Financial Services Matters - November 2025

HM Treasury regulation action plan update

On 21 October 2025, HM Treasury published an update outlining the government's progress in delivering its vision for UK regulatory system reform. Information on the initial action plan, published in March 2025, can be found in our previous article.

Important updates include:

• A new "Regulator Dashboard" will display performance against key performance indicators (KPIs) and authorisation processing times across the initial 16 key regulators. 

• A Regulators Council will be convened attended by the chief executive officers of key regulators to strengthen accountability and transparency by ensuring a regular dialogue between regulators and government ministers. 

• Independent expert performance reviews will be carried out for key regulators to help regulators tackle challenges and barriers that prevent growth.

• The Department for Business and Trade (DBT) will run a series of policy sprints across specific sectors to identify regulatory barriers that affect companies with innovative business models and high potential scale ups. It will look at regulatory mechanisms that may be unduly stifling innovation and healthy competition. 

• The Department for Science, Innovation and Technology (DSIT) is proposing to establish an AI Growth Lab that will bridge the gap between innovation in AI and regulation. (see the AI section below).

• The government also announced that the FCA will become responsible for all AML/CTF supervision for the legal and accountancy sectors, trust and company service providers, and potentially other sectors, such as estate agency and letting agency businesses, who are regulated under the Money Laundering Regulations (see the Economic Crime section below).

EU regulatory agenda for 2026

The European Commission, the three European Supervisory Authorities (ESAs) (EIOPA, EBA, and ESMA), and the Joint Committee of the ESAs, have published their work programmes for 2026, which set out a comprehensive and interconnected agenda.

Cross-cutting strategic themes

• Digital operational resilience. The implementation of the Digital Operational Resilience Regulation (DORA) represents a major shared priority across all ESAs. The Joint Committee will concentrate on ensuring the effective operation of the new oversight framework, conducting risk assessments to outline individual annual oversight plans for each designated critical third-party provider, and strengthening coordination between participating authorities in the pan-European Systemic Cyber Incident Coordination Framework. All three ESAs will jointly exercise their oversight mandate over critical third-party providers under DORA, marking a significant expansion of their supervisory responsibilities. 

• Artificial intelligence and digital innovation. Digital transformation features prominently across all programmes, with key priorities being the provision of support by EIOPA to supervisors in order to assist with the identification and mitigation associated with AI use, monitoring of financial innovation by the EBA, focusing specifically on AI and machine learning applications, and the development of the ESMA Data Platform and exploring AI-powered tools for supervision, including anomaly detection and market abuse prevention. 

Other key institution/authority priorities

• European Commission. The Commission announced 61 new initiatives, of which 20 have a strong simplification dimension. Financial services-related initiatives include updating the European Venture Capital Funds Regulation with legislative proposal anticipated in Q3 2026, reviewing the anti-fraud architecture with both non-legislative and legislative proposal anticipated in Q4 2026 and updating the rules on shareholder rights with legislative proposal anticipated in Q4 2026. The Commission has announced 20 evaluations and fitness checks, including evaluation of the Whistleblowing Directive and evaluation of the Shareholder Rights Directive. These evaluations are designed to ensure continuity of the simplification and burden reduction exercise. Finally, the Commission has identified 151 pending proposals where it wants the European Parliament and Council to reach agreement and has assessed whether each should be maintained, amended, or withdrawn based on adoption date, legislative progress, and alignment with EU priorities. Based on the 2026 work programme and priorities from other institutions, the Commission, Parliament, and Council will establish a joint declaration on the EU's legislative priorities for 2026 and joint conclusions on priorities for the term. 

• EBA. A key priority of the EBA is the continued development of a rulebook that contributes to an efficient, resilient, and sustainable single market. This includes continuing work on the EU banking package (CRR III and CRD VI), developing work relating to the proposed Directive on payment services and electronic money services (PSD3), the proposed Payment Services Regulation, and the proposed Regulation on a framework for financial data access (FIDA). The EBA will continue to monitor financial innovation and identify areas where a regulatory or supervisory response may be needed, including focusing on AI and machine learning and monitoring the use of decentralised finance. 

• ESMA. A key priority of ESMA is the implementation of legislation, including EMIR 3 and the development of the European Single Access Point (ESAP). Work may also need to be carried out on the implementation of the Retail Investment Strategy and a review of the Securitisation Regulation. Additionally, ESMA will continue to focus on the simplification and burden reduction (SBR) agenda. It has published a separate document on its approach and it is integrating principles of SBR in delivering new policy mandates such as EMIR 3.

Chancellor questioned on FCA and PRA growth objectives 

On 31 October 2025, the House of Lords Financial Services Regulation Committee (Committee) published a letter to Chancellor Rachel Reeves expressing concern that HM Treasury has failed to adequately address in its response to the report on the secondary growth and competitiveness objective, key findings of the report. The report and responses are covered in our July 2025 and September 2025 editions respectively.

Key findings of the report the Committee noted as not being adequately addressed include:

• Facilitating Economic Growth. The Committee notes that the Government response lacked detail in the Technical Annex of the Sector Strategy, limited evidence was provided that the creation of a retail investment culture, whilst beneficial for savers, will meaningfully increase productive investment or facilitate growth in the wider economy, and limited engagement was made with the concern included in the Report on the impact of regulatory bank capital and liquidity requirements on the ability of specialist lenders to grow.

• Growth Metrics. The Committee expresses disappointment that the Government declined to review the secondary objective metrics, arguing only two of the current measures address how financial services support wider economic growth. It has requested further detail on the Government response.

• Performance Metrics. The Committee requests in the letter, further detail in support of the Government response that 'the breadth and granularity of the UK's metrics relative to those of other jurisdictions imply that they are sufficiently rigorous'. 

• International Comparisons. The Committee challenges the reluctance of the Government to undertake international comparisons of regulatory performance, and requests, in the letter, further detail as to the reasoning for not undertaking such comparisons. 

The Committee has requested detailed answers to eleven specific questions on growth policy, regulatory alignment, metrics, and comparative analysis, reaffirming the need for greater clarity and cultural change to ensure financial regulation effectively supports the UK’s economic strategy.

FCA review of consolidation in the financial advice and wealth management sector

On 31 October 2025, the FCA published its findings of a review of a sample of groups which were acquiring independent financial advisers and established wealth management businesses, providing discretionary investment management and advice solutions to group clients.

The findings look at:

• debt structures

• organisational structure

• approach to regulatory consolidation

• treatment of group risk

• overall risk management including inherent conflicts of interest

• governance and resourcing of the group

• approach to acquisition and integration.

The FCA notes that firms should compare their arrangements or their group's arrangements against the FCA's findings to identify whether there are arrangements which might lead to increased prudential and conduct risks.  Firms should also consider where they may need to reassess their risk management arrangements or group structure to deliver resilient and well-managed growth, in line with the Consumer Duty and in the best interest of market integrity, noting that these are attributes that are likely to support a timely change in control process.

FCA publishes whistleblowing data for Q3 2025

On 24 October 2025, the FCA published the whistleblowing data for Q3 2025.

Key points to note include:

• Between July and September 2025, it received 405 new whistleblowing reports (up from 315 in Q2 2025 and 322 in Q3 2024).

• The majority of reports were submitted via the online reporting form (187). The other channels being email (122), telephone (65), letter (8), and other (23).

• 70% of whistleblowers shared identity details with the remaining choosing to remain anonymous. 

• The reports contained a total of 1,379 allegations. The top 10 categories were: 

• During the period, the FCA closed 356 reports with the following action being taken: 

Scale-up Unit for financial services firms launched

On 24 October 2025, HM Treasury announced the creation of a Scale-up Unit designed to accelerate the growth of innovative financial services firms in the UK, which will be jointly led by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).

The main aims of the unit include:

• providing dedicated resources and support for fast-growing firms as they expand

• offering expert, bespoke guidance to help firms navigate regulatory requirements

• assisting with regulatory processes and product innovations and understanding the impact of new policy proposals

• by streamlining regulatory support, the unit enables scaling firms to expand more rapidly, develop new products, hire additional staff and attract investment. 

The unit will initially be available to a small cohort of banks, building societies and insurers on a limited basis, however, the FCA is currently exploring an extension of the support to FCA solo-regulated firms and additional details will be announced in Spring 2026. 

The FCA and PRA have published dedicated webpages which provide additional information on the unit. 

FCA review of client categorisation in corporate finance firms

On 20 October 2025, the FCA published its findings following a review of corporate finance firms' (CFFs) compliance with COBS 3 client categorisation rules and COBS 4 certification requirements.

Key findings include: 

• Categorising clients. Most CFFs conducted client categorisation assessments, but some took a superficial approach, applied invalid criteria or failed to keep supporting records. 

• Categorising corporate finance contacts. Whilst most firms conducted client categorisation assessments, the process was not always clear or rigorous. CFFs should use structured assessments and keep adequate supporting records. 

• Certifying retail investors as high net worth or sophisticated. It identified gaps in CFFs' processes for establishing the correct investor certification for contacts and flagged that firms must clearly identify the applicable financial promotion provisions. 

• Policies and procedures. Although most CFFs had documented client categorisation policies and procedures, they were not always tailored to the firm's business. 

The FCA plans to consult shortly on updating the COBS 3 client categorisation rules for all in-scope regulated firms.

Launch of concierge service for financial services firms

On 17 October 2025, HM Treasury announced the launch of a concierge service for global financial services firms.

The aim of the service is to assist global financial services firms with decisions relating to locations, navigating regulation and become familiar with the UK's business environment. 

The service is free and delivered by the Office for Investment as a partnership between HM Treasury, the FCA, the PRA and the City of London Corporation.

European Central Bank highlights importance of embracing digital change for banks

On 16 October 2025, the European Central Bank (ECB) published a speech given by Pedro Machado, ECB Supervisory Board Member, on the importance for banks of embracing digital change.

Points noted in the speech include:

• The industry shift to decentralised ecosystems based on distributed ledger technology, increasing banks' reliance on data, software and big tech platforms.

• In connection with digital strategy and execution risks, to strengthen the sustainability of their business model, banks need to define a clear, sound and effective digital strategy, based on a thorough assessment of their business environment.

• Growing dependence on digital infrastructure is increasing the vulnerability of banks to IT disruptions and downtime. Comprehensive business continuity and disaster recovery plans are essential to minimise downtime and ensure operational resilience.

• The increased reliance on third-party providers, particularly software developers and cloud service providers, also introduces risks and banks must conduct due diligence, establish clear contracts and implement robust outsourcing frameworks.

IRSG publishes global regulatory coherence dashboard

On 15 October 2025, the International Regulatory Strategy Group (IRSG), an industry-led body comprised of UK-based practitioners from within the financial and professional services industry, published a global regulatory coherence dashboard.

The dashboard maps how the global adoption and implementation of financial regulations in different markets aligns or diverges across certain priority policy areas affecting UK-based firms.

The dashboard highlights priority areas where the UK can continue to show its global leadership capabilities in partnership with global standard setters and like-minded jurisdictions in promoting regulatory coherence.

FCA provides clarity on the definition of capital for FCA investment firms

On 15 October 2025, the FCA published a policy statement on the definition of capital for investment firms under MIFIIDPRU 3.

Following consultation, all cross-references to the UK Capital Requirements Regulation will be removed from MIFIDPRU 3, and a separate framework for regulatory capital tailored to investment firms will be established.

The new framework will not change the amount of regulatory capital firm must hold and does not require alteration to the capital structures of investment firms. Rather the new framework will:

• clarify what qualifies as own funds

• reduce complexity of the rules

• remove provisions designed for banks that are not relevant to investment firms.

The new framework will be effective from 1 April 2026. 

FCA announces new open finance partnership and launch of open finance TechSprints

On 13 October 2025, the FCA announced a new partnership to accelerate the delivery of open finance and the launch of two open finance TechSprints. 

• Smart Data Accelerator. The FCA's Smart Data Accelerator will enable real uses of open finance to be tested in practice. Raidiam will provide Smart Data Accelerator participants with access to a stable testing environment that mirrors real-world conditions. Participants will be able to simulate and test data sharing arrangements, which will help them develop smart data solutions that are safe, secure and designed to benefit people and communities. 

• Open finance TechSprints. The FCA also announced The Mortgages Open Finance TechSprint; and The SME Finance TechSprint. Both will inform the FCA's regulatory approach and supporting broader Smart Data Accelerator initiatives. 

The TechSprints will launch on 17 November 2025.

Bank of England highlights importance of innovation within the financial system

On 8 October 2025, the Bank of England (BoE) published a speech by Sasha Mills, Executive Director, Financial Market Infrastructure (FMI), emphasising the importance of innovation within the UK financial system and how the BoE's approach to regulation supports responsible innovation.

Points of interest include: 

• Stablecoins and market structures: imposing holding limits to stablecoins, will allow the BoE to learn more about the impact on the cost and availability of credit. 

• New technologies and transaction execution: the speech noted that new technologies are changing the way transactions are executed and how systems interact, and standards must be established to reduce the inefficiencies, siloed liquidity and restricted interoperability that could result from the introduction and use of such new technologies. 

• Regulatory approach being taken by the BoE: it was confirmed that the BoE will concentrate on emerging risks associated with the activities of firms rather than solely the firm or individual performing the activities.

The BoE intends to publish a consultation in connection with the regulation of systemic stablecoins later in 2025.

European Commission confirms deprioritisation of Level 2 financial services acts

On 6 October 2025, the European Commission published a letter to the Anti-Money Laundering Authority (AMLA) and the European Supervisory Authorities (ESAs) setting out certain non-essential Level 2 acts relating to financial services that it is deprioritising.

Following discussion with the European Parliament, the Council of the EU and relevant ESA, the Commission consider 115 Level 2 measures to be non-essential. These are set out in the Annex to the letter and will not be adopted before 1 October 2027.

Bank of England update on digital pound development

On 23 October 2025, the Bank of England (BoE) published an update on its work to develop a digital pound.

The BoE confirms that a decision has not yet been reached on the introduction of a digital pound. The BoE confirmed that it is focused on completion of a ‘blueprint’ for the development of a digital pound. 

It intends to publish the blueprint and assessment in 2026, supported by design notes which will inform the BoE and HM Treasury's assessment of whether to proceed with further development a digital pound.

FSB and IOSCO progress reports on implementation of cryptoasset regulatory framework

On 16 October 2025, the Financial Stability Board (FSB) and the International Organisation of Securities Commissions (IOSCO) published complementary reports setting out high-level recommendations for the regulation and oversight of cryptoassets and global stablecoins (GSCs). The FSB report can be found here and the IOSCO report here.

Important recommendations include:

• Jurisdictions should focus on cryptoasset service provider (CASP) activities that give rise to financial stability risks and implement the supervisory reporting requirements that are relevant in their jurisdiction. 

• Jurisdictions that have developed or are developing regulatory frameworks for GSCs should focus on requirements for liquidity risk management, capital buffers, stress testing, user redemption, custody of and eligibility for the reserve of assets, and recovery and resolution planning (including insolvency frameworks). 

• Jurisdictions should improve data capabilities and infrastructure to be able to monitor financial stability risks within the cryptoasset market and between the cryptoasset market and traditional financial markets. 

The key areas identified in the report for continued progress include promoting greater consistency in implementation, reducing risks of regulatory arbitrage and strengthening enforcement practices.

The report findings will inform the development of a methodology for future assessments.

FCA consults on new rules to support tokenisation and tokenised funds

On 14 October 2025, the FCA published a consultation paper proposing new rules and outlining plans to support adoption of tokenisation and tokenised funds in the UK (CP25/28).

The consultation sections in chapters 2 and 3 set out proposals in relation to:

• Guidance on operating a tokenised fund under the 'Blueprint' (a model under which firms can operate a tokenised unit holder register within existing legal and regulatory frameworks).

• Rules and guidance for an alternative dealing model for both conventional and tokenised authorised funds. 

Chapter 4 contains a roadmap to advance tokenisation, which includes proposed changes to the COLL sourcebook, introducing a new "direct-to-fund" model for processing conventional and tokenised authorised funds. This model will enable tokenisation, improve efficiency and aligns with practices in other jurisdictions.

Chapter 5 is a discussion section regarding the future fund tokenisation models and how regulation might adapt going forward.

The deadline for responses in respect of chapters 2-4 is 21 November 2025, and, in connection with the chapter 5, the deadline for responses is 12 December 2025.

EU crypto update

Updated ESMA compliance tables

On 31 October 2025, ESMA published an updated compliance table relating to the guidelines for competent authorities in performing their supervisory duties regarding issuers' compliance under MiCAR.

On 29 October 2025, ESMA published an updated compliance table relating to the guidelines for reverse solicitation.

ESRB publishes report on systemic risks from cryptoassets and issues recommendation on third-country stablecoins

On 20 October 2025, the European Systemic Risk Board (ESRB) published a report on the systemic risks arising from cryptoassets and decentralised finance (DeFi).

The ESRB notes financial stability risks caused by stablecoins issued jointly by EU and third country entities, and warns that the Regulation on markets in cryptoassets ((EU) 2023/1114) (MiCA)) does not address those risks. The report also flags policy challenges in preventing widespread EU use of non-MiCA compliant stablecoins issued outside the EU. 

The report calls for formal supervisory co-operation mechanisms and group-level reporting requirements where cryptoasset products and services are offered by entities in the same group as other financial and non-financial firms.

European Banking Authority proposes amendments to Regulatory Technical Standards

On 09 October 2025, the European Banking Authority (EBA) published two opinions responding to the amendments proposed by the European Commission to its draft regulatory technical standards (RTS) on specifying the highly liquid financial instruments (HLFI) with minimal market, credit and concentration risk, and on the liquidity requirements of the reserve of assets under the Regulation 2023/1114 on markets in cryptoassets.

The EBA supports the European Commission's proposed drafting amendments. However, it believes the amendments to be inconsistent with Articles 36(1)(b) and 38(1) of MiCA, as they could introduce significant liquidity risks, weaken alignment with the banking liquidity framework, and create opportunities for regulatory arbitrage. 

The first opinion provides amendments to the final draft RTS in relation to liquidity requirements of the reserve of assets. The second opinion focuses on amendments to the draft RTS on the highly liquid financial instruments (HLFI) with minimal market risk, credit, and concentration risk. 

Draft amended RTS are included in an Annex to each opinion and have been submitted to the European Commission for endorsement. 

The European Commission intends to endorse the draft RTS, with amendments, following which the RTS will be reviewed by the European Parliament and the Council of the EU prior to publication. 

New Regulatory Technical Standards enter into force 

On 3 October 2025, the Commission Delegated Regulation (EU) 2025/1264 Commission Delegated Regulation (EU) 2025/1264 (Regulation) was published in the Official Journal of the European Union.

The Regulation sets out regulatory technical standards (RTS) specifying the minimum contents of the liquidity management policy and procedures for certain issuers of asset-referenced tokens and e-money tokens. The aim of the RTS is to ensure that issuers maintain robust liquidity frameworks capable of withstanding normal and stressed market conditions, including contingency policies.

The Regulation came into force on 23 October.

FCA and PSR publish joint response on consolidation of PSR functions

On 23 October 2025, the FCA and PSR published a joint response to HM Treasury's consultation on its proposed approach to consolidating the PSR's functions within the FCA. 

Both the FCA and PSR support the approach to the PSR functions being consolidated within the FCA, agree with the benefits identified within the consultation and are confident that the proposed consolidation will provide a coherent and holistic view of regulatory issues that affect the payments ecosystem, including both payment systems and payment services. Additionally, the response highlighted that the proposed consolidation, if implemented will avoid unnecessary duplication, complexity, or uncertainty, while retaining the scope of both regimes where possible. 

Annex A to the response includes the FCA and PSR's responses to each of the consultation questions. 

EBA publishes report on white labelling in the EU banking and payments sector

On 14 October 2025, the EBA published a report on white labelling (EBA/REP/2025/30). 

The EBA concludes that white labelling is widely used in the EU banking and payments sector to distribute a broad range of financial products and services. It highlights challenges for providers and partners, including:

• Demonstrating and ensuring compliance with the anti-money laundering (AML) and countering the financing of terrorism (CFT) framework. 

• Ensuring that partners comply fully with measures intended to conform to regulatory requirements. 

• Determining the appropriate regulatory classification for the arrangement.

The EBA intends to take forward actions in 2026 to facilitate supervisory dialogue on white labelling business models, including discussing individual case studies, focusing on the regulatory classification of the arrangements between providers and partners.

PSR consults on methodology for developing price cap on cross-border interchange fees

On 10 October 2025, the Payment Systems Regulator (PSR) published a consultation (MR22/2.8) on a methodology for developing a price cap on multilateral interchange fees (MIFs) for UK-EEA card-not-present (CNP) outbound transactions.

The decision to impose a cap follows the findings of its market review into cross-border interchange fees.

• The PSR proposes using the merchant indifference test (MIT) as a starting point.

• The PSR will decide on an appropriate cap based on the MIT and on evidence of the impact of interchange fees on issuers' incentives and on competition between methods of payment. 

The consultation focuses on the PSR's proposed methodology for identifying an appropriate level of MIF in the UK-EEA CNP outbound corridor. 

The consultation closes on 21 November 2025. 

One year on: PSR publishes data showing impact of APP reimbursement requirement on fraud victims

On 8 October 2025, the Payment Systems Regulator (PSR) published its latest reimbursement data latest reimbursement data and key findings from its APP fraud survey, marking the first anniversary of the Authorised Push Payment (APP) reimbursement requirement which came into effect on 7 October 2024.

The PSR's quarterly dashboard shows that in the first nine months following introduction of the reimbursement policy: 

• £112 million was reimbursed to victims

• reimbursement rates increased significantly to 88% of money lost to APP scams and claimed back from payment firms (up from 66% in the same period in 2023/24)

• 97% of claims were resolved within 35 days and 84% within five business days, demonstrating improved response times by firms

• Cclaim volumes decreased by approximately 15% (126,000 claims between October 2024 and June 2025, compared to October 2023 to June 2024), indicating that firms are preventing fraudulent transactions more effectively in the first instance

• the PSR survey of consumers revealed that 50% of victims who were reimbursed reported trusting their bank more, compared to around one in three of those who were not reimbursed.

The PSR has commenced an independent evaluation of the policy, with finding expected in spring 2026, to assess where improvements could be made, and is working closely with the FCA to leverage combined powers and resources to tackle APP fraud at all levels.

Commission Implementing Regulation published on reporting of charges for credit transfers and payment accounts under SEPA Regulation

On 6 October 2025, the Commission Implementing Regulation (EU) 2025/1979 Commission Implementing Regulation (EU) 2025/1979 was published, requiring payment service providers to report to their national competent authorities:

• The level of charges for regular credit transfers and instant credit transfers with breakdowns by type of transfer (national and cross-border). 

• Type of payment service users.

• Type of payment initiation channels and by party that is subject to the charge. 

The Delegated Regulation entered into force on 26 October 2025.

FCA publishes research note on open banking and open finance

On 6 October 2025, the FCA published a research note on open banking and open finance in the UK. The FCA set out its next steps relating to open banking and open finance on a webpage. These include the following:

• Tech and infrastructure research: research under the FCA's Smart Data Accelerator will assess foundational technologies like AI, blockchain and quantum computing. 

• Cross-sector and cross-border testing: the FCA will explore smart data use cases beyond financial services to unlock wider consumer and business benefits.

• Regulatory framework design and legislative implementation: the FCA will reflect on the research findings to inform the design of the long-term regulatory framework for open banking.

• Commercial variable recurring payment (VRP) services: the FCA continues to work with the industry to introduce commercial VRP services, which are expected to offer consumers greater flexibility and choice in how they make payments. 

• Open finance roadmap: the FCA will continue to engage widely with stakeholders and work closely with the government to shape and publish an open finance roadmap by March 2026.

Motor finance redress scheme update

Motor finance consultation paper published

On 7 October 2025, the FCA published a consultation paper (CP25/27) on its proposals for an industry-wide compensation scheme for motor finance customers.

Key proposals include:

• Regulated motor finance agreements taken out between 6 April 2007 and 1 November 2024 where commission was payable by the lender to the broker only will be captured by the scheme.

• Motor finance agreements will only qualify for compensation if they are unfair. 

• An agreement will be presumed to be 'unfair' if there was inadequate disclosure of discretionary commission arrangements (DCA), a high commission (where the commission is equal to or greater than 35% of the total cost of credit and 10% of the loan) and/or contractual ties that gave a lender exclusivity or a right of first refusal.

• The presumption of unfairness will be rebuttable in limited circumstances only, an example being where there is evidence of adequate disclosure of the relevant arrangement in question.

• Lenders must contact consumers who complained prior to the scheme within 3 months with all such consumers to be included in the scheme unless they opt out and for consumers who have not complained, within 6 months and all such consumers must opt in. 

• Consumers already compensated for complaints will be excluded from the scheme.

• For cases involving an undisclosed contractual tie and commission equal to, or greater than, 50% of the total cost of credit and 22.5% of the loan, customers should receive commission plus interest under the scheme. For all other cases, the FCA proposes that compensation should be calculated as the average of what the FCA estimates the customer overpaid, lost, and the commission paid plus interest.

• Lenders will deliver the scheme, rather than brokers.

The FCA also proposes to extend the deadline for firms to send a final response to motor finance complaints to 31 July 2026. This extension will not be applied to leasing arrangements as they are not covered by the scheme.

The deadline for responses in relation to the proposed extension of the complaint handling rules is 4 November 2025 and 18 November 2025 for the consultation on the proposed redress scheme.

The FCA expects to publish a policy statement and final rules by early 2026, with consumers starting to receive compensation before the end of 2026.

An analyst briefing took place on 7 October 2025 following publication of the consultation, the transcript for which can be accessed here and associated slides here.

FCA Dear CEO letter to claims management companies

On 7 October 2025, the FCA issued Dear CEO letter to claims management companies (CMCs) outlining its expectations for firms handling motor finance commission claims that may fall within the scope of its proposed compensation scheme (CP25/27). 

Key points addressed by the FCA include that CMCs must comply with CMCOB 4.3.1R by obtaining signed statements confirming customers understand they can claim independently, where a firm discovers that a customer is already represented, the firm must promptly engage with the customer and cease acting if instructed to do so, firms should familiarise themselves with the scheme's scope and avoid placing undue burdens on respondent firms, including refraining from requesting excessive information, and at all times firms should ensure compliance with the SUP 15 requirements, in particular, in relation to reporting of material breaches and prompt engagement with the FCA in relation to issues requiring investigation or remediation.

FCA Dear CEO letter to firms involved in motor finance lending and broking

On 7 October 2025, the FCA published a Dear CEO Letter sent to firms involved in motor finance lending and broking since 2007. The letter outlines the FCA's expectations in the light of its proposed compensation scheme for motor finance customers (CP25/27).

The FCA letter emphasised that firms should not wait for the outcome of its consultation, act now in relation to existing complaints and prepare for the potential introduction of a redress scheme. 

Its immediate expectations for firms include, in relation to existing complaints, that lenders and brokers should determine when they need to send final responses to their existing portfolio of leasing complaints and how they plan to handle these complaints in compliance with the 8-week complaint handling requirements.

In relation to non-leasing complaints, firms should continue gathering evidence to support the eventual resolution of the complaint. 

The FCA provides further details on the responsibilities for lenders and brokers under the compensation scheme proposed in CP25/27. 

FCA published FAQs on the proposed motor finance consumer redress scheme 

On 15 October 2025, the FCA published, in connection with its consultation on the motor finance consumer redress scheme (CP25/27), an FAQs section.

Issues covered by the FAQs include clarification regarding the approach the Financial Ombudsman Service (FOS) will apply to complaints, the communication between firms and professional representatives, and communications between firms and consumers.

The FCA intends to update the FAQs regularly as engagement with stakeholders continues.

Department for Science, Innovation and Technology announces AI Growth Lab

On 21 October 2025, the Department for Science, Innovation and Technology (DSIT) announced the launch of the AI Growth Lab (the Lab). 

The Lab will provide a controlled testing environment (known as a sandbox) for organisations to test AI products in a reduced regulatory regime for a limited period whilst being subject to strict supervision. 

DSIT has launched a call for evidence on the AI Growth Lab proposals for the Lab to help inform future regulatory strategy for AI and to gather views on which regulations should never be modified or disapplied during a pilot.

The deadline for responses to the call for views is 2 January 2026.

Bank of England's outlines approach to innovation in AI, DLT and quantum computing

On 15 October 2025, the Bank of England (BoE) published a document setting out its approach to innovation in artificial intelligence (AI), distributed ledger technology (DLT) and quantum computing. 

The BoE is working proactively to ensure that the firms it regulates, and the wider financial system, can make safe and effective use of increasingly complex forms of AI. It is keeping its approach under review given rapid innovations in AI, particularly with large language models and generative AI. 

Future AI work

• Members of the BoE's AI Consortium will explore specific challenges and risks including growing reliance on third-party providers, increased use of similar AI models that could amplify systemic vulnerabilities, and the explainability and transparency of AI models.

• The BoE intends to consider future opportunities to supplement its engagement with insights from AI experimentation and is open to exploring whether AI-specific guidance for firms could be beneficial. 

• The BoE is building out its proactive approach for surveillance of AI adoption and use to ensure it can continue to identify emerging risks.

Quantum computing

The BoE will assess the opportunities that quantum computing offers and develop its understanding of the potential opportunities and risks it poses for the financial sector.

Innovation in money and payments

The BoE also refers to its approach to innovation in money and payments, along with the National Payments Vision and the development of a new model to deliver the next generation of UK retail payments infrastructure.

DRCF call for views on Agentic AI

On 10 October 2025, the Digital Regulation Co-operation Forum (DRCF) launched a call for views on regulatory challenges to the adoption of agentic AI. The DRCF is a multi-regulatory initiative involving the ICO, the CMA, the FCA and Ofcom.

Agentic AI refers to AI systems capable of independent decision-making that manage a series of AI tasks to reach an overall goal. The call for views consists of six questions covering regulatory challenges to adopting or developing agentic AI.

The call for views closes on 6 November 2025.

DRCF report on AI and Digital Hub pilot

On 10 October 2025, the Digital Regulation Co-operation Forum (DRCF) published a report on the effectiveness of the AI and Digital Hub pilot. 

The report draws on findings from an independent evaluation conducted by the Centre for Strategy & Evaluation Services (CSES).

The CSES analysis identified several areas for improvement, including:

• implementation of a triage system to route queries by topic for faster response times

• development of tools to help organisations structure their queries between different regulatory regimes

• introduction of flexible response times to accommodate more complex queries.

FSB report on monitoring AI adoption in the financial sector

On 10 October 2025, the Financial Stability Board (FSB) published a report on approaches to monitoring the adoption of artificial intelligence (AI) and related vulnerabilities in the financial sector.

G7 Cyber Expert Group Statement on AI and cyber security

On 6 October 2025, HM Treasury published a statement from the G7 Cyber Expert Group (CEG) on AI and cyber security in the financial sector.

The CEG highlights several ways AI may influence cyber security-related risks in the financial sector:

• malicious use of AI to exploit cyber vulnerabilities

• disproportionate vulnerability of institutions lacking AI expertise to cyber security risk

• potential for a significant cyber incident at a widely used AI provider to affect multiple financial institutions.

Cyber risk and digital resilience driving ESMA strategic priorities for 2026

On 24 October 2025, ESMA confirmed that cyber risk and digital resilience will drive the agenda for its Union strategic supervisory priorities for 2026 (USSP).

ESMA encourages supervisors' engagement on cyber risk and digital resilience and calls for their continued efforts on the USSPs and considers co-ordination between supervisory work and the DORA oversight framework to be essential.

BoE, FCA and PRA guidance on effective practices for cyber-attack recovery

On 20 October 2025, the Bank of England (BoE), FCA and PRA jointly published a document setting out effective practices for firms and financial market infrastructures in the event of a cyber-attack in the financial sector.

Effective practices observed include:

• a pre-defined crisis communication plan that is transparent and timely during and after an attack, covering all customers, counterparties, regulators and any broader stakeholders

• testing to ensure the resilience of communication capabilities during and after an attack

• ability to restore critical data from immutable back-ups

• capability to rebuild critical applications and core infrastructure that supports important business services

• use of a separate, segregated, tertiary facility designed to make it highly unlikely for an external actor to gain unauthorised access to the firms' production environments.

Where third parties support delivery of important business services the most mature firms actively ensure the third party's resilience capabilities are equivalent to those they would expect from their own infrastructure.

Where firms cannot currently achieve this level of assurance, they are considering alternative ways to remain within impact tolerances, such as requiring the third-party provider to build its own capability.

FCA speech on enforcement approach and priorities

On 21 October 2025, the Financial Conduct Authority (FCA) published a speech by Therese Chambers, Joint Executive Director of Enforcement and Market Oversight. Chambers addresses the FCA's shift in enforcement approach, emphasising that 'doing the right thing' remains the central expectation of both firms and individuals.

• As of 1 October 2025, the number of open enforcement cases had fallen to 124, down from 220 in 2023.

• In 2024, the FCA delivered 41 enforcement outcomes, with over 30 expected in 2025.

• Recent investigations have been concluded significantly faster compared to a previous average duration of 42 months, with seven cases reaching public outcomes within 16 months.

• Chambers notes the FCA's increased use of criminal powers and encourages firms to engage proactively with the FCA, reiterating that whilst compliance carries costs, failing to meet regulatory expectations can result in significantly greater financial and reputational consequences. 

Recent enforcement outcomes highlighted include: 

• A digital bank was fined £28 million after a 14-month investigation for failing to restrict opening accounts for high-risk customers and shortcomings in its automated screening system and financial sanctions framework. 

• A major UK bank was fined £40 million following a case that began in 2013 relating to undisclosed advisory agreements with entities in connection with capital raisings in 2008.

• Four individuals were convicted for insider dealing in 2025, including two individuals sentenced to a combined 11 years' imprisonment after an 18-week trial for making £960,000 profit.

• An individual had over £586,000 of assets confiscated in January 2025 following his conviction in February 2023 for using inside information about potential mergers and acquisitions.

Additionally, the FCA secured the UK’s first criminal sentence for unregistered crypto activity, with an individual sentenced to four years’ imprisonment for owning and operating a network of nearly 30 crypto ATMs despite being refused FCA registration. 

The FCA emphasised that firms choosing to cooperate, take responsibility and remedy issues early can avoid skilled persons reports, formal requirements and enforcement referrals, whilst firms that fail to do so will face enforcement action.

Recent examples of the FCA’s approach where firms cooperate early include:

• A major UK bank received a £3 million penalty (reduced from a potential £6 million) following its cooperation in a three-month investigation into opening a client money account for a firm without proper checks and voluntarily paid £6.3 million to that firm's clients.

• An asset management firm avoided a fine entirely after agreeing to make €250 million available to investors whose investments were trapped and applying to cancel its authorisation, despite serious breaches including failures in due diligence and providing false or misleading statements to the FCA. 

• A major retail bank's penalty was reduced by more than half after the firm invested £94 million in identifying and remedying issues and paid £185 million in redress to over 1.5 million customers.

• Three firms operating voluntary redress schemes worth an estimated £354 million in relation to treatment of borrowers in financial difficulty received reduced financial penalties. 

ESMA annual consolidated report on sanctions and measures

On 16 October 2025, ESMA published its annual consolidated report on sanctions and measures imposed by national competent authorities (NCAs) in member states in 2024.

• Member states imposed more than 970 administrative sanctions and measures in financial sectors under ESMA's remit. This figure remains stable compared to 2023.

• The aggregated value of administrative fines has increased since 2023. 

• The highest amounts of fines and the highest number of administrative fines for 2024 were imposed under the Market Abuse Regulation (596/2014) (MAR).

• Over 60% of all administrative sanctions and measures imposed in 2024 were administrative fines. 

• 10% were issued using settlement procedures (that is, cease and desist orders). 

• Other enforcement sanctions and measures represented 16% of the total. 

FCA final notice issued to BlueCrest Capital Management

On 13 October 2025, the FCA published a final notice to BlueCrest Capital Management (UK) LLP, imposing a requirement to pay redress to non-US investors in the sum of $101 million in respect of conflict-of-interest failings. 

Between October 2011 and December 2015, BlueCrest failed to manage fairly a conflict of interest that arose from its dual role in overseeing:

• a partner- and employee-exclusive investment fund

• a flagship fund available to external investors. 

The FCA has taken account of BlueCrest's agreement to pay redress in its decision to issue the final notice.

HM Treasury publishes consultation response on AML/CTF supervision reform

On 21 October 2025, HM Treasury published its consultation response on reform of the anti-money laundering and counter-terrorism financing (AML/CTF) supervisory system.

Creation of Single Professional Services Supervisor:

• Having consulted on four possible models for a future regime, HM Treasury has decided to create a single professional services supervisor (SPSS), which will have consolidated responsibility for AML/CTF supervision of legal, accountancy, and trust and company service providers. 

• The FCA will assume this role and will carry out the supervisory functions as part of its remit. It will supervise all firms that carry out activities within scope of the MLRs as legal service providers, accountancy service providers, and trust and company service providers. 

The policy change marks a significant change in the FCA's role and will require it to develop an understanding of the operation and risks of the legal, accounting and company service sectors. The FCA is developing a detailed plan for carrying out this role and will engage with HM Treasury, HMRC, the PBSs and firms on the transition.

A HM Treasury consultation will be published in November 2025 regarding the powers the FCA will need as SPSS.

FCA findings on financial crime controls in corporate finance firms

On 20 October 2025, the FCA published its findings following a survey on financial crime controls in corporate finance firms (CFFs).

The FCA found that approximately two-thirds of the CFFs surveyed may not be complying with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692) (MLRs) in one or more elements of their anti-financial crime control frameworks.

• 11% of CFFs surveyed reported they had no documented business-wide risk assessment, which is required under the MLRs. The FCA warns in a related press release that this leaves CFFs and the wider market vulnerable to money laundering, fraud and other forms of financial crime.

• 10% of responding CFFs did not retain this evidence.

• 29% of principal firms said they did not assess the financial crime risks inherent in their appointed representatives (ARs). In addition, 6% of principal firms do not monitor ARs' compliance with financial crime regulations or conduct on-site visits or audits.

The FCA also highlighted areas of good practice, including:

• firms regularly updating their business-wide assessments to reflect emerging risks

• using detailed management information to strengthen their financial crime controls

• 97% of responding CFFs regularly report to senior management on financial crime matters

• 72% use a form to assess customer risk.

The FCA will use the survey results in its supervision of CFFs and will intervene where required.

FCA findings on romance fraud detection and prevention

On 17 October 2025, the FCA published its findings following a multi-firm review of how firms detect and prevent romance fraud, and the measures they take to protect their customers against it.

Key findings include:

• The FCA identified multiple instances of firms missing opportunities to identify seemingly suspicious transactions, which suggests firms could calibrate their monitoring systems to be more effective.

• While many firms demonstrated strong investigative practices, the FCA found notable gaps in both payment analysis and staff capability, which limited their ability to identify and respond to romance fraud effectively.

• Although many firms demonstrated strong engagement and compassionate care, there were cases where safeguarding concerns were not escalated appropriately.

• The FCA found that many firms were unaware of key customer vulnerabilities until after the fraud had occurred, which limited their ability to apply protective measures earlier.

• Although most firms had education initiatives in place, the reach and consistency of these efforts varied.

Move to single UK sanctions list

On 13 October 2025, the Foreign, Commonwealth and Development Office (FCDO), the Office of Financial Sanctions Implementations (OFSI) and HM Treasury announced the move to a single sanctions list for UK sanctions designations from 28 January 2026. 

The single sanctions list will come into effect on 28 January 2026. 

It is recommended that people switch to the UKSL as their primary source of designations data now, and in any case no later than 28 January 2026.

EBA final report on AML and CTF supervision stocktake

On 8 October 2025, the EBA published its final report summarising the findings of a stocktake conducted across 39 competent authorities (CAs) responsible for anti-money laundering (AML) and counter-terrorist financing (CTF) in the banking sector. The report reviews the progress made in addressing the EBA's earlier findings and recommendations as part of a multi-year review programme.

The EBA identifies the following key areas requiring attention in respect of AML and CTF:

• ensuring supervisory strategies clearly explain how money laundering and terrorist financing risks are addressed across sectors and how to ensure sufficient coverage across each sector

• ensuring supervisory plans are comprehensive. This includes clear, measurable performance indicators

• ensuring supervisory manuals contain sufficient detail, cover the range of tools available to CAs and provide guidance on how they should be used to meet different supervisory objectives.

Home Office guidance on ECCTA information sharing measures

On 3 October 2025, the Home Office, HM Treasury, Ministry of Justice, Companies House, Serious Fraud Office and Department for Business and Trade published guidance on information sharing measures in the Economic Crime and Corporate Transparency Act 2023 (ECCTA) to support anti-money laundering regulated firms, within Schedule 9 to the Proceeds of Crime Act 2002, to utilise the new information sharing provisions introduced by ECCTA. 

The guidance provides regulated firms with information on:

• the policy intent for the measures

• how regulated firms can ensure that they are protected by the provisions when undertaking direct and indirect sharing

• handling conditions for sharing and receiving information

• undertaking law enforcement reporting

• UK General Data Protection Regulation (GDPR) compliance

• maintaining effective customer complaint processes. 

These organisations should consider how they can apply the overarching principles in the guidance to develop a consistent approach to sharing within their wider sector.

The answer to last month's question: according to the FCA's most recent consumer survey research, 69% of UK consumers chose to use centralised exchanges when purchasing cryptoassets.

This month's question: what is the estimate of the compensation that would be paid under the FCA's proposed motor finance consumer redress scheme if 85% of eligible consumers take part in the scheme?

• £8.2 billion 

• £6.8 billion 

• £9.7 billion 

• £11 billion.