital buffers during periods of market stress, and the review of the implementation of the leverage ratio framework. It also sets out next steps including:
Usability of capital buffers: The PRA has issued a statement on enhancing the usability and releasability of capital buffers. It has clarified that it could release O-SII buffers in a systemic stress, potentially reducing them to zero, which would lower the point at which automatic distribution restrictions would apply. The PRA would provide an indicative period during which it would not expect to increase the buffer again, helping banks use the released capital without fear of a rapid rebuild. Any return to normal buffer levels would be phased over time and depend on economic recovery, financial conditions, banks’ capital outlook and their ability to keep lending. The PRA plans to consult in the second half of 2026 on changes to its O-SII buffer policy.
PRA ringfencing consultation: The PRA is consulting until 14 October on proposals to change the rules on continuity of provision of services. CP10/26 proposes to delete the current requirements around shared services under the ring-fencing regime through the removal of rules 9.1, 9.2 and 9.3:
The PRA considers that the shared services rules can therefore be deleted without undermining its safety and soundness objective and that their removal would not undermine the intent of the ring-fencing regime to insulate the core business of an RFB from potential failures elsewhere in the group. Policy is expected to be finalised in 2027 once the Financial Services and Markets Bill is complete.
HMT proposals for ring-fencing reform: Alongside PRA CP10/26, HMT is consulting until 8 September on its proposed reform package which includes:
HMT’s Overseas Prudential Requirements Regime: PRA PS16/26 sets out rule changes to accommodate HM Treasury’s Overseas Prudential Requirements Regime. The proposals focused on the treatment of overseas exposures within the credit risk and large exposures frameworks, including exposures to overseas institutions, eligible covered bonds, central governments, central banks, regional governments, local authorities, public sector entities and Gibraltarian entities. The PRA has made clarificatory changes to the draft policy and other minor changes only. The new rules will take effect on 1 January 2027 alongside the PRA’s implementation of the Basel 3.1 standards.
FCA financial crime multi-firm review: The FCA has published the findings of its multi-firm review into the design effectiveness of financial crime systems and controls across a selection of large insurance firms. The review found controls to be mostly effective, but highlighted areas for improvement, particularly concerning risk assessments, client due diligence and transaction monitoring. Life insurance firms generally demonstrated stronger controls compared to retail and wholesale insurance firms. Insurers that participated in the review can expect individual feedback from the FCA, and the regulator also expects other firms to consider the findings and make any relevant improvements.
Insurance captives regime: The PRA is consulting (CP11/26) until 14 October on a new captives regime. Captive insurance allows businesses to manage their own risks through a wholly owned insurance subsidiary. The proposed regime would fall outside the Solvency UK framework and includes several areas of more proportionate regulation including: a streamlined authorisation process targeting approval within four to six weeks, factor-based capital requirements, reduced regulatory reporting and an approach to supervision similar to that for current category four firms (the lowest category of risk based on potential to disrupt the financial system). The proposed regime would go live in mid-2027. In parallel, the FCA is consulting on conduct matters for captive insurers under the regime.
UK AIFMD review: The FCA and HMT have progressed the next step of their review of the UK AIFMD regime. In addition to a consultation on the remuneration regime for solo-regulated firms (see ‘Cross Sector’ above), they have published two consultations and draft legislation:
FCA consultation on listing rules for closed-ended investment funds: In CP26/21 the FCA has proposed targeted changes to the UK Listing Rules for closed-ended investment funds to manage conflicts of interest and protect shareholders. The changes aim to strengthen the integrity and independence of investment trust boards, apply consistent protections for all changes to investment manager fees and remuneration and recognise conflicts where a substantial shareholder is also an investment manager.
FCA consultation on simplifying consumer investment disclosures: In CP26/24 the FCA is proposing changes to the UK MiFID costs and charges regime to align the requirements for distributors with recent changes introduced under the Consumer Composite Investments (CCI) regime. The changes would also simplify and consolidate the MiFID, IDD and non-MIFID disclosure requirements. Amongst wider changes, it is particularly noteworthy that the FCA is proposing that CCI manufacturers would not be required to update their existing KIDs or KIIDs during the CCI transition period, unless there are material changes (e.g. investment objectives/strategy or the risk-return profile have changed materially). On a related point, the FCA proposes that manufacturers that produce a CCI product summary during the CCI transition period would also need to continue to publish the associated KID/KIID on a website until the end of the period.
FCA review of pre-sale investment disclosure documents: The FCA has reviewed firms’ current pre-sale investment disclosure documents and found that most were difficult to understand due to industry jargon and technical phrases. It has reiterated that it expects CCI product summary documents to be written in plain English and designed so that consumers can understand them. The FCA will repeat its review next year to track progress.
Recommendations of the Transatlantic Taskforce for Markets of the Future (TTMF): HMT and the US Treasury established the TTMF to advance UK-US financial services collaboration. The TTMF recommendations on digital assets include proposals to:
For capital markets the TTMF recommendations are to:
FCA consultation on reforming the Consumer Duty: In CP26/23 the FCA is proposing targeted changes to the Consumer Duty. The proposals include removing non-UK customers from the scope, being clearer on where the Duty does and does not apply (including via examples) and clarifying how firms should work together across the distribution chain. The CP also explains how the Duty and the product governance rules are intended to interact and puts forward wider technical corrections and clarifications. The FCA expects to publish a policy statement in Q1 2027.
Basic Bank Account access: An FCA review of Basic Bank Accounts (BBAs) found that firms are not providing enough support to consumers who may need them, with one third of mystery shopping interactions rated ‘poor’ or ‘very poor’. Key failings included not mentioning BBAs early enough, not responding flexibly to vulnerable customers’ needs, and creating avoidable barriers for consumers with non-standard identification or no fixed address. The nine UK banks legally mandated to offer BBAs have agreed individual improvement plans with the FCA and the FCA and UK Finance have secured a collective commitment for the issues identified to be addressed. UK Finance will monitor progress through reviews after six and 12 months.
Motor finance redress scheme: The FCA has announced the partial suspension of its motor finance scheme by the Upper Tribunal following a legal challenge to the redress scheme. This decision temporarily exempts firms from calculating or paying redress and sending compensation communications as per the original timetable. Firms must continue to comply with all rules that are not suspended, including responding to complainants where it is clear these would not owe compensation under the scheme. The partial suspension is intended to enable to firms continue with preparations but avoiding work that may need to be repeated if the challenges succeed.
HMT designation of critical third parties: Following a significant delay since the financial regulators’ policy for critical third parties to the financial sector was finalised, the government has announced its first wave of designations. The four major cloud providers have been included in this first wave, effective from 13 July 2026. The formal designation of these CTPs does not change the responsibilities of regulated FS firms in respect of their third-party arrangements but does bring the CTPs themselves within the regulatory perimeter, making them subject to a similar set of rules as banks and insurers. The newly designated CTPs will be subject to oversight by the BoE, PRA and FCA, helping to ensure they have robust arrangements in place to identify, manage and recover from operational disruption affecting critical services used across the financial sector.
Final rules for cryptoasset regime and guidance for applicants: The FCA has introduced landmark rules for firms involved in buying, trading, and holding cryptoassets in the UK. The rules, which will take effect in October 2027, set out financial resilience, market integrity and other specific standards for stablecoins, aiming to balance innovation with consumer protection. The final rules follows legislation in February 2026 to bring cryptoassets within the FCA's remit, with firms required to obtain authorisation between September 2026 and February 2027. The FCA has published additional information to assist firms through the authorisation process.
Final rules and draft code of practice on systemic stablecoins: The BoE has published its policy statement and draft Code of Practice for systemic stablecoin issuers, marking a significant step in establishing the UK's stablecoin regime. The new framework aims to foster safe innovation, enabling UK-issued stablecoins to become trusted forms of digital money. The final rules include an increase in the maximum share of interest-bearing backing asset requirements from 60%, as initially proposed, to 70%, with the remainder held in central bank deposits. Temporary issuance guardrails, initially set at £40 billion, will be applied to systemic stablecoins, replacing earlier proposed holding limits – this is intended to safeguard access to credit while allowing more efficient implementation and permitting unrestricted use by households and businesses. The BoE and FCA are also consulting on their approach to the joint regulation of systemic stablecoin issuers.
The first report of the Wholesale Digital Markets Champion: Following his appointment in April, Christopher Woolard, the UK Wholesale Digital Markets Champion has published his first report detailing 10 key priorities and corresponding actions for industry, government and regulators to progress the tokenisation of UK’s the financial markets. The priorities set out in the report aim to set a clear path towards scalable tokenised markets, tokenised collateral, establishment of a tokenised funds market and wholesale payment rails that support tokenised markets. They also support legal certainty, clearly defined best practice and supportive regulatory standards, interoperability, effective financial crime compliance, a technology neutral tax approach and resilience through collaboration between industry and the FCA, BoE and HMT.
DEMAT plan for withdrawal of paper share certificates: The Dematerialisation Market Action Taskforce (DEMAT) was set up to take forward reforms to the UK’s shareholding framework. Its UK Implementation Plan for the Withdrawal of Paper Share Certificates recommends that paper share certificates should no longer be recognised as evidence of share ownership and should be replaced by entries on digital share registers. The plan sets out a roadmap of legislative actions required from the government, and what industry must do to make the initiative work in practice. DEMAT confirms that no action is required from shareholders in preparation for the new system and that their rights will be unaffected. The government has agreed to legislate to remove paper shares and mandate digital registers before the end of 2027. DEMAT notes that this is the first step in the full transition to an intermediated shareholding model.
Mills’ review into AI impact on retail financial services: The review predicts that there will be four systemic shifts: AI will transform firms, consumer journeys will become agent led, AI will reshape market power and competition, and AI will accelerate both cyber and fraud threats and defences.
The review makes 7 priority recommendations for the FCA Board to consider:
FS Champions’ AI Adoption Plan: The plan developed by the FS AI Champions includes recommendations for industry, government and regulators and has much in common with the Mills’ report recommendations. The government has accepted the recommendations and will take forward with industry and regulators. The 10 recommendations are across six areas including:
Unit-linked pensions and savings review: The FCA has published the findings of its multi-firm review of insurance firms' price and value practices for unit-linked non-workplace pensions and savings. It found that while many unit-linked products deliver fair value, customers in legacy products were more likely to be receiving poor value due to older product designs, complex charges and data limitations. The FCA expects firms to actively identify and address poor value in legacy books to comply with the Consumer Duty.
Value for Money framework: The DWP and the FCA are consulting jointly on proposals for the workplace pensions Value for Money (VfM) framework, alongside draft DWP regulations and FCA rules. The framework has been developed to create consistent policy across trust-based and contract-based workplace schemes). This is the final stage of consultation on the VfM framework prior to implementation. Notable changes include the introduction of a phased implementation process, suspension of formal consequences during the first year in direct relation to VfM assessments, shorter data collection periods and refinements to the assessment process relating to comparator groups and investment performance methodology.
TPR strategy: TPR has published its new five-year Corporate Strategy, Corporate Plan and a Roadmap. This package provides a clear direction for the next five years, supporting the government’s pension reform agenda and focusing on securing sustainable retirement incomes for all by raising governance standards, driving value for money and improving sustainable outcomes at retirement. The roadmap outlines key timelines for existing and planned reforms, including work on VfM, small pots, guided retirement, superfunds and surplus funds.
Modernising payments regulation: HMT is consulting on the future of UK payments regulation, with proposals designed to deliver a more agile regulatory framework that supports innovation whilst maintaining consumer protection. HMT is considering moving large parts of the regime into the FCA rules as it considers that placing more detailed and technical provisions in regulatory rules whilst retaining core provisions (such as regulatory perimeter, key definitions and key protections) in legislation would support a more agile and outcomes-focused regime. HMT is also seeking views on reforms designed to accommodate stablecoins, tokenised payments, Open Banking and AI-enabled payment models.
Authorised Push Payment fraud reimbursement: An independent review of the PSR’s Authorised Push Payment (APP) reimbursement policy has found that APP fraud losses have fallen by an estimated £73 million annually following its introduction, with the number of scams decreasing by nearly 35,000. Research confirms the positive impact of the policy, showing reimbursement rates for in-scope claims reaching 97% and significant improvements from firms with previously high APP fraud levels. The short-term net benefit of £17m–£29m demonstrates the policy’s effectiveness in incentivising fraud prevention. However, despite this, the PSR is concerned about inconsistent implementation and variable outcomes for customers depending on their bank. It therefore plans to consult on proposals to improve consistency in the application of the policy by the end of the year.
