FCA regulatory priorities 2026: Cross-sector themes and what they mean for firms

The Consumer Duty remains the foundation of FCA supervision, explicitly referenced in every retail facing sector. The FCA expects boards to actively monitor outcomes, not processes.

Cross sector messages

• Retail sectors (banking, investments, consumer finance, mortgages, insurance, pensions) face intensified expectations around product governance, fair value, customer understanding and support throughout end to end customer journeys.
• Strengthening investment confidence: 41% of consumers with £10k+ assets still hold everything in cash, signalling a Consumer Duty linked behavioural gap
• Wholesale Markets and Wholesale Buy Side will see consultations in 2026 to clarify or narrow the application of the Duty to wholesale activities.
• Clear, jargon‑free information: under the Consumer Composite Investments (CCI) regime (April 2026), firms must simplify product information to support better risk‑reward understanding.

‍Client impact

• Outcome monitoring frameworks must be robust and evidence led including granular MI and outcomes being delivered for vulnerable customers.
• Firms in wholesale sectors should prepare to participate in the 2026 consultations but should not scale back Duty implementation prematurely.
• Multi sector firms need differentiated implementation strategies that reflect the supervisory intensity of each market.

This is the single most consistent obligation across all eight sectors. Supervisory focus includes:

• Strengthening recovery capabilities for important business services.
• Scenario testing for severe but plausible disruptions.
• Dependency mapping and oversight of third party and technology providers.
• Implementation of new operational incident and material third party reporting rules following the publication policy statement PS26/2 and finalised guidance FG26/3 and FG26/4. (PRA has also issued policy statement PS7/26 and supervisory statements SS1/26 and SS2/21.
• Embedding resilience into change management, product design and digital transformation.‍

Cross‑sector insights

• Retail banking emphasises digital era resilienceand persistent incident volumes.
• Wholesale markets focus on trading venuecontinuity and liquidity controls.
• Investments and buy side prioritise cyberresilience and concentration risk among custodians and fund service providers.
• Mortgage lenders are assessed through aliquidity and funding‑resilience lens.

Client impact

• Firms must strengthen incident reporting infrastructure and third party oversight before the new rules take effect on 18 March 2027.
• Sector specific resilience frameworks should be calibrated based on threat type: systemic (wholesale), volume (retail banking), concentration (buy side) and viability/funding (mortgages).
• If you would like summaries on operational incident reporting, then we have produced the following tailored summaries, please reach out to Nikesh Shah for a copy
  
  • Solo regulated – Standard reporting firms
  • Solo regulated – Enhanced reporting firms
  • Payment Services
  • Dual Regulated CRR firms

The regulator supports responsible innovation but expects robust guardrails:

• Clear accountability, governance and testing for AI models and data use.
• Greater scrutiny where firms deploy third party AI tools.
• Use of FCA sandboxes and the Innovation Pathways programme.
• Sector specific initiatives such as AI Live Testing and the Mills Review (consumer impacts of advanced AI).

Cross sector insights

• Insurance encouraged to trial AI in claims and underwriting.
• Investments/buy side expected to strengthen governance where AI supports execution, research or fund operations.
• Wholesale markets show low levels of understood AI model governance, a supervisory risk.
• Wholesale Buy Side faces parallel scrutiny into tokenisation, DLT models and the direct to fund dealing model.

Client impact

• AI governance frameworks should include model explainability, robust testing, and performance monitoring.
• AI touching customer journeys, pricing, underwriting, claims, debt support, advice journeys, must show clear evidence of Consumer Duty aligned good outcomes.
• Firms exploring tokenisation or algorithmic models must ensure governance keeps pace with innovation.
• Document AI related risk decisions

Across all sectors, expectations have risen significantly:

• Enhanced frameworks for AML, sanctions, fraud, scams and market abuse.
• Addressing weaknesses in risk assessments, surveillance calibration and data quality.
• Heightened attention to AI enabled fraud, deepfake risks and online harm ecosystems.
• Stronger oversight of Appointed Representatives and financial promotions.

Cross sector insights

• Wholesale Markets see the highest market abuse risks (3,806 STORs in 2025; 82% insider dealing).
• Retail Banking faces the largest consumer facing fraud risk, including APP fraud reimbursement.
• Insurance and Buy Side sectors will see FCA financial crime systems reviews in 2026.
• Mortgages continue to face application fraud, misuse of consumer data, and emerging “Freeman on the land” schemes.

Client impact

• Firms must uplift AML and fraud systems, ensure data completeness in transaction monitoring, and evidence strong governance.
• Wholesale and retail risk frameworks should be treated as separate constructs, not a single firm wide approach.
• Expect deeper scrutiny of third-party due diligence, sanctions screening, and surveillance model calibration

Access requirements are intensifying, particularly in retail sectors.

Cross sector insights

• Retail Banking faces statutory obligations under the Access to Cash sourcebook and major scrutiny of branch closure decisioning.
• Insurance must improve access for vulnerable groups, including renters and travellers with pre-existing medical conditions.
• Consumer Finance and Mortgages face intense focus on credit inclusion and affordability barriers.
• Pensions will introduce the targeted support regime (April 2026) to close the advice gap.
• Buy Side firms face scrutiny around access to private markets for retail investors.

Client impact

• Firms must demonstrate full needs assessments and foreseeable harm analysis, particularly during digital transitions.
• Access decisions must be underpinned by strong MI, customer segmentation and, where relevant, location analytics.
• Pensions providers should prepare for major support model redesign.

The FCA is reducing prescription but raising expectations of governance with the aim of cutting unnecessary burdens while supporting innovation and market competitiveness.

Sector examples

• Wholesale Markets: extensive market structure reforms, T+1 settlement, ESG ratings regime.
• Wholesale Buy Side: AIFM reform and a significant overhaul of the regulatory data model.
• Mortgages: a five chapter Mortgage Rule Review covering LTI, later life lending, and responsible lending rules.
• Insurance: reduced product specific rules and more flexible product review governance.
• Consumer Finance: Consumer Credit Act modernisation.
• Cross sector: SMCR reform in H1 2026 aimed at halving the regulatory burden.
• Consolidation of advice and disclosure rules (e.g., investment advice reform and Consumer Composite Investments regime).

Client impact

• Firms should engage with consultations early; many reforms create both opportunities and risks.
• Firms will be expected to show clearer governance, stronger MI and proactive identification of harm
• Data transformation requirements will affect asset managers, banks and intermediaries handling large regulatory data submissions.
• Mortgage lenders should prepare for significant model, governance and policy design changes across affordability, advice and later life markets.