New Year, new regulatory focus – what’s next in 2026?

As the UK financial ecosystem continues to evolve rapidly, 2026 is shaping up to be a year of significant regulatory focus and transformation. Building on the priorities and shifts seen in 2025, regulators are sharply focused on culture, innovation, financial crime, consumer outcomes and resilience – all against a backdrop of economic uncertainty and a government push for competitiveness.

Looking Back: The 2025 Regulatory Landscape

A shift in regulatory philosophy
2025 saw UK regulators — particularly the FCA — signal a change in approach. The FCA’s leadership emphasised moving away from highly prescriptive rules towards a more principles-based, outcome-focused regime, concentrating enforcement on harms with the greatest potential impact aligned to strategic priorities, encouraging a more co-operative relationship with firms, and prioritising broader market policy changes. Policy development has moved faster and proposals for change have been bolder.
Risk culture and governance expectations increased
Regulators pressed firms to deepen risk culture and governance frameworks. Boards and senior leadership were expected to play a more active role in overseeing complex risks in an outcome-based regulatory regime to manage evolving risks, deliver against regulatory expectations and be ready to implement policy changes.
Consumer-centric regulation intensified
The FCA reinforced further its expectations of firms to embed the Consumer Duty, signalling more scrutiny on fair value, customer outcomes, and consumer understanding, including how products are designed and delivered.
Financial crime crackdown
FCA stepped up its focus on financial crime with an increase of 164% in financial crime related cases from 2021-25. Enforcement Investigations are speeding up (more under 12 months), individual prohibitions and voluntary actions (e.g. VREQs) are on the increase and financial penalties significantly increased in number (more than double) and value (more than 4 times 23/24). A clear message reinforcing the prioritised focus on financial crime and the regulator’s expectations of firms.
Non-financial misconduct rose up the agenda
While regulatory proposals on broader conduct were debated, the FCA announced a substantive extension of rules for serious bullying, harassment and discrimination beyond just banks, applying to tens of thousands of firms from September 2026.
Operational and third-party resilience came into sharper focus
New rules aimed at strengthening operational resilience — especially around critical third-party providers — were introduced, reflecting concerns about systemic disruption from cyber-events or service failures.
Regulatory cost and competitiveness debates intensified
Amid growing political pressure to cut red tape and boost economic growth, regulators continued to debate risk appetite and competitiveness goals. The FCA continues to face a delicate challenge: balancing strong consumer protection with its secondary mandate to promote international competitiveness and growth.

What to Expect in 2026: Key Themes and Practical Implications

With priority policy development moving faster and outcomes focused regulation here to stay, the challenge for firms will be to remain accountable for keeping pace with the change and staying on top of managing their evolving risks while continuing to deliver on the expected regulatory outcomes.

Regulatory Philosophy: Smarter, proportionate supervision

Regulators will continue to emphasise a “smarter, purposeful and proportionate” approach using technology, data and outcome-focussed supervision to pinpoint heightened risk and outliers in firms, products and markets.

What it means for firms:

Firms must know their data. Expect questions and engagement on firm, product and market data through greater use of technology and data analytics in supervision.
Invest in robust outcomes-based monitoring and metrics management demonstrating how risk is actively managed and consumers are protected (customer outcomes, insights and actionable change evidencing continuous improvement) – rather than checklist compliance.
Ongoing engagement on risk-prioritised initiatives and market changing policy initiatives such as the pension reforms, stablecoins regulation and modernisation of the mortgage market.

Culture, Conduct and Behavioural Standards

The extension of non-financial misconduct reporting requirements to most regulated firms will become effective in late 2026, reinforcing the importance of a healthy and inclusive culture.

What it means for firms:

Enhance internal reporting and governance mechanisms.
Stronger HR, compliance, and risk functions to capture, assess and escalate misconduct.
Firms must integrate conduct risk into broader risk management frameworks.

Consumer Duty Deepens and Broadens

The FCA’s continued focus on embedding and enforcing the Consumer Duty means firms must demonstrate a proactive, culture-driven approach that delivers genuine customer outcomes.

What it means for firms:

Strengthen governance around product design, distribution and customer outcomes
Enhance monitoring and MI on customer outcomes and fair value.
Vulnerable customer outcomes separately evidenced
Use root cause analysis and continuous improvement cycles.

Financial Crime and AML Enforcement Intensifies

Financial crime remains a persistent threat. Regulator priorities confirm heightened commitments to tackling fraud, AML and sanctions evasion through better use of data for detection and deeper relationships with key partners. The enforcement deterrent will remain strong.

What it means for firms:

More frequent, granular regulatory engagement on financial crime controls.
Lessons learned from recent enforcement cases applied in practice.
Horizon scanning on the threat of evolving financial crime risks
Investment in technology to automate AML, KYC and transaction surveillance will be critical.

Operational and Cyber Resilience Remains Central

2026 will see continued supervisory intensity around operational and third-party resilience. The PRA and FCA will press firms on their resilience standards and incident reporting; and cross-market resilience exercises and scenario testing will become more common.

What it means for firms:

Expect deeper scrutiny of outsourcing arrangements, third-party risk frameworks, and technology-risk management. Firms should prioritise Board visibility into resilience metrics and incident response capabilities.

Crypto Regulation and Digital Finance Evolution

Expect progress on the formal regulation of crypto and digital asset markets – balancing innovation with consumer protection. Draft frameworks have been circulated, with final rules anticipated in 2026. Client money help by Payment Services (PS) and the Electronic Money (EM) firms will be subject to additional protection when the CASS rules come into effect in May 2026.

Firms need to prepare in good time for the regulatory changes ahead – a new regulatory regime for crypto and the CASS15 rule for PS and EM firms.

Regulatory Reform and Policy

With political and parliamentary scrutiny on regulators’ approach to growth to continue, I expect we will see:

Further calls for regulatory simplification and reduced administrative burden.
Further debate on the shape of future markets e.g. pension reforms, modernisation of the mortgage market, reduced legal fragmentation of the credit market (CCA review).
Exploration of cross market issues such as transparency, disclosure and proportionality
Bolder policy initiatives coming to fruition – the updated redress framework (placing more emphasis on ownership of FCA rules interpretation) and future handling of mass redress events.

What it means for firms:

Firms should be ready to leverage engagement opportunities to inform policy development and demonstrate where regulatory flexibility can support growth without compromising stability or consumer protection.
Boards and governance oversight of firms should evaluate the risks, opportunities and impact the impending changes have on the business and its customers.

Financial firms that treat regulation as a core strategic enabler not merely a compliance cost will be well-placed to thrive in an increasingly complex and outcome-focussed regulatory environment. Boards, firm governance and senior managers will play a vital role in keeping pace with the changes and in reassessing risks as more flexibility is brought into the system.