Issue 050 — October 2025
Our new issue of UK Regulatory Radar brings you the latest industry and regulatory updates impacting financial service providers in the UK.
Click on the images below for our latest insights and see the ‘Further updates’ section for other sector-specific developments.
UK government Regulation Action Plan: The government has issued a progress update and next steps for its Regulation Action Plan, the approach to ensuring that regulators and regulation support growth across all industries. For financial services, key areas of progress include the shortening of statutory deadlines for FCA and PRA authorisations, FCA actions to address the Chancellor’s query on the way the Consumer Duty is working for wholesale firms (see below) and FCA and Bank of England/PRA clarifications and increased flexibility around rules relating to mortgages.
Annual conduct reporting: As part of its broader initiative to transform data collection and make reporting more proportionate, the FCA has updated its annual conduct reporting requirements for solo-regulated firms, removing the need to submit nil returns. Firms with a reporting period after 31 August 2025 that have not undertaken disciplinary actions for conduct rule breaches will no longer be required to submit a report. Under the SM&CR, solo-regulated firms have previously been required to report annually on whether they have taken disciplinary action against individuals who are not Senior Managers for breaches of the conduct rules even where there have been no breaches.
Handbook Notice 133: FCA Handbook Notice 133 updates firms on changes made across various rulebooks – including changes to consumer credit regulatory reporting, simplified assessment of value disclosures for fund managers under the Collective Investment Schemes sourcebook (COLL), amendments to rules on travel insurance signposting, and changes to strengthen the payments and e-money firms safeguarding regime.
‘Strong and simple’ regime: The PRA has published a near-final policy statement (PS20/25) on the second and final phase of the 'strong and simple' regime for Small Domestic Deposit Takers (SDDTs). The regime, designed to provide a more proportionate and simplified prudential framework for SDDTs in the UK while safeguarding their financial resilience, includes simplifications to all elements of the capital stack, including Pillar 1, Pillar 2A, buffers, and the calculation of regulatory capital, as well as to liquidity and reporting and disclosure requirements. PS15/23 included near-final rules for the first phase which focused on simplifications to liquidity and disclosure requirements, and the criteria to meet to be an SDDT. PS20/25 sets out the near-final rules for the simplified capital regime and additional liquidity elements. It provides feedback to responses received to proposals in CP7/24 and CP9/24, and to proposals in CP13/24 and CP14/24 that are relevant to CP7/24. The PRA intends to publish the final SDDT capital regime policies and rule instruments in Q1 2026, for implementation on 1 January 2027 – in line with UK Basel 3.1 implementation.
Pillar 2A ‘refined methodology’: The PRA has published a near-final policy statement (PS18/25) outlining its decision to retire the 'refined methodology' to Pillar 2A when firms implement the Basel 3.1 standards – specifically the credit risk Standardised Approach (CR SA) – from 1 January 2027. This is intended to streamline the capital framework and enhance risk sensitivity. The PRA considers that the CR SA, combined with other changes, will sufficiently reduce the disparity between IRB and CR SA risk weights, making the refined methodology redundant. The PRA has also issued final policy materials introducing minor clarifications to the approaches to Interest Rate Risk in the Banking Book (IRRBB) and pension obligation risk Pillar 2A.
Restatement of CRR requirements: The PRA has published a near-final Policy Statement (PS19/25) relating to the restatement of Capital Requirements Regulation (CRR) requirements, incorporating feedback to Consultation Paper (CP13/24). PS19/25 finalises policies for remaining proposals from CP13/24 not concluded in PS12/25, specifically focusing on securitisation requirements, other CRR requirements and External Credit Assessment Institution (ECAI) mapping. The new requirements will be implemented on 1 January 2027.
Remuneration reform: The PRA and FCA have published a joint Policy Statement (PS21/25) on remuneration reform. The PS is relevant for banks, building societies and PRA-designated investment firms and is intended to ensure better alignment between the financial incentives of staff, particularly those with a material impact on risk, and the long-term interests of firms and the UK economy. It finalises proposals from CP16/24 and CP24/23, which aimed to make the remuneration regime more proportionate and tailored to the UK market. Key changes include a reduced minimum deferral period of four years for all Material Risk Takers (MRTs), the introduction of a marginal deferral system for bonus awards, and increased flexibility regarding the proportion of variable remuneration paid in cash versus instruments.
Funded Reinsurance: In a speech on the PRA's evolving approach to Funded Reinsurance, Vicky White, Director for Prudential Policy, set out views on the Bulk Purchase Annuity landscape and potentially extending the insurance Special Purpose Vehicle (iSPV) regime to accommodate life insurance business. The PRA will hold roundtables this autumn on FundedRe to inform its approach on whether it is appropriate to change the rules to ensure a consistent treatment across economically similar structures. The focus will be to gather insights on whether the investment component of FundedRe should be ‘unbundled’, separating the investment component from the longevity reinsurance for valuation in the Solvency UK balance sheet.
Matching Adjustment Investment Accelerator (MAIA): The PRA has published final rules on the MAIA. This allows firms with a Matching Adjustment (MA) to apply for a MAIA permission to be able to include a limited amount of self-assessed MAIA assets. The MA benefit on these assets can be claimed immediately, with 24 months to submit a full MA application. The PRA has made several changes following consultation, with the intention of making the overall approach more flexible. This includes allowing firms to take a more risk-based approach to assessing asset eligibility, with a proportionately more in-depth approach where greater judgement is required. There is also a change to PRA expectations on contingency planning in case the asset does not get approved for MA use. Firms should cover how they would continue to invest in that asset outside the MA portfolio, rather than assume the sale of the asset in the short to medium term.
Liquidity reporting: The PRA has published its final policy statement (PS15/25) on liquidity reporting for certain large insurers. It has accepted some industry feedback from the consultation process, making the requirements more proportionate in certain areas. However, overall the package remains close to the consultation proposals and is designed to meet the PRA’s objective of closing ‘liquidity reporting gaps for major insurance firms with significant exposure to derivatives or securities involved in lending or repurchase agreements’. The requirements will apply from 30 September 2026.
Solvency II: The PRA has updated SS15/16 on Monitoring model drift and standard formula SCR reporting. It has extended the scope of firms that will be exempt from reporting the SF.01 template – which provides SCR calculations under the standard formula. Under the revised policy, insurers with an internal model (IM), including composites and reinsurers with immaterial non-life holdings, will not be expected to report SF.01. Composite IM insurance and reinsurance firms with material non-life holdings will be expected to report SF.01 for their non-life business only. The change is effective immediately.
Low impact amendments: The PRA is consulting on several ‘low impact amendments’, including amendments to give effect to the Berne Financial Services Agreement, introduce a limited exception to permit single investors to support multiple risk transformation transactions as part of a single contractual arrangement (reflecting a common practice in the ILS market), and make technical changes to Transitional Measure on Technical Provisions (TMPT) rules.
T+1 settlement transition: The FCA has urged firms to prepare for the UK's transition to T+1 settlement by 11 October 2027, identifying key areas for firms to focus on. The FCA expects firms to be able to tell it in detail their plans for T+1 and how they are addressing any existing issues in the settlement process. In a separate letter addressed to compliance officers at asset management and alternatives firms, the FCA set out expectations on what firms need to do by the end of 2025, by the end of 2026, and in 2027.
Primary Market Bulletin 59: In this latest bulletin, the FCA summarises a review of delay disclosure of inside information notifications under the UK Market Abuse Regulation (UK MAR) and its expectations for issuers, reminds listed companies that are planning to adopt cryptoasset treasury strategies of their obligations under UK Listing Rules, Disclosure Guidance and Transparency Rules and the UK MAR, and sets out details of an upcoming consultation on the UK Short Selling Regime.
Client categorisation in corporate finance firms: The FCA’s multi-firm review identified significant gaps in corporate finance firms' assessment processes and record-keeping of client categorisation (COBS 3) and certification requirements (COBS 4), noting superficial approaches and lack of robust methodologies. The FCA encourages all FCA-regulated corporate finance firms to consider which observations are relevant to their processes and address any risk of harm they identify. The FCA also plans to update the COBS3 rules on client categorisation and encourages firms to engage with and consider the forthcoming consultation before making changes to their processes.
Revisions to the FCA’s capital rules: Policy Statement (PS) 25/14 finalises the FCA’s proposals to simplify and consolidate the definition of regulatory capital (‘own funds’) for investment firms under MIFIDPRU 3. The changes aim to reduce unnecessary complexity and clarify aspects of the rules and will take effect on 1 April 2026. Although the PS has the effect of reducing the volume of legal text in this context by 70%, the new rules do not change the level of regulatory capital that firms must hold or require them to alter their capital structures.
UK MiFID Organisational Regulation: The FCA and the PRA have published policy statements 25/13 and 16/25 respectively to transfer the firm-facing requirements of the UK MiFID Org Reg (Commission Delegated Regulation (EU) 2017/565) into the FCA Handbook and PRA Rulebook. There are no major policy or scope changes, however, the FCA has announced that it will consult in November on streamlining conflict of interest requirements and modernising client categorisation rules. It will also publish an engagement paper on consumer access to investments which will consider changes such as whether amendments should be made to certain MiFID-derived rules such as the appropriateness assessment.
Market Watch 84: The FCA’s most recent Market Watch sets out observations on the implementation of UK EMIR Refit obligations, with a focus on implementation change, vendor management, and errors and omissions notifications. It also sets out the FCA’s priorities for the next 12 months which include continuing to work closely with industry to support more accurate and complete reporting, and closely monitoring breach notifications, actively engaging with firms that fail to meet its expectations.
Consumer Duty: In a letter to the Chancellor of the Exchequer, the FCA outlined the actions it plans to take to clarify the application of Consumer Duty to wholesale firms (see wider FCA actions below):
Consumer Duty: The FCA has published three updates relating to the Consumer Duty:
Motor finance consumer redress: The FCA has launched a consultation on its proposed motor finance redress scheme, accompanied by a Dear CEO letter setting out the actions it expects firms to take. For more detail, see article above.
Targeted support (TS): The FCA has consulted on additional amendments to ensure its proposed TS framework operates effectively. CP25/26 followed CP25/17, which proposed the broad framework for TS, to enable firms to provide ready-made suggestions to segments of consumers with common characteristics. The latest consultation sets out technical Handbook changes needed to ensure TS interacts effectively with existing rules, refines some of the CP25/17 proposals (e.g. on commissions and charging) and ensures that TS aligns with the wider regulatory framework. A policy statement is expected in December 2025. The formal application gateway for firms will open in March 2026.
Controls in corporate finance firms (CFFs): The FCA has published the findings of its survey on financial crime controls in CFFs, including areas for improvement and good practice. Survey results indicated that approximately two-thirds of responding firms may not be compliant with the Money Laundering Regulations in one or more elements of their anti-financial crime control frameworks. The FCA expects all responding firms to consider the findings and address any gaps in their financial crime control frameworks.
Romance fraud review: The FCA has published findings from its multi-firm review of how firms detect and prevent romance fraud, and protect customers. It found examples of firms going to significant lengths to protect those at risk, but other where there were missed opportunities to detect or prevent suspicious activity. Key issues included gaps in fraud detection protocols, staff capability and responsiveness, and the handling of customer vulnerability. The report notes the challenges firms face such as the origination of scams online, customers’ reluctance to disclose the purpose of transactions, and difficulties 'breaking the spell' of fraudsters over customers. The FCA stresses the need for robust monitoring systems and well-trained staff who are equipped to identify red flags and respond appropriately, particularly where customer vulnerability is indicated.
Anti-money laundering and counter-terrorism financing (AML/CTF) Supervision: HM Treasury has published the outcome of its 2023 consultation on reforming the AML/CTF supervision regime. It will consolidate AML/CTF supervisory responsibility for legal, accountancy and trust and company service providers under the FCA. Implementation of this policy is subject to the passing of enabling legislation, confirmation of funding arrangements and development of a detailed transition and delivery plan. The date on which the FCA will commence supervision of the professional services sector will therefore be heavily dependent on the availability of parliamentary time. In preparation, HMT will publish a separate consultation on the FCA’s future powers in early November.
Authorised Push Payment (APP) fraud: 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 from the Q2 2025 dashboard indicates consistent, positive outcomes for consumers with high reimbursement rates for APP scams (a total of £112m reimbursed), increased claims response times and a 15 percent drop in claims volumes indicating improved fraud prevention by firms.
Cyber response and recovery: The BoE, PRA and FCA have published joint guidance for firms and financial market infrastructures (FMIs) on effective practices in cyber response and recovery capabilities. The guidance addresses the ongoing significant threat of cyber-attacks to the financial sector, drawing on insights from systemic firms and FMIs into how they continuously evolve their capabilities. It serves as a resource for firms to understand and potentially adopt practices that have demonstrated efficacy in strengthening cyber resilience. The regulators encourage all firms and FMIs to review the practices in the guidance and consider how they can strengthen their own resilience, to support the stability of the wider financial system.
AI, DLT and quantum computing: The BoE has published its approach to fostering responsible innovation in artificial intelligence (AI), distributed ledger technology (DLT) and quantum computing. The BoE outlines its strategy to support the safe adoption of these transformative technologies within the UK financial services sector, whilst delivering against its statutory objectives to maintain the resilience of the financial system and promote sustainable economic growth. The BoE seeks to shape innovation rather than slow it, acknowledging the potential for significant productivity gains while remaining vigilant to associated risks.
Fund tokenisation: The FCA is consulting on proposals (CP25/28) for progressing fund tokenisation, having identified this as a key driver of efficiency for fund management. The proposals include guidance for operating a tokenised fund, the outline of an optional new model for direct dealing in conventional and tokenised authorised funds, and a roadmap for advancing fund tokenisation. The paper includes a discussion chapter on future tokenisation models that could use DLT to provide tokenised portfolio management at retail scale.
Quantum computing: The FCA has published a research note exploring the potential applications of quantum computing within UK financial services, assessing how firms and regulators can prepare for emergence of this technology and its impact on financial markets, consumers and the UK's global financial position. The FCA emphasises that this is a critical juncture and advocates for proactive regulatory engagement to leverage opportunities while mitigating risks. It finds that new regulations are unlikely to be required in the near term – however, future quantum applications will need to consider existing regulatory frameworks on explainability, fairness and operational resilience.
Digital Pound: The BoE has published an update on the progress made on the Digital Pound as it continues to explore alongside HM Treasury (HMT) the case for a central bank digital currency. The BoE notes that payments are evolving towards a future ‘multi-money system’, made up of public money i.e. cash and potentially the Digital Pound, stablecoins, commercial bank deposits and tokenised assets – with public money as the anchor. In this context, over the last year the BoE has focused on designing the detailed blueprint for the Digital Pound. Progress so far includes advancing technical work on the infrastructure through hands on experimentation within the Digital Pound Lab which is now in Phase 2. The Lab is intended to allow industry participants to test innovative payments use cases, using a Digital Pound as the foundation, with potentially broader applicability across retail payments. The BoE has also published a series of design notes setting out its emerging policy and technical thinking on interoperability models, product strategy, intermediary roles, offline payments and alias service. The priority for the remainder of 2025 is to complete the blueprint and assessment which will inform a decision by Bank of England and HMT on next steps in 2026.
ESG ratings: The FCA has welcomed the government's legislation to bring ESG ratings providers within its regulatory remit, to ensure the provision of transparent, reliable, and comparable ESG ratings. The new legislation, which garnered broad industry support, will grant the FCA the necessary powers to regulate ESG ratings providers. In anticipation, the FCA has been actively developing its regulatory regime. It plans to launch a consultation on proposed rules before the end of 2025. The proposals, which will be informed by IOSCO’s recommendations will concentrate on four key areas: transparency, governance, systems and controls, and conflicts of interest. The FCA also intends to issue guidance to assist firms in determining whether their activities fall under the scope of the new regulation and if they will require authorisation.
Accounting for IFRS 9 ECL: The PRA’s latest thematic feedback to PRA-regulated deposit takers focused on IFRS 9 expected credit losses (ECL) included a key focus on enhancing capabilities to quantify the impact of climate-related risks. The Dear CFO letter welcomed the progress made to improve capabilities to capture climate risks in ECL processes, despite data limitations. The PRA encourages firms to continue to enhance the way they identify, assess and model climate risk drivers that could affect ECL, in line with existing supervisory expectations. It also flags the updated supervisory expectations in CP10/25, noting that it expects firms to take into account of these once finalised.
Cross-border interchange fees: The PSR will not proceed with an interim cap on UK-EEA cross-border interchange fees (IF) for card-not-present transactions. Instead, the fee cap will be implemented in a single step once an appropriate level is established. A price cap restricting the maximum level of outbound IF had been identified in the PSR’s market review as the only effective remedy to address the detriment to merchants and customers due to post-Brexit increases in fees, with a phased implementation proposed. However, in light of ongoing litigation of the fee cap decision, the PSR has concluded it is now inappropriate to impose an interim cap. To support the single step approach the PSR is consulting on the methodology for assessing an appropriate cap for outbound multilateral IFs (MIFs), proposing the use of two analytical approaches.
See other payments related updates in the Cross-sector, Operational Resilience and Fraud and Financial Crime sections.
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