Financial Services SpeedRead: 25 March 2026 edition

Welcome to the latest edition of the Financial Services SpeedRead, a collection of bite-sized updates designed to help you keep on top of key regulatory developments in financial services over the preceding fortnight. Please get in touch if you want to explore any of the topics covered in this fortnight's edition of Financial Services SpeedRead in more detail.

Financial Markets

1. FCA publishes 2026 regulatory priorities for wholesale and wholesale buy side markets

On 19 March 2026, the FCA published its first annual regulatory priorities reports for the wholesale and the wholesale buy side markets, replacing various portfolio letters and signalling a more risk based, outcomes focused approach to supervision.

The FCA sets out how it intends to support growth, innovation and UK competitiveness while maintaining high standards of consumer protection and market integrity. Across both reports, common themes include:

• strengthening operational and cyber resilience and third party risk management;
• reshaping rules to make markets more efficient (including reforms to listing, securitisation, transparency and transaction reporting);
• enabling tokenisation and wider digital asset use via the Digital Securities Sandbox and fund tokenisation roadmap;
• tightening expectations on conflicts of interest and conduct; and
• reinforcing financial crime and market abuse controls.

Key planned actions for the coming year include:

• consulting on a proportionate regime for alternative investment fund managers and transforming data collection for asset managers;
• finalising policy on fund tokenisation (including a direct to fund dealing model) and on enhanced fund liquidity risk management;
• publishing final rules on the equity consolidated tape and running a procurement to appoint the tape operator;
• implementing securitisation and commodity derivatives reforms;
• publishing final policy statements on the new UK cryptoasset regime;
• progressing multi firm reviews of model portfolio services, private markets conflicts and wholesale trading conduct; and
• reviewing the Senior Managers and Certification Regime and launching a post implementation review of the Investment Firms Prudential Regime jointly with the PRA and HMT.

2. FCA, PRA and BoE publish policy statements on operational incident and third-party reporting

On 18 March 2026, the PRA, FCA and BoE published policy statements establishing a regulatory framework for reporting operational incidents and material third party arrangements (see PRA policy statement PS7/26 here, FCA policy statement here, and the BoE's policy statement on the rules as applicable to FMIs here).

Taken together, these statements establish a single, aligned UK regime for reporting operational incidents and material third party arrangements across PRA regulated firms, FCA regulated firms and relevant FMIs.

Following feedback, the regulators have made the following key changes to the rules (without limitation):

Operational incident reporting

• a single definition of "operational incident" has been introduced, as well as a single notification template to materially reduce the compliance burden for dual-regulated firms; and
• a two-tier framework made up of "standard reporting" obligations (applicable to the majority of FCA solo regulated firms) and "enhanced reporting" obligations (for systemically important firms identified as "enhanced reporting firms" e.g. enhanced scope SMCR firms, designated investment firms, banks, among others);

Material third-party reporting (MTP)

• an expanded reporting obligation (applicable to enhanced scope SMCR, banks, CASS large firms, and designated investment firms, among others) covering both material and non-material outsourcing arrangements;
• an obligation to notify the regulator when entering into, or significantly changing a MTP arrangement; and
• an annual submission requirement for the firm's MTP arrangements (submitted via FCA RegData).

The new rules take effect on 18 March 2027, meaning firms will have 12 months to prepare for compliance. The regulators will engage with firms to provide support in the preparatory phase of the regime.

For further information, please read our briefing on the updated regulatory framework here.

3. HMT publishes consultation response on reform of the Financial Ombudsman Service

On 16 March 2026, HMT published its consultation response on proposals to reform the Financial Ombudsman Service (FOS). The reforms follow the Chancellor's July 2025 review, which found that changes were needed to prevent the FOS acting as a quasi-regulator and to ensure greater coherence with the FCA. At the same time, the FCA and the FOS published a consultation paper (CP26/9) on related changes to the FCA's DISP sourcebook – see further detail below.

The Government confirmed it will legislate for the following key reforms, largely as consulted on:

• the "fair and reasonable" test will be adapted so that the FOS must find a firm acted fairly where it complied with relevant FCA rules;
• a referral mechanism will require the FOS to seek FCA views where there is ambiguity in FCA rules, with a 30-day response deadline;
• an absolute 10-year time limit for referring complaints to the FOS will be introduced, albeit subject to FCA mandated exceptions;
• the Chief Ombudsman will have overall responsibility for FOS determinations, with key appointments subject to the Government's approval; and
• the FCA will gain enhanced powers to manage mass redress events, including the ability to pause complaints.

The Government will not, however, proceed with its proposal to make the FOS a subsidiary of the FCA, following concerns raised with respect to the FOS's impartiality and independence.

The reforms require primary legislation, which the Government will take forward when Parliamentary time allows.

4. FCA and Financial Ombudsman Service publish consultation paper on modernising the UK redress system

On 16 March 2026, the FCA and FOS published consultation paper CP26/9 on modernising the UK financial redress system. The paper follows CP25/22 and the Government's July 2025 consultation on legislative reforms to the FOS mentioned above. It sets out consultation proposals on the FOS's complaint-handling procedures alongside finalised policy positions on firms' reporting obligations and operational efficiency.

The consultation paper sets out the following key proposals:

• the introduction of a registration stage at the Financial Ombudsman to ensure complaints are adequately evidenced before progressing to investigation;
• amended dismissal grounds, including new grounds for complainants behaving abusively/unreasonably, and with respect to complaints relating solely to investment performance;
• amendments to the fair and reasonable test under DISP 3.6.4R by removing reference to the requirement to consider "good industry practice" and clarifying that only standards applicable at the time of the relevant act or omission apply; and
• finalised SUP 15 guidance on reporting potentially recurring or systemic redress issues.

The consultation period closes on 11 May 2026. The FCA and FOS aim to publish a further policy statement later in 2026.

Banking and Prudential

5. PRA consults on modernising the liquidity policy framework

On 17 March 2026, the PRA published a consultation paper (CP5/26) setting out proposals to modernise the prudential liquidity policy framework for UK banks and building societies. The proposals draw on lessons learnt from key developments in the sector (such as digital banking) and the March 2023 banking turmoil, aiming to strengthen firms' resilience to rapid liquidity outflows without requiring them to hold additional liquid assets.

The consultation proposes targeted changes to the Pillar 2 framework, including amendments to the Internal Liquidity Adequacy Assessment rules and SS24/15 on the PRA's approach to supervising liquidity and funding risk. Specifically, the paper sets out the following key proposals:

• requiring firms to assess the composition of liquidity resources and monetisation risk, including preparing internal stress scenarios with sudden, severe outflows in the initial days of a stress;
• removing the exemption for Level 1 Assets, including sovereign bonds, from the Liquidity Coverage Ratio monetisation testing requirement;
• clarifying the role of central bank facilities, permitting firms to include drawings from regularly available facilities in overall liquidity adequacy assessments; and
• requiring firms to monitor and assess pre-positioned collateral with central banks as an additional liquidity resource.

The consultation closes on 17 June 2026, with a proposed phased implementation thereafter.

Fund Management

6. ESMA publishes guidelines on liquidity management tools of UCITS and open-ended AIFs

On 12 March 2026, ESMA published guidelines on the selection, activation and calibration of liquidity management tools (LMTs) for UCITS and open-ended alternative investment funds (AIFs). These guidelines follow the publication of the Level 2 RTS for open-ended AIFs and UCITS (see our publication here for further detail), in the lead up to 16 April 2026 when most of the changes under AIFMD II (Directive (EU) 2024/927) will apply.

Whilst the guidelines reiterate that primary responsibility for LMTs remains with the UCITS and AIFMs, the guidelines are intended to establish consistent, efficient and effective supervisory practices. Some of the key expectations for fund managers as set out in the guidance are as follows:

• fund managers must select at least two LMTs, and should consider selecting at least one quantitative-based tool and at least one anti-dilution tool;
• anti-dilution tools should be activated under both normal and stressed market conditions, with estimated costs of liquidity based on a pro-rata approach;
• suspensions and side pockets should be activated only in exceptional circumstances; and
• redemption gate thresholds should be calibrated by reference to NAV calculation frequency, investment objective, liquidity of underlying assets and current market conditions.

The guidelines apply from 16 April 2026 (i.e. the date of application of the relevant regulatory technical standards), with a 12-month transitional period for existing funds.

Senior Managers and Governance

No recent updates.

Financial Crime

7. Financial Action Task Force publishes report on illicit finance risks linked to offshore virtual asset service providers

On 11 March 2026, the Financial Action Task Force (FATF) published a report on illicit finance risks linked to offshore virtual asset service providers (VASPs), on the basis that such offshore VASPs may exploit differences in licensing thresholds to avoid AML/CTF obligations.

The report finds that under half of the jurisdictions that have introduced a registration or licensing requirement have adopted an "activity-based approach" (i.e. requiring offshore VASPs to be licensed or registered where they engage in defined activities e.g. advertising, onboarding local users or offering services into the market). The FATF highlights that this gap can increase the risk of and facilitate fraud, money laundering and terrorist financing activities.

The report further notes that:

• Offshore VASPs may have significantly higher exposure to illicit activity than regulated onshore VASPs, with methods including dispersal of victim funds across multiple addresses, routing transactions through intermediary wallets and using multiple blockchains to increase obfuscation; and
• financial institutions and VASPs should assess their exposure to unlicensed offshore VASPs, apply group-wide AML/CTF controls, and refrain from maintaining relationships with unregistered or unlicensed VASPs.

The report recommends that firms include offshore VASP activity in their risk assessments and strengthen domestic co-ordination and international co-operation.

8. Home Office publishes fraud strategy for 2026-2029

On 9 March 2026, the Home Office published its Fraud Strategy for 2026-2029, entitled "Disrupting crime, supporting economic resilience and delivering justice", setting out the Government's approach to tackling fraud.

The Home Office cites that fraud accounts for 45% of all crime in England and Wales and cost the economy an estimated £14.4 billion in 2023-2024. The Government's strategy is underpinned by over £250 million in investment and structured around three pillars: disrupting criminal activity, safeguarding individuals and businesses, and improving victim support and justice outcomes.

Key points set out in the strategy include:

• the launch of a new public-private Online Crime Centre to share data and collaborate on interventions to eliminate online fraud at scale;
• the continuation of mandatory reimbursement for authorised push payment fraud within the Faster Payment System;
• FCA supported analysis of "cashing-out" methods which will be shared with industry to tackle exploitative money laundering; and
• establishing crime and fraud prevention as a lawful basis for sharing data under the Data (Use and Access) Act 2025.

The Government intends to publish a progress update during the strategy delivery period.

9. Home Office publishes call for evidence on economic crime information sharing

On 9 March 2026, the Home Office published a call for evidence seeking stakeholder input on the UK's economic crime information sharing framework. The document aims to identify legal, operational and cultural barriers to effective data sharing across public and private sectors to combat fraud, money laundering and corruption. The call for evidence notes that despite progress in establishing legal gateways, the UK's system remains a "complex patchwork" of frameworks that are often underutilised or inconsistently applied, with no clear system leader.

The call for evidence focuses on five key areas:

• private-to-private information sharing, including the effectiveness of the Economic Crime and Corporate Transparency Act 2023 provisions and the "Super SAR" model;
• private-to-public information sharing, including whether the SAR "suspicion" threshold should be amended to "reasonable grounds to suspect";
• public-to-public information sharing, including whether a broad legal gateway similar to the Digital Economy Act 2017 should be introduced;
• cross-border information sharing, including challenges arising from fragmented legal regimes and operational complexity; and
• the role of new technologies, including AI and automation.

The consultation period closes on 18 May 2026.

Retail Services

10. FCA publishes good and poor practice report on consumer understanding

On 19 March 2026, the FCA published findings from its review of firms' approaches to the consumer understanding outcome under the Consumer Duty, setting out areas of good and poor practice. Key findings of the report include the following:

• firms should analyse multiple data sources, including complaints, call transcripts, and drop-off data, to identify where consumers struggle, and should test communications proportionately before and after launch;
• communication design should prioritise clarity, plain language, and accessibility, with evidence-based changes rather than cosmetic adjustments;
• firms should proactively identify consumers in vulnerable circumstances and test communications with diverse customer groups, including those with lower financial capability;
• financial promotions must present risks as prominently as benefits and be tested with real customers to confirm understanding; and
• governance should include clear accountability, structured oversight, and evidence-driven decision-making linked to comprehension-focused metrics.

The FCA expects firms to use these findings to assess their own approach and identify where improvements may be needed to meet their obligations under the Consumer Duty.

11. FCA publishes regulatory priorities report on consumer finance

On 17 March 2026, the FCA published its Regulatory Priorities report on consumer finance, setting out expectations for consumer credit firms over the coming year. The report is one of nine new annual sector-specific reports replacing the FCA's portfolio letters and intended to reflect the FCA's focus on more predictable, data-driven supervision.

Key points addressed in the report include:

• the FCA expects firms to lend responsibly, offering fair value on products and taking into consideration how to best help consumers currently excluded from credit;
• firms must ensure consumers in financial difficulty can access appropriate support without unnecessary barriers;
• motor finance firms should prepare to work with the FCA on a potential redress scheme, with final rules expected in late March 2026;
• new rules regulating deferred payment credit take effect on 15 July 2026; and
• the FCA will consult on changes to Chapter 3 of CONC (covering financial promotions) to improve alignment with the Consumer Duty.

The FCA intends to use enhanced regulatory data to make quicker, more targeted interventions where consumer harm is identified.

12. FCA publishes regulatory priorities in retail banking and mortgages

On 12 March 2026, the FCA published its regulatory priorities for the retail banking and mortgage sectors.

For mortgages, its priorities include:

• improving customer outcomes under its Mortgage Rule Review, such as simplifying rules to increase access for first-time buyers and protect vulnerable customers;
• encouraging responsible lending and supporting mortgage borrowers in financial difficulty; and
• ensuring quality of advice, by ensuring that firms recommend products that are suitable for customers' needs.

For retail banking, its priorities include:

• ensuring access to cash and essential banking services, to address gaps for those less digitally capable;
• ensuring firms are delivering good outcomes from products and services, and to ensure that firms keep developing their data for monitoring retail customer outcomes;
• fighting fraud and other financial crime, by ensuring firms monitor for such risks and help consumers understand the risks; and
• encouraging firms to refine action plans on operational resilience and data security.

13. FCA publishes good and poor practice report on Consumer Duty implementation by second charge mortgages intermediaries and lenders

On 12 March 2026, the FCA published a report identifying good and poor practice by second charge mortgage intermediaries and lenders with respect to Consumer Duty outcomes, setting out findings relating to advice quality, affordability assessments and fees. The review covered over 40% of second charge advice firms and around 50% of second charge lenders.

The report identifies the following key findings:

• Standards of advice could be improved: Advisers did not always evidence thorough consideration on whether solutions were genuinely suitable for the clients' needs and circumstances. Additionally, debt consolidation was sometimes recommended when it was not evident from the documents that this was an appropriate or affordable solution for the consumer;
• Affordability assessments could be more robust: some lenders' affordability assessments relied on unrealistic expenditure assumptions and overlooked key costs such as childcare costs or household goods and repairs;
• Record-keeping was sometimes incomplete, undermining firms' ability to demonstrate suitability of advice and the basis on which lending decisions were made; and
• Intermediary fees, typically 10% to 12.5% of the loan value, were materially higher than in the first charge market, with insufficient justification in fair value assessments to explain how such fees had been determined.

The FCA will communicate directly with relevant firms on the remedial action it has identified under the review. Additionally, the FCA is considering policy changes to its mortgage rules to support good outcomes for consumers consolidating debt.

14. ESMA publishes report on simplifying the retail investor journey

On 12 March 2026, ESMA published a report summarising stakeholder feedback and outlining follow-up actions arising from its 2025 call for evidence on the retail investor journey (please see our previous Financial Services SpeedRead here). The call for evidence sought input on MiFID II regulatory requirements impacting retail investors and non-regulatory barriers to capital market participation. Respondents identified complex disclosures, burdensome suitability assessments and difficulties integrating sustainability preferences as key obstacles.

Key actions set out in the report include:

• streamlining disclosure requirements and tackling information overload, including through layered, digital-first presentation of key information;
• reducing complexity in suitability and appropriateness assessments, including by introducing further proportionality for simpler products and promoting the use of digital tools;
• simplifying MiFID II requirements on sustainability preferences, including by linking them to any new product categories under the Sustainable Finance Disclosure Regulation review; and
• using consumer testing to validate improvements to disclosures and digital investor journeys, including for mobile-first users.

ESMA will use the feedback to shape future technical advice on MiFID II delegated acts, to be aligned with the final outcome of the Retail Investment Strategy.

Payments

15. FCA publishes updated 'Our Approach' document on payment services and electronic money firms

On 19 March 2026, the FCA published the seventh version of its "Our Approach" document, providing guidance for payment service providers and e-money institutions on the UK payment services and e-money regulatory regime. This version contains updated guidance on the exemptions from strong customer authentication (SCA), including the contactless payments exemption.

The updated guidance addresses the following in relation to SCA exemptions:

• PSPs may identify low-risk contactless transactions based on the value of the individual transaction, the cumulative value of previous transactions and/or the number of consecutive contactless transactions since the last application of SCA;
• PSPs should consider their overall fraud rate for in-person contactless payments, with a significant increase potentially indicating that transactions fall outside the scope of the exemption; and
• where PSPs rely on the contactless exemption, they should do so in compliance with their obligations under the Consumer Duty, including considering enabling customers to set individual personal limits on contactless payment functionality.

Digital Finance and Fintech

No recent updates.

ESG

16. EU Commission seeks feedback on revision of EU Taxonomy technical screening criteria

On 17 March 2026, the EU Commission published a request for feedback on proposed revisions to the technical screening criteria under the EU Taxonomy Regulation, the EU's classification system for sustainable economic activities. The review follows a call for evidence and stakeholder engagement throughout 2025, and builds on the Commission's Omnibus I package introduced in February 2025, which focused primarily on disclosures. The draft revisions aim to simplify the criteria and reduce the administrative burden for market participants.

Key proposed changes include:

• streamlined criteria and clarifications on how to demonstrate compliance with the taxonomy;
• alignment of criteria with updated EU legislation and technological advances;
• revisions to most activities under the Climate and Environmental Delegated Acts, including forestry, manufacturing, energy, transport and construction; and
• updates to the generic "do no significant harm" appendices.

The feedback period closes on 14 April 2026. The Commission intends to adopt the revised criteria by summer 2026.

Other

17. FCA publishes call for input on how regulation can help SMEs access finance

On 18 March 2026, the FCA published a call for input seeking views on how regulation can help SMEs access finance. Supporting growth is one of the FCA's four strategic priorities and this work complements joint initiatives by HMT, the BoE and the Department for Business and Trade on SME finance.

The FCA seeks to explore the following matters:

• barriers to SME finance, including regulation that affects the cost or perceived risk of providing finance to SMEs;
• opportunities for future regulation to better support SME finance, including through industry collaboration and new technology;
• sector-specific issues in obtaining finance, particularly for high-growth sectors such as clean energy, life sciences and digital technologies; and
• future trends, including the role of open finance.

Responses should be submitted to the FCA by 17 April 2026. The FCA aims to hold a roundtable with stakeholders in May 2026 and to produce a summary of insights later in 2026.

18. EU Commission publishes report on crisis preparedness in the EU financial sector

On 10 March 2026, the EU Commission published a report assessing the preparedness of the EU financial sector to continue carrying out its critical functions under all circumstances. The report forms part of the preparedness union strategy jointly presented by the EU Commission and the European External Action Service in March 2025.

Overall, the Commission confirms the resilience of the EU financial sector, identifying a solid framework based on robust legislation, strong governance and effective coordination. The report identifies the following key elements of the EU's financial sector preparedness framework:

• DORA applies across 20 types of financial entities and establishes harmonised requirements for ICT risk management, incident reporting and digital operational resilience testing;
• the ESAs designated critical ICT third-party providers under DORA in November 2025 enabling pan-European oversight of systemic ICT concentration risks;
• stress testing remains central to preparedness, with the EBA, European Insurance and Occupational Pensions Authority and ESMA conducting regular EU-wide exercises across banks, insurers and central counterparties; and
• the EU Systemic Cyber Incident Coordination Framework, established by the ESAs in January 2025, provides protocols for rapid information sharing during significant cyber incidents.