Financial Regulation Weekly Bulletin - 15 January 2026

GENERAL

EUROPEAN SUPERVISORY AUTHORITIES AND UK FINANCIAL AUTHORITIES

Oversight of critical ICT third-party service providers - ESAs and UK regulators sign memorandum - 14 January 2026

The European Supervisory Authorities (comprising the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority) (ESAs) have published a memorandum of understanding (MoU) with the FCA, the PRA and the Bank of England regarding the oversight of critical third parties (CTP). The MoU establishes a framework for coordinating and sharing information on the oversight of CTPs designated under the UK’s CTP regime, which stems from the Financial Services and Markets Act 2000, and critical third-party providers (CTPPs) designated under the EU’s Regulation on digital operational resilience for the financial sector ((EU) 2022/2554) (DORA).

This cooperation includes, but is not limited to, coordination where CTPPs own, or use in any way, premises located in the UK for providing services to EU financial entities, and where CTPs own, or use in any way, premises located in the EU for providing services to UK financial entities. The MoU states that this cooperation contributes to effective oversight, including by reducing duplicative oversight.

HM TREASURY

Transition to post-quantum cryptography - G7 Cyber Expert Group advances roadmap for the financial sector - 13 January 2026

HM Treasury has published a statement from the G7 Cyber Expert Group on advancing a coordinated roadmap for the transition to post-quantum cryptography in the financial sector. The roadmap, which is informative rather than prescriptive, sets out key ‘migration activities’ in support of a coordinated, timely and objective-driven transition. Financial authorities and entities are encouraged to integrate the approaches within the roadmap into their existing governance and risk management frameworks and technology strategies, and to consider prioritising migration planning based on exposure and systemic importance to contribute to collective resilience.

PRUDENTIAL REGULATION AUTHORITY AND FINANCIAL CONDUCT AUTHORITY

FSCS - PRA and FCA consult on management expenses levy limit for 2026/27 - 13 January 2026

The PRA and the FCA have published a joint consultation paper (PRA CP1/26 and FCA CP26/2) on the management expenses levy limit (MELL) for the Financial Services Compensation Scheme (FSCS) for 2026/27. The proposed MELL amounts to £113 million (an increase of £4.4 million from the 2025/26 MELL) and would apply from 1 April 2026 to 31 March 2027. The consultation closes on 10 February 2026. Final rules would be in place for the start of the FSCS’s financial year on 1 April 2026.

FINANCIAL CONDUCT AUTHORITY

Cryptoasset regulation - FCA publishes new webpages - 8 January 2026

The FCA has published new webpages setting out its approach to the new regulatory regime for cryptoassets, which is expected to come into force on 25 October 2027. The FCA seeks to support those cryptoasset firms which will be regulated by the FCA under the Financial Services and Markets Act 2000 (FSMA) for the first time, and the webpages cover: (i) FSMA and the FCA Handbook; (ii) the FCA’s minimum standards for cryptoasset firms; (iii) the FCA’s approach to authorisation, supervision and enforcement; (iv) how the FCA’s application gateway for firms that want to undertake the new cryptoasset regulated activities will operate; and (v) transitional provision for existing cryptoasset firms that are unsuccessful in securing authorisation.
 
Of particular interest, the FCA expects the application gateway to open in September 2026, subject to confirmation in due course via a direction published on the FCA’s website. 

INTERNATIONAL REGULATORY STRATEGY GROUP

AI in financial services - IRSG publishes report - 12 January 2026

The International Regulatory Strategy Group (IRSG) has published a report on emerging global approaches to AI in financial services. The IRSG finds that AI largely amplifies existing financial sector risks rather than introducing wholly new ones, and that while there is positive alignment on the high-level principles that should govern AI across jurisdictions, there is significant global divergence in how these principles are operationalised. The IRSG advocates for interoperable, principles-based supervision anchored in existing technology-neutral rules. Notably, extra-territorial impacts should be avoided when any new AI measures are contemplated.

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SECURITIES AND MARKETS

EUROPEAN SECURITIES AND MARKETS AUTHORITY

Principles for risk-based supervision - published by ESMA - 9 January 2026

The European Securities and Markets Authority (ESMA) has published a document containing its principles for risk-based supervision. These aim to support a common EU-wide supervisory culture, providing a structured framework for identifying, assessing, prioritising and addressing risks. The principles apply to all national competent authorities and ESMA when it carries out direct supervision, are non-binding, and are intended to complement pre-existing frameworks.

Digital and data strategies - published by ESMA - 13 January 2026

The European Securities and Markets Authority (ESMA) has published its Digital Strategy for 2026-2028 and updated its Data Strategy for 2023-2028. In an associated press release, ESMA explains that these two strategies reflect ESMA’s commitment to smarter regulatory reporting and technology-driven supervision, seeking to promote synergies and innovation while reducing unnecessary complexity. ESMA expects the two strategies to converge into one unified strategy by 2029.

Sustainability-related claims relating to ESG strategies - ESMA publishes thematic notes - 14 January 2026

The European Securities and Markets Authority (ESMA) has published a document containing thematic notes on clear, fair and not misleading sustainability-related claims relating to ESG strategies. These seek to clarify ESMA’s expectations towards market participants when making sustainability claims, and include examples of good and poor practices. Market participants should acquaint themselves with the four principles set out in the document for making sustainability claims to ensure that all claims are clear, fair and not misleading, and thereby avoid the risk of greenwashing.

HOUSE OF LORDS FINANCIAL SERVICES REGULATION COMMITTEE 

Private markets inquiry - report published by House of Lords Financial Services Regulation Committee - 9 January 2026

The House of Lords Financial Services Regulation Committee has published a report on its inquiry into the growth of private markets in the UK following the reforms introduced after the 2008 global financial crisis.
The report found, among other things, that:

• reforms introduced after the global financial crisis (particularly bank capital and liquidity regulatory requirements) have, as intended, encouraged the banking system to retreat from riskier lending, leaving certain segments of the economy, including SMEs, less well served by banks;
• banks are increasingly relying on an ‘originate to distribute’ model of lending, in which private credit plays a significant role;
• the availability of SME finance has been squeezed by a combination of changes to bank capital requirements and the fact that private credit has not entered the SME finance market. Addressing constraints on smaller and specialist banks’ ability to lend could increase the finance available to SMEs if demand, which has been subdued for some time, increases; and
• the growth in collateralised loan obligations and significant risk transfers in the UK may pose a potential risk to the UK’s financial stability. The Bank of England and the PRA should pay close attention to the development of these markets.

Finally, the Committee raised concerns that there are insufficient data to conclude whether private markets are systemic, meaning there are considerable ‘unknown unknowns’, and at HM Treasury’s apparent “passivity in the face of potential risks to the UK’s financial stability arising from the growth of private markets”.

Separately, the Committee has also published a letter dated 18 December 2025 from Lucy Rigby MP, Economic Secretary to the Treasury, which follows up on her oral evidence given to the Committee on 19 November 2025.

FINANCIAL CONDUCT AUTHORITY

Complex exchange-traded products - FCA publishes outcome of multi-firm review - 12 January 2026

The FCA has published its findings following a multi-firm review of the distribution of complex exchange-traded products (ETPs) such as those using leveraged and inverse positions, which reset daily. The FCA reviewed a sample of platform and wealth management firms of different sizes which offered complex ETPs to retail consumers on an execution-only basis. The FCA assessed how firms evaluate these products, communicate key risks and monitor outcomes under the Consumer Duty.

In short, the FCA found that some firms demonstrated detailed processes for defining target markets, assessing customer knowledge and monitoring outcomes. Others had weaker controls or limited assessments of a customer’s investment experience and knowledge. The FCA also saw unclear disclosures, making it harder for consumers to understand risks. The FCA makes a number of recommendations for firms, including that distributors should define and regularly review their target market for complex products at a granular level.

POATRs regime - FCA publishes latest edition of the Primary Market Bulletin - 12 January 2026

The FCA has published Primary Market Bulletin 61, which focuses on the new Public Offers and Admissions to Trading Regulations (POATRs) regime, which comes into force on 19 January 2026. The bulletin makes a number of confirmations relating to procedural, technical and guidance notes to prepare for implementation of the POATRs regime. The FCA also uses the bulletin to consult on proposed changes to a technical note entitled ‘Sponsors: Record Keeping Requirements’, with a response deadline of 16 February 2026. 

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INSURANCE

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITY

Strategy towards 2030 - published by EIOPA - 15 January 2026

The European Insurance and Occupational Pensions Authority (EIOPA) has published its strategy towards 2030. EIOPA has identified three strategic areas to reach these goals: (i) strengthening single market integration; (ii) enhancing market and societal resilience against risks; and (iii) ‘simpler, bolder, faster: better regulation supporting supervision’. Each strategic area is structured around actionable objectives.

PRUDENTIAL REGULATION AUTHORITY

Insurance supervision - PRA publishes letter communicating 2026 priorities - 15 January 2026

The PRA has published a letter addressed to the CEOs of insurance firms communicating its 2026 supervisory priorities for the UK insurance sector. The letter covers life, general and cross-sectoral priorities. In particular, the PRA highlights continued pressures in the bulk purchase annuity market, a softening underwriting cycle in the general insurance market, and a need for firms to continue to invest in their operational resilience.
 
The PRA also flags that in 2026, it plans to commence the transition to a two-year Periodic Summary Meeting (PSM) cycle for all firms which remain on an annual cycle. The PRA states that reducing the number of PSMs, and associated communications and processes, will also reduce the regulatory burden on firms, in line with its secondary objective to facilitate UK competitiveness and growth.

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