Your guide to this week in regulation

This week, we see familiar themes in the Prudential Regulation Authority’s (PRA’s) latest business plan which reiterates its commitment to proportionate regulation. This follows and aligns with the publication earlier this year of its annual supervisory priorities letters for banks, building societies and insurers.

Next up, the Financial Conduct Authority (FCA) reflects on the evolving impact of Consumer Duty which remains central to its supervisory approach.

Elsewhere this week, the critical subtleties of forthcoming UK crypto regulation are in the spotlight through the consultation of perimeter guidance. And we conclude this week with recent revisions to the UK Short Selling Regime and the Financial Policy Committee’s (FPC’s) review of UK bank capital.

PRA sets priorities for 2026/27

The PRA has published its Business Plan for 2026/27. It confirms a continued focus on safety and soundness, policyholder protection and a more proportionate, efficient approach to regulation. The PRA will balance high prudential standards with its secondary objective to support UK competitiveness and growth.

For banks, priorities include embedding Basel 3.1, modernising the liquidity risk framework and simplifying requirements for small domestic deposit takers. The PRA will also streamline supervisory engagement by moving periodic summary meetings to a two year cycle for all firms.

For insurers, the PRA will focus on funded reinsurance, alternative life capital, Solvency UK reforms and preparations for the Dynamic General Insurance Stress Test. It will also consult on a new captive insurer regime to support growth.

Operational resilience, cyber risk, third party dependencies and climate risk remain cross-sector priorities. Firms should review how these plans affect their capital, liquidity, reporting and governance arrangements, and prepare early for consultations and supervisory engagement during 2026/27.

Read more on the Prudential Regulation Authority Business Plan 2026/27

FCA reviews year two Consumer Duty reports

The FCA has published its review of year two Consumer Duty board reports, ahead of the third reporting cycle. The regulator says the Duty is starting to change behaviour but expects firms to strengthen their approach to outcome‑focused reporting.

Year two reports show progress in several areas:

• Boards now formally review and approve Consumer Duty reports, often retaining a Board Champion to support accountability
• Action plans are clearer, with named owners, timelines and progress tracking
• Firms use broader data, including trend analysis and root cause insights, and show better identification of outcomes for vulnerable customers

However, the FCA highlights gaps where firms should focus next:

• Some reports present data without clearly linking it to customer outcomes or emerging risks
• Oversight of outcomes delivered by distributors and outsourced providers remains weak. The FCA plans to consult on changes to distribution chain rules and guidance
• Board challenge is not always well evidenced in minutes and papers

Firms should use these findings now to strengthen year three reports, with sharper analysis, clearer governance evidence and stronger distribution oversight.

Read more on year two Consumer Duty Board Reports

FCA consults on future crypto guidance

The FCA has published a consultation on draft guidance to clarify how the UK’s future cryptoasset regulatory regime will apply in practice. Cryptoassets will fall into regulation from October 2027, with final rules due this summer and an authorisation gateway opening on 30 September 2026.

The guidance explains how the FCA interprets which activities will be regulated, including:

• Issuing qualifying stablecoins
• Operating cryptoasset trading platforms
• Dealing in and arranging qualifying cryptoassets
• Safeguarding and staking cryptoassets

This will be of interest to firms assessing whether they fall inside the regulatory perimeter and how the new regime may affect their business models. The FCA says the guidance aims to support an open, sustainable and competitive crypto market that consumers can trust. The consultation closes on 3 June 2026.

Read more on FCA consults on guidance on UK’s future crypto regime  

FCA simplifies UK short selling

The FCA has finalised a clearer and simpler UK short selling regime. The new rules aim to cut reporting burdens for firms while keeping effective regulatory oversight. They follow legislative changes under the Government’s repeal and replace programme.

Key points for firms:

• The FCA will publish aggregated data on the overall size of net short positions in each company, rather than naming individual short sellers
• Firms gain a more workable reporting timetable, with more time to calculate and submit short position reports
• Market maker exemption rules are simplified. Eligible firms will move from multiple notifications to an annual confirmation
• The FCA’s emergency intervention powers remain unchanged and apply only in exceptional market conditions

The changes seek to reduce administrative effort without weakening market oversight. The FCA describes this as a more proportionate and practical approach that supports fair and orderly markets.

Read more on FCA introduces clearer and simpler short selling rules

FPC reviews UK bank capital

The Bank of England has published a summary of stakeholder views gathered during the FPC’s review of UK bank capital. The discussion focused on whether current capital requirements remain proportionate, resilient and supportive of the real economy.

Key points for firms include:

• There were diverging views on the FPC’s decision to lower its system wide Tier 1 capital benchmark to 13 percent in December 2025. While some stakeholders favour maintaining higher capital given geopolitical and macroeconomic risks, others argue banks could operate safely with less capital, based on recent stress test results
• Participants had an ongoing concern about buffer usability. Boards, investors and rating agencies still discourage firms from using buffers in stress, limiting their practical value
• There was a mixed views on the leverage ratio. Some see it as overly constraining capital allocation, while others view it as an essential backstop given imperfect risk modelling

The evidence will inform the FPC’s next steps, with a further update promised in the July 2026 Financial Stability Report.

Read more on FPC review of UK bank capital