Your guide to this week in regulation

Technical

05 Oct 2026 6 min read

Welcome to our weekly round-up for UK financial services regulation. Paul Staples summarises the key announcements and developments. Be sure to subscribe to receive our updates in your inbox every week.

This week, we lead with the Financial Conduct Authority’s (FCA’s) final report on pure protection. It finds the market serves existing policyholders well, and yet most adults hold no cover. The FCA will tackle this gap through partners and existing Consumer Duty expectations rather than new rules, which matters for any firm serving customers with lower financial resilience.

Next, the FCA’s sustained action against those contracts for difference (CFD) firms that inappropriately use UK authorisation highlights its laser focus on ensuring consumers understand which jurisdictional protections apply.

Elsewhere, the Bank of England’s Financial Policy Committee (FPC) judges that the risk of interconnected vulnerabilities crystallising has risen, with private credit under scrutiny in both the UK and the EU. And, a recent Bank of England speech underlines the distinctions in resolution between banks of varying sizes.

We conclude this week with latest developments in tokenisation as UK and EU regulators look to support wholesale markets to harness the benefits with effective, supporting regulation.

Closing the protection gap

The FCA has published the final report of its market study into how pure protection products, such as life insurance, critical illness cover and income protection, are sold to retail customers. It concluded that the market serves existing policyholders well, with high claims acceptance rates. However, 58% of adults hold no protection product and 59% of them have never thought about their needs.

Renters, the self-employed, gig economy workers, lower-income households and people with pre-existing medical conditions are most likely to go without cover. The FCA intends to work through partners and existing frameworks without the need for new rules. For example, the Money and Pensions Service will add prompts at key life events, the Protection Distributors Group will lead an awareness campaign and the Association of Mortgage Intermediaries will support advisers. The FCA is not proposing a ban on so-called 'loaded premiums'.

The report reminds firms of their Consumer Duty and product governance duties and sets out good practice on fair value assessments. Expressions of interest in a planned TechSprint close on 13 November 2026.

Misuse of UK authorisation

The FCA has confirmed that 21 contracts for difference (CFD) firms have closed since 2025 following its supervisory work, and three more are cancelling their permissions. These firms did little UK business but used their UK permission to lend credibility to associated overseas businesses.

As a result, consumers could wrongly assume that a UK-regulated firm stood behind the service and that UK protections applied. The FCA’s interventions ranged from trading restrictions and independent business reviews to enforcement investigations into the two most serious cases. The action builds on the FCA’s 2025 warning that investors redirected offshore risked losing UK protections, and also on the restrictions on selling these products to retail customers in place since 2019.

Groups with overseas entities in any sector can use this as a prompt to check that marketing, branding and customer journeys make clear which entity a customer is dealing with and which protections apply.

Financial stability risks rise

The Financial Policy Committee (FPC) has said that the likelihood of interconnected vulnerabilities crystallising has risen since July 2026. Renewed Middle East conflict has lifted energy prices and gilt yields, the latter to levels last seen in 2008, while debt raised to fund artificial intelligence keeps growing fast. The FPC has held the countercyclical capital buffer at 2% and agreed to proceed with leverage ratio reforms, on which the Bank of England expects to consult in early 2027.

Private credit is a shared concern. The FPC said parts of this market remain vulnerable to tighter financing conditions and pointed to the Bank of England’s private markets exploratory scenario exercise. In the EU, the European Commission has asked the three European Supervisory Authorities to map banks’ and non-banks’ private credit exposures, reporting gaps and retail participation, with feedback due by March 2027. Those authorities have also named private credit as a key vulnerability.

Resolving smaller UK banks

Ruth Smith of the Bank of England has set out how the Bank plans for the failure of small and mid-tier banks, while the largest banks plan for bail-in.

Mid-tier banks, typically with balance sheets of £25 billion to £40 billion, are usually set a transfer strategy, to a private buyer or a temporary Bank-owned bridge bank. For most banks below £25 billion, the simplest exit is a solvent wind-down led by directors, with the Bank Insolvency Procedure and a rapid payout to covered depositors as the fallback.

The 2023 failure of Silicon Valley Bank UK (SVB UK) showed customers relied on it for payments as well as deposits. The Bank can now use the recapitalisation payment mechanism, introduced by the Bank Resolution (Recapitalisation) Act 2025, to fund some transfer costs upfront and recover them afterwards through a Financial Services Compensation Scheme (FSCS) levy on industry, not public funds.

Read alongside the Bank’s April guide to transfer resolution, this speech offers smaller banks and building societies a benchmark for testing their own exit plans.

Tokenised markets move to adoption

Nikhil Rathi, FCA chief executive, has called for UK wholesale markets to move from testing tokenisation to adopting it. Speaking on 22 September, he said the 120-plus responses to the joint FCA and Bank of England call for input showed firms want speed, citing ‘pilot fatigue’, and see the clearest gains in post-trade including collateral efficiency.

The FCA and the Bank of England will publish a joint tokenisation roadmap, and the FCA intends to consult on safeguarding rules for tokenised investment assets so that ownership stays clear. Rathi also raised questions on how continuous, round-the-clock trading will affect disclosure, market abuse monitoring and oversight.

Meanwhile, in the EU, the European Central Bank launched a platform, Pontes, on 21 September 2026, allowing for wholesale tokenised transactions to settle in central bank money, with full implementation expected by 2028.

Authors

Paul Staples
I’m an experienced regulatory consultant working in our financial services advisory team. I provide practical and pragmatic advice to a range of firms, supporting them in their regulatory engagements and interventions. View Profile

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