Your guide to this week in regulation

For the first time, three regulators will now jointly oversee those institutions that could pose single points of disruption or failure to the UK financial sector. As part of the UK Government’s targeted and proportionate approach, the names of the first four designated cloud and technology providers will be of no surprise, and yet this marks a major step in strengthening the resilience of the industry, alongside other more established regulatory frameworks.

Meanwhile, this week brings further insights into the application of the Consumer Duty including for smaller firms, with shortcomings in third-party oversight being a common feature.

Elsewhere, as the Financial Conduct Authority (FCA) publishes its Annual Report and Accounts, we highlight its scrutiny of illegal finfluencer promotions and market abuse as part of the first year of its 5-year strategy.

We conclude this week with the Prudential Regulation Authority’s (PRA) moves to make capital buffers more usable in stress, and the FCA proposes a major streamlining of its rules for asset managers, expecting to bring annual savings to the industry of £128m.

Regulators begin overseeing critical third parties

The Bank of England, the PRA and the FCA start overseeing four critical third parties (CTPs) from Monday 13 July 2026, following designation by HM Treasury.

CTPs are technology and service providers whose services underpin the UK financial system. Many firms rely on the same providers, so disruption or failure could affect several firms or markets at once. The regulators will jointly oversee the resilience of the critical services these providers supply, working with the CTPs to reduce the risk of disruption spreading across the financial sector. This regime sits alongside, rather than replaces, existing outsourcing and operational resilience rules.

Firms remain responsible for their own third-party arrangements, including due diligence, risk management and contingency planning.

Read more on UK financial regulators overseeing critical third parties

FCA reviews products and services under Consumer Duty

The FCA has published findings from its review of how firms design, monitor and distribute products and services under the Consumer Duty. The review looked at three areas: product design from the outset, ongoing review of products, and oversight of outcomes where products are sold through third parties.

These findings are based on a qualitative survey of 38 firms from across banking, insurance, payments/e-money, asset management, consumer investments, funeral plans, and consumer finance, including a reasonable coverage of small, medium and large firms with a variety of business models and risk profiles. 

The FCA found encouraging progress, with many firms strengthening product governance and using data such as complaints and behavioural indicators to spot problems earlier. Good practice examples included:

• a firm supplying mini fridges for customers to store medication under an appliance insurance policy
• a caregiver debit card that lets carers buy essentials for dependants without needing access to the dependant's own card and PIN, and
• clearer app information that cut ATM complaints by 45% in three months.

However, some firms still rely on broad target markets and have limited visibility over how third parties distribute their products, leaving gaps in oversight.

Read more on why product design matters to consumers

Read more from FCA on their findings into approaches to products and services 

FCA cracks down on finfluencers and market abuse

The FCA secured 17 criminal convictions, issued £129m in fines and returned £82m to consumers in the first year of its five-year strategy, according to its Annual Report and Accounts 2025/26. Two individuals received a combined 11 years in prison for insider dealing and money laundering.

The FCA also led a coordinated crackdown on illegal finfluencer promotions with nine international regulators, resulting in three arrests and 650 social media takedown requests. It fined firms around £14.4m for transaction reporting failures and issued a £42m fine to Barclays for anti-money laundering failures. The number of customers removed as money mules rose by 4.4%, reaching 222,173 across 35 firms.

Alongside enforcement, the FCA delivered an estimated £5.6bn in benefits to consumers, firms and the wider economy, and confirmed nearly 50 pro-growth measures, including support for AI live testing and a new scale-up unit for growing firms.

Read more on the FCA's first year of its new strategy

PRA eases release of capital buffers

The PRA has clarified that it could release the other systemically important institution (O-SII) buffer in the event of systemic stress, supporting a wider Financial Policy Committee (FPC) vision for a simpler capital framework.

The PRA will use its existing powers to vary O-SII buffer rates, including setting them to zero, working with the FPC. Releasing the buffer would lower the point at which automatic distribution restrictions apply during stress. The PRA would also set an indicative period during which no increase is expected, so banks can put released capital to use.

The aim is to let banks absorb losses in a downturn without cutting lending to creditworthy households and businesses, an action that can deepen an economic shock. The PRA plans to consult in the second half of 2026 on updated policy for the O-SII buffer, including guidance on how quickly banks would need to rebuild capital after release.

Read more on enhancing the usability and releasability of capital buffers

Simpler rulebook for asset managers

The FCA has proposed reforms to asset manager reporting and rules that it expects will save the industry £128m a year. Most of the savings are expected to come from simpler Fund Reporting for Asset Management Entities (FRAME) requirements, replacing the current patchwork of fund reporting rules.

The FCA also proposes to modernise rules for alternative investment fund managers, which currently date from 2013, and to simplify remuneration rules by replacing overlapping codes with a single, more proportionate framework. Under the proposals, firms would be classified by net asset value rather than assets under management, with new thresholds for small, medium and large managers.

The FCA says the changes would keep clear standards, particularly for firms serving retail clients, while easing the burden on smaller managers. The consultation on fund reporting closes on 22 September 2026, with final rules expected in the first half of 2027 and full implementation by 2028.

Read more on the streamlined rulebook for asset managers