UK Regulatory Outlook 2026

2026 is set to be a pivotal year for UK financial services as the focus turns to regulating for growth and reducing red-tape. With the Financial Services and Markets Act (FSMA) framework in place, UK authorities are moving to deliver policy reforms across a range of financial regulatory issues, from digital finance to changes in capital markets regulation and market structure.

This piece takes stock of the main regulatory initiatives in the UK underway in 2026 across the following themes:

• Trading and markets
• Risk, capital, and financial stability
• Digital finance and technology
• Sustainable finance

Trading and markets

The UK’s capital markets reform agenda will be busy throughout 2026, as regulators aim to modernise market infrastructure while maintaining competitiveness and investor confidence.

MiFID / MiFIR transaction reporting

The UK has embarked on a comprehensive review of its regulatory reporting framework. Work is underway to reform the UK transaction reporting framework under Markets in Financial Instruments Regulation (MiFIR) to streamline post-trade reporting and improve data quality for regulatory and market oversight. A policy statement with final rules is expected in the second half of 2026 with a planned implementation period of around 18 months. Further consultations on reforms to Securities Financing Transactions Regulation (SFTR) and European Market Infrastructure Regulation (EMIR) are also expected in due course, and HM Treasury will begin the formal revocation process when parliamentary time allows, marking a significant step in tailoring UK rules post-Brexit.

Equity market structure and transparency

As part of the FCA’s Wholesale Markets Review, the FCA will consult on equity market structure and transparency reforms in 2026. These proposals will aim to simplify the framework, improve pre- and post-trade transparency, and enhance overall market efficiency. Key proposals include allowing Multilateral Trading Facilities (MTFs) to conduct matched principal trading, lifting restrictions so firms can operate both an Organised Trading Facility (OTF) and a SI, and broadening the reference price waiver to use multiple price sources. These changes aim to reduce complexity, enhance competition, deepen liquidity, and improve market efficiency.

Bond and equity consolidated tapes

The UK’s first bond consolidated tape is planned to be launched in June 2026, following the FCA’s decision to award the contract to Etrading Software (ETS). An FCA update in December confirmed it will determine ETS’s authorisation as soon as possible ahead of the planned June launch.

Meanwhile, the FCA’s consultation on the equity consolidated tape framework closes on 30 January 2026, with a policy statement expected in the first half of 2026. The equity tape is expected to begin operations in 2027, with the aim of creating a more integrated market data environment and improving transparency for UK public markets.

Short selling reform

The UK is undertaking its most significant overhaul of short selling rules since 2008. Under the proposals, firms will be required to submit private notifications to the FCA for net short positions above 0.2% of a company’s issued share capital, alongside anonymised public reporting. Final rules are due in Q2 2026, with implementation by the end of the first half of the year. Implementation of the UK short selling reforms is likely to take 12 to 18 months to allow market participants and regulators sufficient time to adjust their operations.

Accelerated settlement (T+1)

The UK is preparing for a transition to T+1 settlement, with legislation confirming 11 October 2027 as the first day of trading under the new standard. This move aligns with broader global trends towards accelerated settlement cycles. Firms are expected to begin preparations now, following the Accelerated Settlement Taskforce’s recommendations.

Reform of the UK Benchmarks Regulation (BMR)

In December, HM Treasury published a consultation paper outlining its proposal to replace the current benchmarks regime (inherited from the EU) with a new, bespoke framework. Under this proposed regime, regulatory oversight would be limited to designated benchmarks and administrators that pose potential systemic risks to UK financial markets. The Treasury is inviting feedback on these proposals until 11 March 2026, after which it will draft legislation to implement the new regime. The FCA will consult on specific regulatory requirements in due course.

Risk, capital and financial stability

Maintaining financial stability remains a core focus for the Bank of England (BoE) and the Financial Conduct Authority (FCA), particularly in the context of elevated asset prices, an increasingly interconnected system, and technological developments. Regulators are also monitoring the growing role of non-bank financial intermediaries (NFBIs) such as private credit firms.

Private markets and the System-Wide Exploratory Scenario

Regulatory focus on private markets is intensifying as authorities seek to better understand vulnerabilities in the private credit ecosystem. The BoE has launched its second System-Wide Exploratory Scenario (SWES), focused on private markets and examining how banks and non-banks could respond to a severe downturn, including the potential for stress to be amplified through interconnected behaviours. Most of the analytical work will take place during 2026, with system-wide and sector-specific findings expected in early 2027.

Beyond SWES, private markets remain a key UK regulatory priority. While the FCA opted against immediate rule changes following its Private Markets Valuation review, the findings are feeding into a forthcoming review of the Alternative Investment Fund Managers Directive (AIFMD). HM Treasury plans to consult on draft AIFMD legislation in early 2026, coordinated with FCA consultations on liquidity, leverage and reporting, alongside follow-up supervisory work on conflicts of interest.

Macro-prudential and non-bank financial intermediation (NBFI)

The rapid growth of non-bank financial intermediation is sharpening regulatory focus on liquidity, leverage, and interconnectedness between banks and market-based finance. The BoE’s Financial Policy Committee (FPC) has made strengthening the oversight and resilience of NBFIs a core priority through 2026, with an emphasis on identifying system vulnerabilities and mitigating financial stability risks, in line with the work of the Financial Stability Board (FSB), which Governor Bailey chairs.

Bank and investment firm capital requirements

Most of the Basel 3.1 package, covering banks’ capital requirements for credit and operational risk, is scheduled to come into force on 1 January 2027. The Prudential Regulation Authority (PRA) is expected to publish its final policy statement and implementing rules in Q1 2026, having delayed the internal model approach to market risk (FRTB-IMA) in light of implementation delays in the United States.

In parallel, the FPC is reviewing the bank capital framework, including the leverage ratio, buffer usability and capital requirements linked to UK geographic concentration risk, with an update expected in summer 2026.

Alongside this, the FCA has also launched a wide-ranging review of the market risk capital framework applicable to FCA regulated investment that deal in investments as principals and operate trading books.

Capital market reforms

In July 2025, the FCA set out a programme of capital market reforms, much of which has progressed in the second half of 2025 and will continue in 2026. This includes finalised plans to simplify regulatory capital requirements for investment firms by consolidating and tailoring the definition of regulatory capital within MIFIDPRU 3 and removing cross-references to the UK Capital Requirements Regulation (UK CRR). As part of the wider post-FSMA review of inherited EU capital market rules, the FCA and PRA also plan to consult in 2026 on potential simplifications to the UK securitisation framework.

The Consumer Composite Investment Regime (CCI)

The FCA has also finalised rules on its CCI regime, replacing PRIIPs, which will take effect from 8 June 2027. The FCA aims for this regime to offer a more flexible and proportionate approach to product disclosures. Firms will have an 18-month implementation period before the regime comes fully into force to familiarise themselves with the new rules and make the necessary changes to their systems and procedures.

Insurance

The PRA has finalised updates to its Solvency UK policy framework, with phased implementation continuing through 2027. Reforms aim to enhance the resilience of the UK insurance sector while supporting increased investment. The next stage of UK Solvency II reporting and disclosure reform will be set out in a Q2 policy statement, ahead of implementation in Q4. Further prudential changes are expected as the PRA intends to share a policy statement in Q2 2026 on insurance third-country branches, targeting implementation by year-end, except for the immediate uplift in the indicative subsidiarisation threshold.

Senior Managers and Certification Regime (SMCR)

Following the Leeds Reforms published in July 2025, the Government and the regulators consulted on changes to reduce regulatory burden under SMCR. The FCA expects the first phase of reforms to be implemented by mid-2026, with the Government planning further changes through primary legislation later in the year, subject to parliamentary time.

Digital finance and technology

As digital transformation accelerates, UK regulators are shifting from consultation to implementation, balancing innovation with resilience and consumer protection.

Operational resilience

As the financial industry becomes increasingly digital and interconnected, operational risk and cyber resilience remain a growing priority for UK policymakers. The UK is in the process of implementing its Critical Third Parties (CTP) regime, which will allow HM Treasury to designate ‘critical’ service providers, subjecting those firms to enhanced oversight on scenario testing, risk management, and cyber resilience. Initial designations are expected within the next 12 months.

The BoE, FCA, and PRA closed their consultation in March 2025 on proposals regarding operational incident and third-party reporting, with the final policy statement expected in 2026. Furthers plans to consult on BoE/PRA policy relating to the management of ICT and cyber risks are also expected later this year.

Artificial Intelligence (AI)

AI remains high on the policy agenda in the UK. While the Government has reportedly deferred plans for an AI Bill until after the King’s Speech expected in May 2026, parliamentary scrutiny has intensified. The Treasury Select Committee has now published its report on Artificial Intelligence in Financial Services, concluding that UK authorities are adopting an overly “wait-and-see” approach to AI-related risks. The Committee called for greater regulatory clarity from the FCA on the application of existing rules and senior management accountability for AI-related harm, as well as the introduction of AI-specific stress testing by the FCA and the Bank of England to address potential financial stability and systemic risks. The Government is required to respond formally to the report in 2026, at which point it will become clearer whether these recommendations will be taken forward.

Meanwhile, the FCA is prioritising experimentation over prescriptive rulemaking, using initiatives such as its AI Live Testing service to support innovation in a controlled environment. The regulator has said it does not intend to introduce AI-specific rules in the near term and will instead rely on existing frameworks to manage emerging risks. This approach is being complemented by targeted supervisory work, including an FCA-commissioned review into the growing use of AI in consumer financial advice.

Digital assets

Digital assets remain a core focus for UK regulators as they move to bring cryptoassets and tokenised instruments fully within the UK regulatory perimeter. Following HM Treasury’s December 2025 statutory instrument, the FCA launched consultations covering market abuse, admissions and disclosures, prudential requirements and crypto activities, with final policy expected in 2026 ahead of the regime going live in October 2027.

In parallel, the BoE’s consultation on systemically important stablecoins runs until February 2026, with a policy statement due in the first half of 2026 and joint supervisory guidance with the FCA later in the year, while the PRA plans to consult on Basel crypto standards in late 2026. The FCA’s Digital Securities Sandbox remains active, and a policy statement on fund tokenisation regulation is planned for the first half of 2026.

Sustainable finance

The UK continues to advance the development of its sustianable finance policy framework, shifting from consultation to implementation in 2026.

ESG ratings regulation

The UK is on track to bring ESG ratings providers into the FCA’s regulatory perimeter. HM Treasury laid the enabling legislation on 27 October 2025, with parliamentary passage expected in the first quarter of 2026. The FCA has published its proposed rules for ESG ratings providers in parallel, which it is consulting on until 31 March 2026, with the aim to finalise its approach by the end of the year.

UK Sustainability Reporting Standards (UK SRS) and Transition Plans

The Government consulted on draft UK-endorsed ISSB Standards, known as the UK Sustainability Standards (SRS), in June 2025. Both the FCA and the Government will consult on requiring UK listed and economically significant non-listed companies to report under these standards. The FCA plans to publish its consultation on disclosure requirements for UK-listed companies in January 2026. The FCA’s consultation will also include a proposed approach for transition plan disclosures, following the Government’s 2025 consultation.