Financial Services SpeedRead: 29 January 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 policy statement on new public offers and admissions to trading regime

On 19 January 2026, the FCA published a policy statement (PS25/9) setting out final rules to implement the Public Offers and Admissions to Trading Regulations 2024 (POATR). The new rules make it easier for companies to raise capital in the UK and reduce costs when admitting securities to UK public markets.

Key takeaways include that:

• Scope: the policy statement affects issuers with securities trading on a UK regulated market or primary Multilateral Trading Facility (MTF), including prospective issuers;
• Public Offer Platform Regime: enables smaller and scaling companies to raise capital by offering securities to a broad investor base, including retail consumers, outside public markets;
• Authorisation gateway: from 19 January 2026, firms may apply to become authorised as Public Offer Platform operators; already authorised firms should apply for variation of permission; and
• Transition: the new POATR regime replaces the UK Prospectus Regulation; further work on perimeter guidance and updates to FCA Knowledge Base materials will continue into 2026.

The new regime came into force on 19 January 2026 and replaces the UK Prospectus Regulation.

2. FCA publishes good and poor practice on complex exchange traded products

On 12 January 2026, the FCA published a press release on good practice and risks in complex exchange traded products (ETPs) for retail investors. The findings relate to the FCA's multi-firm review in July 2025 into the distribution of complex ETPs, such as those using leveraged and inverse positions, which reset daily. The review assessed compliance with Consumer Duty obligations across product targeting, pricing, consumer understanding and outcomes monitoring.

The following five areas emerged as examples of good practice:

• Target market and distribution: firms should define target markets at a granular level using manufacturer and firm-level data, with regular reviews of distribution arrangements;
• Appropriateness testing: firms should produce robust, product-specific appropriateness tests (APTs), with high pass thresholds and meaningful frictions (such as lockout periods);
• Fair value: distributors must assess all relevant costs, not just service fees, and consider manufacturers' assessments alongside distribution costs;
• Communication and risk disclosures: firms should provide clear, tailored risk warnings beyond key information documents, with regular testing for effectiveness; and
• Outcomes monitoring and consumer support: firms must actively monitor consumer outcomes and take action where poor outcomes are identified.

The findings coincide with the FCA's Discussion Paper (DP25/3) on expanding consumer access to investments through which stakeholders can provide feedback. The discussion paper is expected to close on 6 March 2026.

Banking and Prudential

3. PRA publishes a policy statement to restate CRR requirements

On 20 January 2026, the PRA published a policy statement (PS3/26) to restate remaining Capital Requirements Regulation (CRR) provisions into the PRA Rulebook and related materials for implementation in 2027. PS3/26 completes the move of relevant CRR provisions into PRA rules and supervisory materials with limited policy change and targeted updates, including European Conference on Artificial Intelligence (ECAI) mapping, following CP13/24 and near-final PS19/25. It applies to PRA authorised banks, building societies, designated investment firms and certain holding companies, with ECAI mapping also relevant to Solvency II firms in limited contexts.

The PRA confirms no substantive change from near-final rules, with minor updates aligned to Basel 3.1 finalisation in PS1/26. Definitions of probability of default, loss given default and conversion factor now sit in the PRA Rulebook Glossary with formatting changes to ensure coherence.

The policies are expected to take effect on 1 January 2027 and firms should prepare to apply the updated PRA Rulebook and supervisory materials.

4. PRA publishes final policy statement on simplified capital regime for SDDTs

On 20 January 2026, the PRA published its final policy statement on the simplified capital regime and additional liquidity simplifications for Small Domestic Deposit Takers (SDDTs) (PS4/26). The policy was previously issued as near-final in October 2025 following consultation in CP7/24.

The regime aims to ensure SDDTs maintain adequate capital while significantly reducing regulatory complexity. The PRA made only minor amendments to the near-final rules, principally to reflect changes to related capital frameworks and to enhance clarity. For further details on the previous near-final policy statement for SDDTs, please see our previous Financial Services SpeedRead here.

The final rules came into force on 1 January 2027, except for certain provisions relating to the frequency of Internal Capital Adequacy Assessment Process (ICAAP) and Internal Liquidity Adequacy Assessment Process (ILAAP) updates, which apply from 20 January 2026.

5. PRA publishes final policy statement on Basel 3.1 implementation

On 20 January 2026, the PRA published its final policy statement (PS1/26) on implementing the Basel 3.1 capital standards, confirming a delayed implementation date of 1 January 2027. The policy follows near-final publications in PS17/23, PS9/24 and PS7/25, with adjustments to the market risk framework following CP17/25.

The rules apply to PRA-authorised banks, building societies, PRA-designated investment firms, and financial holding companies. The final package includes amendments to credit risk, operational risk, and market risk frameworks, alongside updated reporting and disclosure requirements.

The policy statement provides the following:

• the internal model approach for market risk is deferred until 1 January 2028;
• firms retain existing permissions during the interim;
• Small and Medium-sized Enterprises (SME) and infrastructure lending adjustments are introduced to prevent capital requirement increases for those exposures;
• output floor transitional factors updated to reflect revised implementation timeline; and
• final reporting taxonomy and technical standards published alongside main rulebook amendments.

The policy is expected to come into effect on 1 January 2027.

6. PRA publishes final policy statement on retiring the refined methodology to Pillar 2A

On 20 January 2026, the PRA published a policy statement (PS2/26) providing the final policy to retire the refined methodology to Pillar 2A. The final policy is unchanged from the near-final version published in October 2025 (PS18/25) and it will apply to all firms, including small domestic deposit takers (SDDTs).

The policy confirmed the retirement of the refined methodology to Pillar 2A to comply with the Basel 3.1 standards. It also provides for further clarifications to the Pillar 2A approaches for: (i) interest rate risk in the banking book, and (ii) pension obligation risk.

Alongside, the PRA also published the updated supervisory statement on Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP).

The policy and supervisory statement are expected to come into effect on 1 January 2027, alongside the Basel 3.1 policy, with a rebasing exercise for Pillar 2 requirements.

7. PRA publishes letters on UK Deposit Takers Supervision and on International Bank Supervision

On 15 January 2026, the PRA published a letter from Charlotte Gerken and Laura Wallis on UK Deposit Takers Supervision. Alongside, the PRA also published a letter from Rebecca Jackson and Alison Scott on International Banks Supervision. Both letters provide the PRA's supervisory priorities for 2026, outlining its sector-specific priorities for the coming year to all banks, building societies, insurers and other PRA-regulated firms.

The letters identify the following five priorities:

• Strategic risk management: firms must proactively identify and manage counterparty credit risk, particularly exposures to non-bank financial institutions and private markets;
• Operational resilience: firms should integrate operational resilience into decision-making, with robust cyber capabilities and testing of third-party contingency plans;
• Financial resilience: firms must prepare for Basel 3.1 implementation on 1 January 2027, including updating Internal Capital Adequacy Assessment Processes;
• Data quality: firms are expected to improve data governance and ensure timely, accurate regulatory submissions, supported by the Future Banking Data programme; and
• Supervisory approach: the PRA will transition firms to a two-year Periodic Summary Meeting cycle to reduce regulatory burden.

Firms are expected to prepare for the implementation of Basel 3.1 and the Strong and Simple Framework from 1 January 2027.

Senior Managers and Governance

No updates.

Financial Crime

No updates.

Retail Services

8. FCA publishes consultation paper on retail banking business models

On 14 January 2026, the FCA published a consultation paper (CP26/3) on retail banking business models (R2B2), proposing enhanced data collection and analysis to assess firms’ profitability drivers, cross-subsidies and resilience. The FCA seeks views on formalising a yearly R2B2 return to maintain a current view of retail banking models and reduce burdens from unpredictable ad hoc requests used since 2018.

Key points include the following:

• The reporting requirements would apply to banks and building societies offering retail banking services that have more than 200,000 UK customer relationships and £5m revenue over the last three accounting periods, capturing around 33 firms.
• The return would comprise a core financial data request and an off-the-shelf document request.
• The return, in the case of groups, should be aggregated and, in all cases, would be due annually by 30 November.

The deadline for feedback on the proposals is 4 March 2026. The FCA aims to publish a final policy statement and response to feedback later in 2026. Firms would submit the first return in November 2026.

Digital Finance and Fintech

9. FCA publishes consultation paper on application of the FCA Handbook for regulated cryptoasset activities

On 23 January 2026, the FCA published a consultation paper on the application of the FCA Handbook for regulated cryptoasset activities.

This consultation reflects how FCA Handbook requirements apply to cryptoasset firms, and follows feedback from previous consultations, including CP25/25 (Application of the FCA Handbook for Regulated Cryptoasset Activities – part 1).

The consultation covers FCA requirements for the Consumer Duty, redress and dispute resolution, conduct of business, credit for crypto purchases, training and competence, Senior Managers and Certification Regime, regulatory reporting (SUP 16), cryptoasset safeguarding, retail collateral treatment in cryptoasset borrowing, and location policy guidance.

The consultation closes on 12 March 2026. Following consideration of all consultations published as part of the FCA's Crypto Roadmap, it will publish final rules and guidance in due course.

10. FCA publishes consultation paper on the application of Consumer Duty for cryptoasset firms

On 23 January 2026, the FCA published a consultation paper with proposed guidance on the Consumer Duty for cryptoasset firms. The guidance supplements existing Consumer Duty materials (FG22/5) and addresses sector-specific issues such as overseas manufacturers, distribution structures, and unfamiliar terminology.

The consultation is expected to close on 12 March 2026. The gateway for firms to apply for cryptoasset permissions is expected in September 2026.

11. FCA publishes letter on process to establish a future entity for open banking

On 16 January 2026, the FCA published a letter to trade associations setting out the process to create a future entity (FE) for open banking in the UK.

The FE is intended to be the primary standard-setting body for application programming interfaces (APIs) in the UK. The FCA letter outlines expectations for how industry should organise to propose and deliver the new entity’s design, governance and funding.

In addition, the FCA letter asks industry participants to engage with any organisations interested in taking on the FE role (two of which are named in the letter) and to decide which option they believe should lead the next phase of work. To assist industry in coming to a view, the FCA will commission an independent consultant-led assessment of the proposals.

The FCA invites interested market participants to write to it directly or via their trade associations, but no later than 30 January 2026.

12. Treasury Committee publishes report on AI in financial services

On 22 January 2026, the Treasury Committee published a report assessing the opportunities and risks of artificial intelligence (AI) across UK financial services. This follows an inquiry launched by the Treasury Committee on 3 February 2025 to examine the opportunities and risks posed by AI for the UK financial services sector.

The report discusses stakeholder evidence received on:

• consumer risk, including monitoring work by the FCA and Bank of England, clarity on regulatory rules, and preventive measures in the form of product trials; and
• financial stability, including stress testing and the Critical Third Parties Regime.

The report's recommendations are that: (i) the FCA should provide the financial services sector with greater clarity on the application of existing rules to the use of AI; and (ii) by the end of 2026, HM Treasury must designate the major AI and cloud providers as critical third parties for the purposes of the Critical Third Parties Regime.

13. ESAs and UK regulators sign MoU on oversight of critical ICT third-party service providers under DORA

On 14 January 2026, the European Supervisory Authorities (EBA, EIOPA and ESMA) signed a Memorandum of Understanding (MoU) with the Bank of England, the PRA and the FCA. The MoU enhances cooperation between EU and UK authorities on the oversight of critical ICT third-party service providers under the Digital Operational Resilience Act (DORA).

The MoU:

• establishes clear principles and procedures for cooperation, information sharing and coordination of oversight activities between the relevant authorities responsible for EU CTPPs/UK CTPs oversight; and
• aims at enhancing third-party risk management and contributing to the overall operational resilience of the financial sector in the EU and UK through strong cross-border cooperation.

14. ESMA publishes Digital and Data Strategies to enhance EU financial markets supervision

On 13 January 2026, the European Securities and Markets Authority (ESMA) adopted a new Digital Strategy for 2026–2028 and updated its Data Strategy for 2023–2028 to support smarter regulatory reporting and technology-driven supervision of EU financial markets. The strategies aim to drive digital transformation across the European System of Financial Supervision (ESFS), reduce complexity, and promote innovation while enhancing operational efficiency.

Key objectives from the strategies include:

• Digital Strategy 2026-2028: building EU digital synergies, enhancing digital capabilities of ESMA and the ESFS, bolstering operational efficiency, and establishing a secure ecosystem.
• Data Strategy 2023-2028: flagship initiatives to streamline supervisory reporting on transaction data and funds, expanding the capacity of the ESMA Data Platform, implementing MiCA joint supervisory tools for crypto market monitoring, and finalising the development of the European Single Access Point.

By 2029, ESMA expects to converge the two strategies into one unified strategy.

ESG

15. ESMA publishes updated sustainable finance regulatory timeline

On 13 January 2026, ESMA published a regulatory timeline setting out the implementation dates and transitional provisions for key EU sustainable finance regulations, including the Sustainable Finance Disclosure Regulation (SFDR), Taxonomy Regulation (TR), Corporate Sustainability Reporting Directive (CSRD), Benchmark Regulation (BMR), European Green Bonds Regulation (EuGBR), and Environmental, Social and Governance Ratings Regulation (ESGRR).

Future key milestones include:

• Phased disclosure obligations under TR and CSRD, with Wave 1 entities already reporting, Wave 2 starting in 2028, and Wave 3 in 2029 following the two-year "Stop-the-Clock" postponement;
• EuGBR application date of 21 December 2024, with a transition period for external reviewers ending 21 June 2026; and
• ESGRR now applicable from 2 July 2026 (postponed by two years).

Other

No updates.