UK Regulatory Radar

Regulators Forum publishes Regulatory Initiatives Grid: The latest edition of the Regulatory Initiatives Grid sets out the regulatory pipeline for financial services over the next two years, across nine organisations.

FCA quarterly consultation paper No.50: The FCA's latest quarterly consultation paper (CP25/35) proposes changes to various elements of its Handbook. Key proposals include decommissioning certain general insurance pricing returns (REP021a, REP021b, REP021d) and reducing the reporting frequency of the Baseline Financial Resilience Report (FIN073) for smaller firms. The FCA also plans to reduce the administrative fee for overdue regulatory returns from £250 to £100, streamline UK listing application processes by removing redundant prospectus-related requirements, and clarify various UK Listing Rules (UKLR) and Prospectus Rules (PRM). The consultation proposes to extend the transitional period for COLL 5.2.29R(3) until January 2027 to allow for further review and simplification of concentration rules.

PRA 2026 supervisory priorities: The PRA has set out its annual supervisory priorities for UK Deposit Takers and International Banks. Notably, to relieve the regulatory burden, reflect the longer-term nature of supervisory workplans and ‘allow firms and supervisors to focus resources more efficiently on identifying and remediating key risks’, the PRA plans to move all firms to a two-year supervisory cycle for its Periodic Summary Meetings (PSMs). Key priorities include:

• the consideration and management of risks across a comprehensive set of capital and liquidity metrics
• implementation of the Basel 3.1 and Simpler capital regimes
• ensuring robust risk management frameworks, capable of adapting to the changing global environment
• monitoring of counterparty credit risk, especially exposures to NBFIs – including private assets – under current and stressed conditions
• model risk remediation
• operational resilience – including cyber and third party resilience
• data quality
• the safe and robust adoption of new technologies including AI

The PRA will also continue to pursue initiatives to support its secondary growth and competitiveness objective, including streamlining processes for authorisations and senior manager applications, modernising reporting requirements, and providing further support to help firms scale up and compete more effectively.

Final policy for UK Basel 3.1 and Simpler Capital Regime: The PRA has published four policy statements finalising the requirements and timelines for the UK implementation of Basel 3.1 and the introduction of the Simpler capital regime for Small Domestic Deposit Takers (SDDTs). The new policy statements replace the previous “near-final” rules:

• PS1/26 Implementation of Basel 3.1: Final rules: no substantive changes to content or timeline in PS17/23, PS9/24 and PS7/25. Minor amendments, corrections and clarifications to the policy, rules, and supervisory statements published as near-final:
  • the Basel 3.1 policy, rules, supervisory statements and statements of policy will take effect on 1 January 2027, with the exception of the market risk internal model approach which will come into effect on 1 January 2028.
  • the Basel 3.1 reporting requirements will take effect from 1 January 2027.
• PS2/26 – Retiring the refined methodology to Pillar 2A – final: no changes between the near-final policy and final policy. Effective 1 January 2027.
• PS3/26 – Restatement of CRR requirements – 2027 implementation – final: no substantive difference between the near-final rules in PS19/25) and the final rules and policy. Minor amendments only. PS3/26 replaces the provision of the CRR revoked by HMT’s commencement regulations. The remainder of the policies will take effect on 1 January 2027
• PS4/26 – Simplified capital regime for SDDTs: no substantive changes to PS20/25, minor amendments and clarifications only. Implementation, as for the bulk of Basel 3.1 on 1 January 2027.

PRA 2026 supervisory priorities: The PRA has published its annual ‘Dear CEO’ letter outlining supervisory priorities for insurers. Most notably, the PRA will move to a two-year supervisory cycle for its Periodic Summary Meetings (PSMs).

Priorities for life insurers include:

• competitive pressures such as bulk purchase annuities (BPA) and funded reinsurance
• investment strategies including liquidity and private assets
• new capital and ownership structures 
• using results from life insurance stress test (LIST) to inform the supervisory approach

For general insurers, key priorities include:

• optimistic underwriting assumptions in internal models
• exposure management
• delegated authority underwriting
• dynamic general insurance stress test (DyGIST)

Priorities affecting all insurers include operational resilience, solvent exit planning, artificial intelligence and measures to facilitate the PRA’s secondary objectives.

Low impact amendments: The PRA has published LIAF03/25, finalising a series of ‘low impact’ rule amendments. These follow the LIAC02/25 consultation and include changes aimed at giving effect to the UK Swiss-Berne Financial Services Agreement, adjustments to the Transitional Measure on Technical Provisions (TMPT) and revisions to the Insurance Special Purpose Vehicle (iSPV) Part of the PRA Rulebook, alongside other miscellaneous updates. Further amendments were made without prior consultation concerning hyperlinks and the Fees Part of the PRA Rulebook.

The iSPV changes were also reflected in the updated Supervisory Statement for Prudential considerations for insurance and reinsurance undertakings when transferring risk to Special Purpose Vehicles, SS2/25.

Fund liquidity risk management: The FCA has published consultation paper (CP) 25/38, proposing enhancements to fund liquidity risk management arrangements. Read more in the article above.

Specified Authorised Benchmark Regime (SABR) – HM Treasury (HMT) is consulting on an entirely new benchmarks regime, which would only regulate those benchmarks or benchmark administrators that pose systemic risks to UK financial markets. HMT’s view is that the financial landscape has evolved since the Benchmarks Regulation was introduced and there is now a need for a more agile, proportionate framework.

Best execution in UK listed cash equities – wholesale banks: The FCA has published the findings of its multi-firm review of how wholesale banks deliver best execution in UK listed cash equities. The FCA found stronger practices since its last review, especially around assessing the scope of the best execution and monitoring outcomes. However, the quality of MI was variable, and improvement is needed in governance and oversight especially in challenge from the second line of defence. The FCA expects banks to consider the good practices and areas for improvement and will continue its discussions with banks on their approaches to best execution. 

Market risk capital for certain investment firms: The FCA has published an engagement paper for solo-regulated investment firms that deal as principal or manage a trading book as part of their regulated activity. The FCA invites views on whether the rules on market risk capital should be amended to encourage wholesale trading, improve market liquidity and reduce barriers to entry for specialised trading firms. After considering feedback, the FCA aims to publish a consultation paper later this year. 

Good practice in complex ETPs for retail: Following its review of firms trading complex exchange traded products (ETPs) for retail investors, the FCA has highlighted good and bad practice for firms. The review included firms of varying sizes and business models and assessed how they evaluate complex ETPs, communicate key risks and monitor outcomes under the Consumer Duty. Good practice included detailed processes for defining target markets, assessing customer knowledge and monitoring outcomes. Poor practice included weak controls, limited assessments of a customer’s investment experience and knowledge and unclear disclosures which make it harder for consumers to understand risks. The FCA has emphasised its desire for "firms to put consumers first by making sure products and services meet their needs, and communications are clear to support understanding". The review follows the FCA's lifting of the ban on the distribution of crypto exchange traded notes (cETNs) to retail customers and the publication of DP25/3. It also demonstrates that, as the regulator innovates to support growth and competitiveness and drive retail investment, firms serving retail customers should also expect increased supervisory scrutiny. 

Motor finance complaints handling: The FCA has published policy statement (PS) 25/18, outlining changes to handling rules for motor finance complaints. The PS brings forward the deadline for firms to issue final responses to relevant complaints to 31 May 2026 – rather than 31 July as consulted upon in CP25/27 – to align with a potential consumer redress scheme decision. Complaints relating to leasing agreements were excluded from this extension and from any potential redress scheme, requiring firms to respond by 5 December 2025. The standard six-month period for consumers to refer complaints to the FOS will resume for final responses sent after 29 January 2026. The FCA is expected to announce its decision on a wider motor finance consumer redress scheme by the end of March 2026.

FCA response to Which? super complaint: The FCA is expanding its work to improve standards in the home and travel insurance markets, following a super complaint from Which? The complaint argued that markets were failing consumers through poor claims-handling, inappropriate sales processes and a lack of application and enforcement of FCA rules (read more here). The FCA has shown that there is room for improvement and has committed to undertake further work on improving claims handling and customer outcomes, monitoring the impact of sales processes on outcomes and reviewing the steps taken by the market to improve customer understanding of insurance cover. 

Mortgage rule review: The FCA has published Feedback Statement (FS) 25/6, outlining its response to feedback received on DP25/2 regarding the future of the mortgage market. FS25/6 includes a roadmap, with prioritised actions focusing on key themes for policy development starting in 2026: first time buyers and underserved consumers, later life lending, innovation and vulnerable customers. In 2026, the FCA will bring forward proposals to assist first time buyers and underserved consumer groups. Work on broader policy development across all themes is also scheduled to commence by the end of 2026 and continue into 2027.

2025 CBEST thematic review: The BoE has published its 2025 CBEST thematic. The annual thematic shares findings and lessons learned from the CBEST programme, which assesses the cyber resilience of key financial institutions through security testing performed in ‘live’ corporate environments. Key observations include:

• To reduce the likelihood of severe cyberattacks, firms and FMIs should look to harden operating systems, including by patching vulnerabilities and securely configuring key applications.
• Firms and FMIs can reduce the impact of unauthorised access to sensitive systems and information by strengthening credentials management, enforcing strong passwords, considering the use of multi-factor authentication (MFA), preventing or detecting insecure credential storage and appropriately segmenting networks.
• Early detection and effective monitoring, alerting and response processes are key to reducing the impact of cyberattacks.
• Firms and FMIs should implement risk-based remediation plans with oversight from risk managers and internal auditors to ensure the successful remediation of technical findings, including vulnerabilities.

Memorandum of Understanding on critical third parties: The BoE, PRA and FCA have signed a Memorandum of Understanding (MoU) with the European Supervisory Authorities (the EBA, EIOPA and ESMA), effective immediately, to enhance cooperation and oversight of critical third parties. The MoU establishes a framework for coordinating and sharing information on oversight under the UK Critical Third Party (CTP) regime and Critical Third Party Providers (CTPPs) under the EU's Digital Operational Resilience Act (DORA), including during incidents such as power outages or cyber attacks. The EU published its first list of CTPPs in late 2025. The UK CTP designation process is in progress and regulators continue to work with HMT.

Cryptoasset regulation: In December 2025, the FCA issued three consultation papers and two research notes on consumer behaviour around cryptoassets. These were the last of the crypto-related consultations scheduled for 2025 according to the FCA's cryptoassets roadmap. CP25/40 "Regulating Cryptoasset Activities" complements proposals made in DP25/1 and CP25/25. CP25/41 "Regulating Cryptoassets: Admissions & Disclosures and Market Abuse Regime for Cryptoassets" and CP25/42 "A prudential regime for cryptoasset firms" outline supplementary proposals to those in CP25/14. The research notes, Cryptoasset Regulation and Consumer Decision-Making: Evidence from an Online Experiment and the 2025 Cryptoasset Consumer Research Report explore consumer sentiment towards crypto in light of the unfolding regulation. Responses to the consultations should be submitted by 12 February 2026.

Authorisations for crypto firms: As the FCA enters the next phase of its roadmap for crypto regulation, with a view to bringing the full regime into force by October 2027, it has published guidance for firms wishing to prepare for the new regime. Publication of the guidance is an indication that the FCA is coming to the end of its "design phase" and expects both crypto firms and tradfi firms dealing in cryptoactivities to begin engaging with its proposals and implementing enhancements as they prepare to apply for FSMA authorisation.

Progress on payments regulation recommendations: The PSR and FCA have written to the Chancellor with an update on their progress against the government’s payments regulation recommendations. The update highlights progress in four key areas: coordination and efficiency, open banking and open finance, retail payments infrastructure, and consumer protection. Notable initiatives include preliminary steps to integrate PSR functions into the FCA, establishing a joint oversight department to enhance decision-making for open banking and open finance, progress on variable recurring payments and digital wallets, and the launch of the FCA’s smart data accelerator program.

Card scheme fees remedies: The PSR has confirmed changes designed to provide businesses with more details about the fees charged for card payments. This follows a market review that found limited card scheme competition, resulting in increased fees and unclear costs for businesses accepting card payments. After reviewing feedback to CP25/1, the PSR plans to implement the measures related to information, transparency, complexity (ITC), pricing governance and financial regulatory reporting, but will not proceed with a remedy on the publication of schemes’ information. The PSR is consulting (CP25/3) on draft rules to bring the pricing and ITC remedies into effect. These remedies mandate schemes to provide merchant acquirers with clear and actionable pricing information and imposes new pricing governance standards to ensure pricing decisions are evidence-based. A consultation on a draft direction for enhanced regulatory financial reporting remedy is planned for Q1 2026.

Pensions value framework: The FCA, DWP and TPR have issued a joint consultation (CP26/1) on proposals requiring defined contribution (DC) pension schemes to publish transparent data on their performance, costs and service quality. The framework features a colour rating system for value for money assessments, to facilitate clear and easy comparisons for decision-makers across the DC market, including trustees. In a change to the initial proposals CP24/16 proposes a 4-point rating rather than a traditional RAG rating with an additional green rating - dark green for strong performance. It outlines clear steps for schemes that fail to provide good value, such as closing to new business or transferring members to better performing schemes. Final rules are dependent on legislative agreement and the Pension Schemes Bill receiving Royal Assent.

Collective defined contribution schemes: TPR is consulting on a new collective defined contribution (CDC) code of practice allowing for the introduction of multi-employer schemes from the summer. The revised code builds on the existing single-employer CDC framework and sets out the regulator’s expectations for multi-employer schemes, including the criteria for authorisation. New expectations include details of any organisation or individual providing financial support to a scheme, how schemes are promoted and marketed, and the fitness and propriety of key personnel involved. The new code will apply to both types of CDC schemes and will come into effect at the end of July 2026 . TPR anticipates being able to accept applications from the beginning of August 2026, which schemes could be operating in early 2027.

Data quality: 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. Key findings included value data being overlooked, informal or fragmented improvement plans, variations in oversight, wide variation in 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. To support schemes, TPR has revised its member data guidance.