Your guide to this week in regulation

This week, regulators are taking coordinated steps to tighten expectations around resilience and third‑party risk.

Our main item covers consolidated measures from the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA) and the Bank of England on operational incidents and material third‑party reporting. These proposals aim to bring better industry alignment, but more importantly, to strengthen firms’ resilience to better protect consumers and markets.

Elsewhere, we also highlight the FCA’s view of how technology will change pensions engagement as dashboards aim bring pension pots into one place; and there’s a reminder for firms to carry out proper due diligence when dealing with so-called ‘Annex 1’ firms that sit outside of the FCA’s full rulebook. In our last item this week, the FCA seeks views by 17 April 2026 on how its rules affect SMEs’ access to finance.

Finally, it’s worth signposting that on Monday 30 March, shortly after markets close, the FCA will publish its next steps on motor finance redress.  

Operational incident and third‑party reporting

The FCA, PRA and Bank of England have released a coordinated package of final rules and guidance covering operational incident reporting and material third‑party reporting. These include PS7/26, SS1/26 and updates to SS2/21 from the PRA and PS26/2, FG26/3 and FG26/4 from the FCA.  Following previous consultation, the regulators have aligned definitions, thresholds and timelines to create a single reporting regime for most firms, reducing duplication and improving consistency. Firms will submit reports through a unified portal, using a standardised short-form in most cases. Enhanced firms will follow a more detailed process.

FG26/3 and SS1/26 explain how firms should assess, categorise and report operational incidents, including when to use standard or enhanced reports. It clarifies the definition of an operational incident and sets out thresholds for reporting.

FG26/4 and updates to SS2/21 expand requirements for material third‑party arrangements, covering both outsourcing and non‑outsourcing relationships. It introduces a structured notification template and annual third‑party register reporting to improve visibility of systemic third‑party risks.

Firms can now operate with clearer regulatory expectations under a consolidated regime and a single reporting structure.  Firms should review and update their incident reporting processes, assess material third‑party arrangements, and prepare to use the new templates and meet new notification timescales ahead of implementation on 18 March 2027.

Read more on PS26/2: Operational Incident and Third Party Reporting

Read more on FG26/3: Operational Incident Reporting

Read more on FG26/4: Material Third Party Reporting

Read more on new incident and third-party rules to bolster resilience

Technology reshapes pensions engagement

Technology is set to change how consumers see and manage their pensions. The FCA highlights that dashboards will soon allow millions to view their pension savings in one place for the first time. This visibility is expected to increase engagement and prompt more consumers to update details, reconnect with lost pots, consider consolidation and rethink retirement plans. With many over 45 lacking a clear retirement strategy, the FCA sees a major opportunity to improve outcomes through better information, simpler advice routes and well-designed defaults.

Firms should prepare for increased contact from savers and ensure customer journeys can support more active decision making. The FCA stresses that greater engagement brings risks as well as benefits. The FCA urges firms to adopt ‘risk-aware’ approach is responding to these changes. The regulator also points to rapid growth in digital tools and AI that help people model scenarios, plan contributions and explore investment choices at lower cost.

The FCA encourages firms to use its Innovation Pathways and testing environments to prepare for rising consumer expectations, and to invest in strong data foundations and digital capability to stay competitive.

Read more on how technology is changing the pensions conversation

Risks of dealing with unregulated lenders

The FCA has reminded regulated firms to carry out thorough checks when dealing with unregulated lenders and other Annex 1 firms. These entities, which include safe‑custody providers, money brokers and financial leasing companies, are only registered with the FCA for anti‑money laundering purposes. They are not authorised under the Financial Services and Markets Act and do not fall under the FCA’s wider rulebook. Consumers using these firms cannot access the Financial Ombudsman Service if something goes wrong.

The FCA expects regulated firms to meet their legislative duties by confirming a firm’s registration status directly, performing independent checks on information provided and assessing risks highlighted in the 2025 National Risk Assessment. The FCA wrote to CEOs in 2024 to raise concerns about weak anti‑money laundering standards and followed up with 300 firms in late 2025. It has also seen cases of consumers being encouraged to set up limited companies to obtain unregulated bridging finance.

Firms should review existing relationships with Annex 1 businesses, strengthen due‑diligence checks and ensure front‑line teams understand the limits of consumer protections when referring customers to these lenders

Read more on FCA highlighting risks when dealing with unregulated lenders

SME finance regulation review 

The FCA has opened a call for input on how its regulation affects small and medium-sized enterprises (SMEs’) access to finance. SMEs account for most private sector employment and half of turnover in the UK, however, demand for external finance remains low compared with other countries. The regulator is aiming to understand where its rules may add cost or perceived risk for lenders and where regulation could better support growth, including through innovation and industry collaboration. The regulator will look across debt, equity, hybrid and alternative finance, and consider sector specific challenges for high growth areas such as clean energy, life sciences and digital industries. The FCA has also commissioned research into how international markets address SME finance.

The FCA will engage with SME bodies in March and hold a stakeholder roundtable in May. It invites SMEs, lenders and distributors to share their experiences by 17 April 2026. This is a chance for firms to highlight regulatory barriers and propose practical changes that could shape future rule reviews and wider policy work.

Read more to understand how regulation can help SMEs access finance