The UK continues to recalibrate its financial regulatory framework in 2025, balancing innovation and competitiveness with consumer protection and systemic resilience.
As we’ve tracked the shifting landscape in recent weeks, a number of notable developments have emerged, spanning everything from structural reforms and market supervision to evolving conduct expectations and digital infrastructure. These include FCA developments, PRA news, HM Treasury and government initiatives, parliamentary and legislative activity, and upcoming developments.
Together, these developments illustrate how UK financial regulation is not simply responding to change, but actively reshaping itself to meet new demands. What’s emerging is a more agile, integrated, and forward-looking model of oversight, one that recognises innovation as part of the regulatory fabric, not an external force to be contained.
Major regulatory framework changes
The UK’s financial regulatory foundations are undergoing a structural reset. Recent changes signal a shift toward greater domestic control, with regulators gaining new tools and responsibilities to shape policy in line with UK-specific priorities.
Financial Services and Markets Act 2023 implementation
The Financial Services and Markets Act 2023 (FSMA) is beginning to take concrete form.
The ninth commencement regulations, published in May, will bring key provisions into force on 31 July. This includes, most notably, the repeal of the 2014 Capital Buffers and Macro-prudential Measures Regulations. In their place is a more flexible regime designed to give UK regulators greater latitude in how they manage systemic risk.
The shift signals a deliberate move away from inherited EU structures and toward a homegrown prudential framework, one more attuned to the particular conditions of the UK economy. It offers welcome discretion with heightened accountability. Decisions around capital buffers will need to be explained clearly and withstand domestic and international scrutiny. This isn’t a shift driven by algorithms or automation. It’s a policy recalibration rooted in human judgement, the kind that depends on reading real-world signals, weighing trade-offs, and responding to context machines can’t fully grasp.
Consolidation of the Payment Systems Regulator
Although announced back in March, the planned transfer of core functions from the Payment Systems Regulator (PSR) to the Financial Conduct Authority (FCA) remains one of the most consequential structural reforms currently in motion.
The consolidation aims to streamline oversight of the UK’s rapidly evolving payments sector, where responsibilities have historically been split across multiple regulators. As digital transactions, from contactless retail to embedded finance, become more pervasive, the need for joined-up supervision grows more urgent.
Bringing key PSR functions under the FCA is expected to improve regulatory coherence, speed up decision-making, and reduce overlaps in enforcement. This means a significant recalibration of roles, workflows and communication channels. The revised MoU between the FCA, Prudential Regulation Authority, Bank of England and PSR reflects this shift, formalising a more integrated approach to policymaking and supervision.
Still, this consolidation is not without risk. Differing institutional cultures and operational models could pose challenges during the transition. The FCA will have to manage the integration carefully to avoid mission creep or capacity strain. If successful, the move could offer a compelling blueprint for how regulators adapt to complexity, not by multiplying agencies, but by making smarter use of those that already exist.
Financial Conduct Authority (FCA) developments
The FCA continues to reshape its regulatory toolkit, focusing on market innovation, cultural reform, and streamlined supervision. From cryptoassets to AI, the regulator is signalling both ambition and adaptability in how it approaches emerging risks and expectations.
Cryptoassets and market innovation
Crypto regulation continues to gain definition. In early June, the FCA proposed lifting the retail ban on crypto exchange traded notes (cETNs), provided they’re admitted to a UK-recognised investment exchange.
This could be seen as a cautious softening of posture, reflecting growing maturity in crypto infrastructure.
At the same time, the FCA is consulting on rules for stablecoin issuance and custody, with comments open until 31 July. This means getting to grips with a new category of digital asset that blurs the line between payments and securities. That requires fresh thinking on risk, oversight responsibilities, and coordination with other agencies. Earlier, it also invited feedback on the overall crypto framework, which closed 13 June.
AI sandbox launch
The FCA also recently announced a new “Supercharged Sandbox” to support AI experimentation in financial services. Built in collaboration with NVIDIA, the programme is open to applicants until 11 August, and will run from 30 September to 9 January 2026. It aims to accelerate safe, responsible deployment of AI models across the sector.
Enforcement guide overhaul (ENFG)
A significant procedural shift came on 3 June with the FCA’s new Enforcement Guide (now simply ENFG), replacing over 250 pages of legacy material. Among its notable changes, the guide now outlines when enforcement investigations may be made public, enhancing transparency and predictability. It applies to all investigations launched from that date forward.
Insurance conduct reform
The FCA is also simplifying insurance conduct regulation. In May, it published CP25/12, proposing a narrower definition of “contracts of commercial or other risks” and the removal of duplicative disclosure rules. The consultation closed 2 July. If adopted, these changes would trim the rulebook and ease compliance burdens for insurers.
Non-financial misconduct consultation
Addressing culture and conduct, CP25/18 proposes amending the Code of Conduct sourcebook (COCON) to explicitly capture serious bullying, harassment and other non-financial misconduct. Released 2 July, the proposals would come into force from September 2026. This move mirrors similar expectations from international regulators, positioning conduct risk as central to firm culture.
Handbook and technical updates
The FCA launched a redesigned Handbook website on 4 July. It also issued several technical instruments in the last two months, including updates to listing rules, periodic fees, training and competence, and the new Non-Financial Misconduct Instrument 2025. Incremental changes, yes, but they continue the regulator’s push for usability and simplification.
Private market infrastructure: PISCES
The Private Intermittent Securities and Capital Exchange System (PISCES) framework came into effect in June. Designed to support intermittent trading in private markets, PISCES reflects the government’s push to deepen capital access and secondary market infrastructure for unlisted companies.
In sum, it introduces a novel trading environment that sits outside traditional exchanges, which raises new questions about disclosure standards, investor protection, and supervisory reach. FCA rules are expected soon.
Prudential Regulation Authority (PRA) news
The PRA is sharpening its focus on resilience and responsiveness, updating core elements of the prudential framework while easing the process for low-impact rule changes. Its recent actions reflect a move toward more flexible, UK-specific oversight grounded in economic stability.
Capital buffers and risk calibration
On 3 July, the Prudential Regulation Authority (PRA) published Policy Statement 8/25, updating how it sets capital buffers, which can be thought of as the extra financial cushions banks must hold to absorb shocks.
The changes, which take effect on 31 July, are closely tied to the implementation of FSMA and reflect a broader effort to align the UK’s macroprudential tools with the Bank of England’s Financial Stability strategy.
In practice, this means the PRA is refining the way it judges how much capital banks should be required to hold in different economic conditions. Rather than applying rigid rules, the new framework gives the PRA more flexibility to respond to emerging risks, whether they come from the housing market, geopolitical instability, or broader credit conditions.
This raises the stakes. With greater discretion comes the need for sharper analysis, clearer communication, and robust justification of policy choices. The new regime asks supervisors to enforce rules and actively shape them in response to the financial system’s changing contours.
Streamlined policy amendments
The PRA also recently introduced a streamlined process for low-impact regulatory changes. Designed to reduce consultation burdens on firms, the new approach will be tested with a set of minor rule amendments due later this month.
Competitiveness and growth reporting
As required under FSMA 2023, the PRA published its second annual report on secondary objectives on 26 June. The document outlines how the authority is supporting UK economic competitiveness without compromising stability.
Building societies review
In a technical consultation, the PRA has proposed withdrawing Supervisory Statement 20/15 on building societies’ treasury and lending activities. The change would take effect in January next year and is part of a broader rationalisation of legacy guidance.
HM Treasury and government initiatives
HM Treasury and allied agencies are laying the groundwork for a more open, data-driven financial system. Recent initiatives emphasise regulatory coordination, consumer protections, and cross-border alignment, and these are all aimed at modernising the UK’s financial infrastructure.
Open finance and data access
The Data (Use and Access) Act 2025 received Royal Assent, empowering the FCA to oversee open banking and laying groundwork for open finance. This marks a significant legislative step toward a more interoperable and data-driven financial system.
Contract termination rules
New rules on payment account terminations also came into force. They extend notice periods from 60 to 90 days and require detailed reasoning for closures. The reforms follow political scrutiny over de-banking and aim to bolster consumer rights.
UK–US financial regulatory dialogue
At the 11th UK–US Financial Regulatory Working Group in June, discussions covered macroeconomic outlook, regulatory cooperation, digital finance, and investment conditions. These bilateral talks continue to influence cross-border regulatory alignment, and they serve as a key forum for shaping transatlantic standards, anticipating policy shifts abroad, and ensuring that domestic reforms hold water in an increasingly interconnected financial system, particularly amid growing geopolitical and economic uncertainty.
Parliamentary and legislative activity
Parliamentary scrutiny is intensifying around areas of market growth and systemic risk. Recent inquiries and ongoing implementation efforts highlight the legislature’s role in shaping long-term regulatory direction and ensuring accountability.
House of Lords inquiry on private markets
The House of Lords Financial Services Regulation Committee launched an inquiry into the growth of private markets on 2 July. The inquiry, open for submissions until 18 September, focuses on post-2008 reforms and transparency in non-public capital markets.
Operational resilience for critical third parties (CTPs)
Implementation of the CTP regime, effective since January, continues. Designated providers of essential outsourced services must comply with new resilience obligations. While no new rules were announced in the review period, operationalising this regime remains a top supervisory focus.
Enforcement actions and penalties
The FCA has issued over £12.3 million in fines in 2025, including two high-profile cases on 30 May. Toni Fox and David Brian Price, former financial advisers involved in pension transfer services, were fined £567,584 and £465,415 respectively for providing unsuitable advice. These actions reinforce the FCA’s continued scrutiny of financial advice quality.
Upcoming developments
Several high-impact reforms are on the horizon:
- Basel 3.1 rules delayed until 2027: The new timeline gives UK regulators and banks more time to prepare for stricter global capital and risk requirements, while also allowing for tailored implementation that reflects domestic priorities.
- A new FCA five-year strategy to be launched: The upcoming strategy will set the FCA’s medium-term priorities, likely influencing everything from enforcement focus to resource allocation. Regulators will need to align operational plans accordingly.
- Further consultations on cryptoassets regulation: These will shape the UK’s long-term approach to digital assets, determining how innovation is balanced against consumer protection, market integrity, and systemic risk.
- Continued rollout of the Financial Services Growth and Competitiveness Strategy: This government-led initiative aims to boost the UK’s appeal as a global financial centre. Regulators are expected to support this ambition while maintaining high standards for oversight and stability.
UK regulators and firms alike should prepare for an increasingly nuanced regulatory landscape that prizes agility, transparency and market integrity.
Where next for UK financial regulation?
Regulators are under mounting pressure to keep pace with a rapidly –changing financial landscape – one defined by digitalisation, geopolitical uncertainty, and heightened public expectations. Speed, coordination and clarity are no longer optional; they are the baseline for effective oversight. The period covered here shows how UK regulators are beginning to internalise that shift: not just responding to change, but actively shaping it through structural reform, cultural recalibration, and more agile supervision.
What’s emerging is a regulatory model where innovation is not treated as a separate silo or experimental outpost, but embedded directly into the architecture of rulemaking and oversight. From AI to open finance, the direction is clear, even if the route remains subject to political and economic headwinds. The challenge now is to hold that course while maintaining legitimacy, coherence and public trust.
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