UK Regulatory Radar

Sanctions breaches: The FCA has published findings from its review of sanctions systems and controls across financial services firms. While firms have made progress in preventing sanctions breaches, gaps remain. The most common root causes of breaches were weaknesses in due diligence, alert management and screening systems, and issues in managing frozen assets and complying with specific and general licences. The FCA expects firms to proactively identify, investigate and mitigate suspicious activity, and to review their systems and controls against the findings to ensure robust sanctions compliance.

FCA penalty and decision-making policies: The FCA is consulting until 10 August on changes to its Decision Procedure and Penalties Manual (DEPP) to introduce targeted amendments including raising the minimum fine for individuals involved in the most serious market abuse cases from £100k to £150k, and allowing the FCA to increase penalties with regard to a person’s income and assets as a deterrent. The consultation also sets out consequential changes to extend the penalty framework to cover cryptoasset market abuse. 

Market risk under Basel 3.1: The PRA is consulting until 18 September on adjustments to the internal model approach (IMA) for market risk under Basel 3.1. The targeted amendments in CP9/26 aim to address identified calibration, proportionality and operational issues, and support an international level playing field. The proposals include extension of the monitoring period for the profit and loss attribution (PLAT) test from one to three years, adjustments to the risk factor eligibility test (RFET) and measures to reduce the barriers to the gradual nature of IMA approval for firms. The proposed updates would modify the Trading Book (CRR), Market Risk: Internal Model Approach (CRR) and Reporting (CRR) parts of the PRA Rulebook. Implementation of the IMA approach will proceed as planned from 1 January 2028.

PRA Pillar 2A review: The PRA has published its final policy (PS15/26) following consultation (CP12/25) on Phase 1 of the Pillar 2A review. Based on feedback received, there have been some changes to the draft policy to clarify and provide additional detail. The most material include:

• Credit risk: exclusion of exposures to SMEs from the systematic methodology for unconditionally cancellable commitments in the retail exposure class
• Credit risk: greater flexibility for firms in assessing idiosyncratic credit risks, compared to the CP proposal requiring firms to use credit scenarios
• Operational risk: clarifications to improve transparency and guidance for all firms, and changes to align the operational risk Pillar 2A methodology for Small Domestic Deposit Takers (SDDTs) and non-SDDTs
• Implementation date revised from 1 July 2026 to 1 January 2027, harmonising the timelines for pension, market and counterparty credit risk.

FCA R2B2 data collections: The FCA has transformed its previously ad hoc Retail Banking Business Models (R2B2) data collections into a single annual regulatory return, effective from 1 June 2026. PS26/8 applies to retail banks and building societies and is part of a broader effort to streamline data collection and reduce unnecessary burdens on firms, in this case the unpredictability of ad hoc requests. The change also aims to ensure that data is readily available for timely decision-making. The annual return can be accessed via RegData, the FCA's data collection platform. 

Third country branches: The PRA has published PS13/26, providing feedback to responses received on CP20/25 concerning insurance third-country branches. PS13/26 outlines updates to the policy framework, including increasing the subsidiarisation threshold for third-country branches, amending reporting requirements and clarifying expectations for Own Risk and Solvency Assessments (ORSA) and resolution reports. A significant change from the consultation is the discontinuation of quarterly reporting for all branches, not just smaller ones, to reduce operational burden. Annual reporting remains, either on a full or reduced basis, based on a threshold.

UK Captives Regime: Shoib Khan, Director of Insurance Supervision at the PRA, delivered a speech on the upcoming UK captive insurance regime, which the PRA is consulting on in summer 2026. The initiative aims to establish a competitive and credible environment by 2027, enhancing risk financing, promoting innovation in insurance and supporting the broader UK economy. In the speech, Khan covers why captives matter and some of the feedback gathered from stakeholders as part of the PRA engagement with stakeholders via the Subject Expert Groups (SEGs).

FCA update on reforms to the UK Money Market Fund Regulation (MMFR): The FCA has provided an update on plans to reform the UK MMFR. It summarises feedback on the FCA's consultation (CP23/28) and sets out updated proposals. This includes a proposed new rule that all UK MMFs should hold sufficient liquidity for adequate resilience, and a modified approach to Weekly Liquid Assets (WLA) thresholds. No new guidance is planned for Daily Liquid Assets (DLA) thresholds. Otherwise, the updated proposals are expected to proceed with the other measures set out in the consultation. To facilitate the new regime, the government plans to repeal the UK MMFR by the end of 2026 and the FCA plans to make new rules to this timescale.

FCA consultation on depositaries and alternative assets: The FCA is consulting on changes to its rules for UK-authorised alternative investment funds regarding depositaries' registration of certain alternative assets. It is proposing to allow depositaries of authorised AIFs to delegate to a third party their registration function in this context. The goal is to ensure these funds can continue to invest in private market assets such as property and partnership assets.

Mortgage rules reform: The FCA is consulting on changes to mortgage rules to give lenders more flexibility to consider individual circumstances and develop products tailored to diverse needs, while maintaining strong consumer protections. Proposals include measures to help lenders evaluate applicants with variable incomes including self-employed individuals and those receiving foreign currency payments, encouraging lenders to assess affordability based on a person’s full and current situation, updated rules on interest-only (or part interest-only) mortgages and updated guidance for retirement interest-only mortgages.

Illegal finfluencers: The FCA has led an international action to stop illegal finfluencers putting consumers' money at risk. 17 regulators worldwide took part in the 'week of action' which included enforcement activity, consumer awareness campaigns, and educational programmes for finfluencers who want to act responsibly. This was more than double the number involved last year, highlighting growing global concern. The FCA's targeted activity resulted in criminal proceedings for illegal promotions on social media, warning letters for unauthorised financial promotions, warning alerts against unauthorised individuals or firms, and account takedown requests to social media platforms hosting illegal finfluencer content.

Motor finance claims: The FCA has issued further information to firms regarding the motor finance compensation scheme, clarifying queries on the scheme's scope, handling of complaints, redress calculations, and supervisory expectations, particularly after the complaints pause ended on 31 May 2026. It addresses issues such as the definition of a motor vehicle, responsibilities of successors, FOS involvement, commission calculations, and firms' financial resource management arrangements. The document should be read in the context of the ongoing legal challenge to the scheme.

Financial promotions: The FCA has found that some firms responsible for approving financial promotions are failing to adequately protect consumers. Its review concentrated on firms that approve promotions for non-FCA authorised firms offering Buy Now Pay Later, crowdfunding or corporate finance products and services. While stronger firms successfully apply the Consumer Duty to ensure promotions are accurate and clear, others approved adverts with unsubstantiated claims or allowed retail investors to view promotions intended for professionals. The FCA expects all firms to ensure promotions are fair, clear, and not misleading, and the risk of consumers being misled into harmful financial decisions is avoided.

See Pensions section for an update on consumer protections in self-invested personal pensions.

BoE Supervisory Statement for RPSOs and SSPs: The BoE has published a Supervisory Statement (SS) for the operators of payments systems recognised under section 184 of the Banking Act 2009 (RPSOs) and specified service providers under section 206A of the Act (SSPs) – excluding systems operated by central counterparties (CCPs) or central securities depositories (CSDs) which are subject to their own operational resilience SSs. The BoE considers payment systems to be a key component of ensuring financial stability and the SS is intended to ensure that RPSOs and SSPs can be operationally resilient to disruption events. It will supervise this operational resilience policy in line with the existing supervisory approach for financial market infrastructure firms (FMIs).

The FCA’s approach to AI: The FCA has reiterated that it is not going to introduce new regulations for AI – instead it will rely on existing frameworks including the Consumer Duty, the Senior Managers and Certification Regime (SM&CR), and its expectations on governance and controls. However, it will share good and poor practice later this year to support firms in adopting AI safely and responsibly. The FCA continues to engage with firms on the use of AI and encourages views and examples of safe and responsible AI adoption via its AI Input Zone | FCA and engagement via its AI Lab | FCA

FCA Emerging Technology Horizon Scan: In the first external publication of its emerging technology horizon scan, the FCA sets out three plausible ways emerging technologies could combine to create new outcomes for consumers, firms and markets. It aims to support collaboration, informed debate and knowledge-sharing across the UK’s financial services ecosystem as technological change accelerates. It sets out how

• AI-powered personalised intelligence could help consumers navigate their financial lives but raises questions about autonomy, digital exclusion and consumer protection.
• Advances in AI could expose consumers and firms to new forms of fraud and deception and make it harder to detect.
• Programmable finance could support growth by reshaping financial infrastructure and enabling new markets.

Wholesale Digital Markets Champion: HMT has published the terms of reference for the Wholesale Digital Markets Champion. The Champion is tasked with producing a report for the Chancellor by July 2027 on how UK wholesale markets can best adopt tokenisation and other related technologies and how the sector and government can ensure Distributed Ledger Technology interoperability. They will be supported by a cross-industry taskforce and work with the chairs of the Accelerated Settlement Taskforce (T+1) and Dematerialisation Market Action Taskforce.

For updates on the TPR’s AI plan see Pensions below

Self-invested personal pension consumer protection: The FCA is consulting on new rules to strengthen consumer protections in the self-invested personal pension (SIPP) market, focusing on asset due diligence and the handling of pension scheme money and assets, where it considers risks more likely to arise. The proposals would introduce explicit due diligence requirements for SIPP operators, covering relevant third parties and SIPP investments, alongside a new Pension Scheme Money and Assets (PSM&A) regime requiring scheme money and assets to be held securely. The latter would apply where SIPP operators are not currently covered by the CASS rules. The changes aim to promote more consistent and effective practices across the market and address current gaps. Reflecting the operational impact on SIPP operators, the FCA proposes a 12-month implementation period for the due diligence changes and a 24-month period for the client assets requirements .

TCFD climate reporting rules: The FCA is consulting (CP26/17) until 13 July on proposals to remove TCFD product-level reporting requirements for asset managers, life insurers and FCA-regulated pension providers. In place of the existing requirements, it proposes fewer, more targeted and more outcomes-based rules. Under the proposals, retail investors would receive relevant information on how material climate risks could affect a product’s financial performance, and institutional clients would be able to request key emissions data from firms, but this would no longer need to be published in full reports. Implementation is planned for autumn 2026.

Findings of Transition Finance Pilot: The FCA, in collaboration with the PRA and the Green Finance Institute (GFI), has published findings from the Transition Finance Pilot. The pilot identified systemic challenges in scaling finance for climate solutions, specifically highlighting difficulties in achieving commercial maturity for some solutions, mismatches between capital and opportunities, and information and capacity gaps. The FCA will share its findings with UK and international stakeholders to inform policy development and market coordination. 

The Retail Payments Infrastructure Board (RPIB) is consulting on the future design of the UK’s next-generation retail payments infrastructure, a key step in modernising the UK’s payments landscape. The consultation focuses on future payment journeys, design principles and the wider payments ecosystem, aiming to support innovation, choice, seamless payments and emerging forms of digital money. Delivering the core infrastructure is a critical component of achieving the Payments Vision Delivery Committee strategy

Open banking payments scheme: The FCA has welcomed the UK Payments Initiative (UKPI) launch of a scheme designed for the next generation of open banking payments to give individuals more choice about how and when they pay for recurring goods and services. The UKPI scheme establishes a shared rulebook, commercial model and operational standards for flexible, automated or recurring account-to-account payments, powered by open banking. The scheme, which provides an alternative to traditional card-based and direct debit payments, marks a significant advancement for open banking and commercial variable recurring payments (cVRP). It is also intended to support the ambitions set out in the UK Government’s National Payments Vision by enabling new use cases for open banking payments at scale.