Welcome to the latest edition of the Financial Services SpeedRead, a collection of bite-sized updates designed to help you keep on top of key regulatory developments in financial services over the preceding fortnight. Please get in touch if you want to explore any of the topics covered in this fortnight’s edition of Financial Services SpeedRead in more detail.
Financial Markets
1.ESMA consults on revised guidelines on standardised procedures and messaging protocols under CSDR
On 26 May 2026, ESMA published a consultation paper on amendments to the guidelines on the procedures and messaging protocols used between investment firms and their professional clients under Article 6(2) of the Central Securities Depositories Regulation (CSDR). The review forms part of ESMA's work to support market participants in preparing for the transition to a T+1 settlement cycle, which will take effect on 11 October 2027, and the amendments are made in light of those proposed to Articles 2 and 3 of Commission Delegated Regulation (EU) 2018/1229 on settlement discipline.
The consultation paper proposes the following key changes to the guidelines on allocations and confirmations:
- requiring the mandatory use of specified electronic, standardised communication channels and international open communication procedures and messaging standards (in accordance with Article 2(1)(34) of CSDR);
- removing references to oral allocations and confirmations, except in cases of temporary technical disruptions where alternative non-electronic communications may be accepted;
- permitting contractual arrangements to be documented in any form, provided they remain valid and binding;
- specifying that emails and graphical user interfaces may be compliant with the new framework under certain conditions; and
- deleting the option to use internal or domestic messaging standards, which are incompatible with the new regulatory framework.
The consultation closes on 7 July 2026. The revised guidelines are expected to apply from 7 December 2026 and ESMA aims to publish the final report, including updated guidelines, by October 2026.
2. EU Commission adopts Delegated Regulation on EU code of conduct for issuer-sponsored research
On 21 May 2026, the EU Commission adopted a Delegated Regulation supplementing MiFID with regulatory technical standards establishing an EU code of conduct for issuer-sponsored research. The Delegated Regulation follows amendments introduced as part of the Listing Act package, which sought to encourage higher-quality investment research coverage of companies, particularly small and medium-sized enterprises.
For more information on the new rules as set out in the Final Report published in November 2025, please see our previous SpeedRead here.
The Delegated Regulation is not yet in force and will become enforceable on the third day following its publication in the Official Journal of the European Union.
3. Government introduces Financial Services and Markets Bill to Parliament
On 20 May 2026, the Government introduced the Financial Services and Markets Bill [HL] 2026-27 to Parliament (the Bill). The Bill forms part of the Government's wider plan to support growth and investment across the UK financial services sector, while also modernising how the financial services sector is regulated and ensuring consumer protections are fit for the digital age.
The Bill, announced in the King's Speech, consolidates regulatory responsibilities by absorbing the Payment Systems Regulator into the FCA, reducing the number of overlapping regulators for firms. It also seeks to reduce the overall burden of the Senior Managers and Certification Regime by 50 per cent (including by repealing the certification regime), reform the Financial Ombudsman Service, modernise consumer credit regulation by repealing provisions of the Consumer Credit Act 1974, update the statutory framework underpinning the ring-fencing regime, and widen credit union membership rules.
Banking and Prudential
4. FCA publishes policy statement on retail banking business models data
On 29 May 2026, the FCA published a policy statement (PS26/8) introducing an annual regulatory reporting return for retail banks and building societies, replacing previous ad hoc collections of Retail Banking Business Model (R2B2) data. The policy statement followed CP26/3 and sets out the FCA's final rules and guidance on the new return. The FCA stated that collecting this data annually will allow it to effectively monitor the retail banking market and publish timely insights.
The FCA has confirmed the following key changes to the R2B2 reporting framework:
- the number of data points to be collected has been reduced by 30% compared to the 2024 ad hoc request, reducing firm burden;
- the reconciliation calculation between product-level data and whole-firm data has been removed, and the relevant section on profit and loss data renamed "whole business";
- the off-the-shelf document request has been streamlined to focus on the business as a whole, with firms permitted to submit extracts where appropriate;
- rules on group reporting requirements have been amended to improve clarity, including how firms should treat unregulated subsidiaries and how reporting thresholds interact with data requirements; and
- the return will apply to approximately 36 firms, with eight firms newly in scope.
The first R2B2 submission deadline is the end of November 2026.
5. PRA publishes policy statement on Phase 1 of the Pillar 2A review
On 28 May 2026, the PRA published a policy statement (PS15/26) setting out feedback to responses to consultation paper CP12/25 and outlining final policy on the first phase of its two-stage Pillar 2A review. The policy statement updates Pillar 2A methodologies and guidance to address the consequential impacts of the Basel 3.1 standards and improve transparency, proportionality, and risk capture. Following feedback to CP12/25, the PRA has confirmed the following key changes to the draft policy:
- exclusion of SME exposures from the systematic methodology for unconditionally cancellable commitments in the retail exposure class; greater flexibility for firms when assessing idiosyncratic credit risks, moving away from the originally proposed expectation for firms to use credit scenarios;
- clarificatory updates to operational risk guidance and methodology for all firms, including alignment of the operational risk Pillar 2A methodology for Small Domestic Deposit Takers (SDDTs) and non-SDDTs; and
- a single implementation date of 1 January 2027 for all final policy and rules.
The PRA will publish a further consultation paper on Phase 2 of the Pillar 2A review in 2027.
6. PRA publishes Dear CEO letters on prudential treatment of cryptoassets and innovations in deposits, e-money and stablecoins
On 18 May 2026, the PRA published two Dear CEO letters addressing: (i) the prudential treatment of tokenised assets, stablecoins, and other cryptoasset exposures (see link here); and (ii) innovations in the use of deposits, e-money and regulated stablecoins (see link here).
The letters supersede the PRA's previous communications on these topics in 2022 and 2023 respectively, to reflect further developments in the UK regulatory framework and in the crypto market since the previous letters were published.
Key takeaways from the letters are as follows (without limitation):
- firms are reminded to consider the full prudential framework when assessing and mitigating risks from cryptoasset exposure (including Pillar 1, the ICAAP, Pillar 2, and operational risk requirements). The PRA considers that a 100% capital requirement remains appropriate for unbacked cryptoassets under the market risk framework, to reflect their heightened volatility;
- tokenised traditional assets should, in general, receive the same prudential treatment as non-tokenised equivalents, reflecting the regulator's "same risk, same regulatory outcome" approach;
- where deposit-takers wish to issue stablecoin or e-money, these must be issued from a separate, insolvency-remote entity with distinct branding from the deposit-taker to mitigate risk of contagion; and
- firms should develop robust ways of identifying, measuring and mitigating operational risks arising from innovations in the use of digital-money or money-like instruments.
The PRA expects to consult on a proposed prudential framework for crypto asset exposures in 2028 at the earliest. For further detail on the Dear CEO letters, please see our LinkedIn briefing here.
7. HMT publishes findings from its Ring-Fencing Review
On 18 May 2026, HMT published a report setting out the Government's conclusions from its Ring-Fencing Review and proposals for reform. The review concludes that there are opportunities to make the regime more flexible and proportionate. Key reforms set out in the review include:
- introduction of a New Growth Allowance, permitting ring-fenced bodies (RFBs) to use up to 10% of Pillar 1 risk-weighted assets for otherwise prohibited activities, potentially unlocking up to £80 billion of financing;
- transfer of detailed ring-fencing provisions from primary legislation into PRA rules to enable more agile regulation;
- permitting exposure to a wider range of financial institutions where those firms undertake activities which the ring-fencing regime would permit the RFB to undertake directly; and
- a commitment to review the £35 billion primary core deposit threshold every three years.
The Government will consult on the New Growth Allowance and other reforms in summer 2026, with changes delivered via secondary legislation once the Financial Services and Markets Bill has been enacted and as soon as Parliamentary time allows.
Fund Management
8. FCA consults on registration of authorised fund assets
On 21 May 2026, the FCA published a consultation paper (CP26/16) on the registration of authorised fund assets. The paper addresses concerns that depositaries of authorised AIFs face increasing legal and financial risks from holding legal title to assets such as UK commercial real estate, threatening the ability of these funds to invest in such assets. CP26/16 proposes the following key changes:
- enabling depositaries of authorised AIFs managed by 'full-scope' AIFMs to delegate some of their safekeeping functions in respect of some private markets asset types to certain third parties;
- permitting depositaries to delegate the safekeeping function for 'non-custodial' private market asset types (including real estate) to the AFM's affiliates, subject to additional protections for the fund; clarifying aspects of the authorised fund registration function requirements;
- clarifying how the CASS 6 custody rules apply to depositaries of all authorised funds and unauthorised AIFs; and
- replacing the Modification by Consent for COLL 5.6.22R (in respect of COLL 5.5.9R, on guarantees and indemnities) with a permanent rule change.
The consultation closes on 9 July 2026.
Senior Managers and Governance
No recent updates.
Financial Crime
No recent updates.
Retail Services
9. HMT publishes updated consultation response on review of the Financial Ombudsman Service
On 20 May 2026, HMT published an updated consultation response on reforms to the Financial Ombudsman Service (FOS). The updated document removes original paragraph 2.19 which set out the Government’s intention to retain powers allowing it to specify that particular rules should be treated differently under the adapted ‘fair and reasonable’ test. Following further assessment and feedback, the Government no longer considers this power necessary and it is not included in the Financial Services and Markets Bill.
For further details on the wider consultation response, please see our previous SpeedRead here.
10. FCA publishes findings from review of financial promotion approvers
On 27 May 2026, the FCA published the findings from its review of firms that approve financial promotions for unauthorised businesses (i.e. "section 21 approvers"). The FCA found that, in general, firms that approve financial promotions should be doing more to protect consumers.
Key findings of the review include:
- the strongest firms embedded the Consumer Duty throughout their approval processes, ensuring promotions were accurate, clear and reached the right audience;
- some firms approved adverts containing unsubstantiated claims or allowed retail customers access to promotions intended for professional clients;
- certain firms relied on third-party templates rather than conducting their own substantive checks; and
- as a result of the FCA's work, one firm has had to conduct a remediation exercise and some websites have been blocked to retail customers.
The FCA will continue to monitor compliance and stated that it will hold firms that fall short to account.
11. HMT publishes policy statement on reform of the Consumer Credit Act 1974
On 18 May 2026, HMT published a policy statement setting out its final approach to reforming the Consumer Credit Act 1974 (CCA). The CCA, first enacted over 50 years ago, will be modernised as part of the Financial Services and Markets Bill announced in the King's Speech, transferring many of its prescriptive requirements into the FCA's rulebook. The policy statement sets out the following key changes:
- the majority of information disclosure requirements will be repealed and recast into FCA rules, enabling firms to tailor communications using modern technology;
- sanctions of unenforceability and disentitlement to interest will be repealed, with consumer protection relying on the FCA's existing supervisory and enforcement powers;
- criminal offences, including those relating to canvassing off trade premises and circulars to minors will be retained; and
- complex provisions including section 56 (antecedent negotiations); sections 75 and 75A (connected lender liability); and sections 140A-C (unfair relationships) will not be changed at this stage but require more detailed policy work.
The Government will bring forward legislation as part of the Financial Services and Markets Bill, with the FCA to consult on replacement rules in due course.
Digital Finance and Fintech
12. IOSCO publishes final report on supervisory toolkit for AI use in capital markets
On 26 May 2026, the International Organization of Securities Commissions (IOSCO) published a final report providing regulators with a practical, non-binding supervisory toolkit for oversight of AI use in capital markets. The report builds on IOSCO's 2021 and 2025 AI reports and addresses risks posed by increasing AI complexity, evolving use cases, and concentration in third-party service providers for specific AI systems.
The report sets out a three-layered supervisory toolkit comprising:
- areas of supervisory consideration, covering governance, model risk management, market risks, cybersecurity, outsourcing, and disclosure;
- tools for supervisory oversight across four focus areas: governance and risk management, third-party and outsourcing risk management, disclosure, and recordkeeping and reporting; and
- indicators and data sources to support monitoring of AI adoption and performance.
Stakeholder feedback can be submitted by 26 June 2026. IOSCO's next phase will involve a review of emerging industry practices across the supervisory focus areas identified in the report.
13. EU Commission consults on review of Markets in Crypto-Assets Regulation
On 20 May 2026, the EU Commission published a public consultation and a targeted consultation on the review of Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA), which has been fully applicable since 30 December 2024. The consultations seek stakeholder views on whether MiCA remains fit for purpose in light of market developments and international regulatory changes.
The targeted consultation covers the following key areas:
- the scope and classification of crypto-assets, including the boundary between MiCA and MiFID;
- the prudential, reserve and redemption requirements for asset-referenced tokens and e-money tokens, including the prohibition on interest payments;
- the adequacy of the regulatory framework for crypto-asset service providers, including capital requirements and reporting obligations;
- topics beyond MiCA's current scope, including decentralised finance, staking, lending and borrowing, non-fungible tokens and prediction markets; and
- opportunities to simplify administrative burdens in line with the EU Commission's competitiveness agenda.
Responses to both consultations are due by 31 August 2026.
14. FCA and BoE publish Call for Input on the future of tokenisation in UK wholesale markets
On 18 May 2026, the FCA and the BoE published a joint Call for Input on the future of tokenisation in UK wholesale financial markets.
The publication sets out the regulators' short, medium and long-term vision for the use of tokenisation in financial markets, identifies the required regulatory infrastructure to facilitate that vision, and sets out clear goalposts of initiatives to support market evolution in this space. Responses to the paper will inform a joint roadmap building on HMT’s Wholesale Financial Markets Digital Strategy.
The FCA and BoE articulate a long-term vision for tokenisation in UK wholesale markets in which:
- tokenised securities, cash and collateral move efficiently across the full trade lifecycle - from issuance through clearing, settlement and post-trade within an ecosystem anchored in central bank money settlement;
- tokenised and non-tokenised market infrastructure co-exist and interoperate, supported by common rules and standards;
- private sector innovation is supported by trusted public sector foundations, including robust regulatory frameworks, high operational resilience standards and active UK engagement in international standard-setting; and
- tokenisation supports deeper, more liquid capital markets by broadening the range of assets that can be financed and transferred, enabling new distribution models and supporting market participation at scale.
We detail the FCA and BoE's priority areas and key milestones in relation to the above vision in our briefing here.
The deadline for responses is 3 July 2026, with a joint response statement and finalised roadmap expected by the end of 2026.
Payments
15. BoE publishes consultation paper on extending RTGS and CHAPS settlement hours
On 18 May 2026, the BoE published a consultation paper on extending Real-Time Gross Settlement (RTGS) and Clearing House Automated Payment System (CHAPS) settlement hours towards near 24/7 operation. Building on the announcement that CHAPS will open at 01:30 (instead of 06:00) from September 2027, the paper outlines next steps and longer-term options for both RTGS and CHAPS. The BoE stated that extending settlement hours is key to delivering a safe and resilient multi-money ecosystem.
The consultation paper sets out proposals to:
- introduce weekend and bank holiday settlement, most likely to initially take the form of trading on Sundays, alongside certain UK bank holidays, but not before 2029;
- linked to the above, extend the settlement window on existing settlement days to achieve 22/6 operation, but not before 2031; and
- implement longer-term options of either longer settlement hours every day, with slightly longer daily downtime (22x7), or near-continuous CHAPS settlement with a short daily downtime (23.5x7).
The consultation closes on 10 August 2026.
ESG
16. EU Commission publishes delegated regulation on authorisation of ESG rating providers
On 26 May 2026, the EU Commission published a delegated regulation supplementing Regulation (EU) 2024/3005 (the EU ESG Rating Regulation) containing regulatory technical standards (RTS) specifying the information to be included in applications for authorisation and recognition as an ESG rating provider in the EU.
Annex II of the RTS specifies the information applicants must submit to ESMA as part of the authorisation application (or recognition, with respect to non-EU entities), with additional information required in Annexes IV and V where an applicant seeks to endorse credit ratings or provide benchmarks, respectively.
The Council of the EU and the European Parliament will now scrutinise the RTS, which will enter into force on the day following its publication in the Official Journal of the European Union, and become applicable from 2 July 2026.
Other
17. Financial Services Regulatory Initiatives Forum publishes Regulatory Initiatives Grid for May 2026
On 19 May 2026, the Financial Services Regulatory Initiatives Forum published the tenth edition of the Regulatory Initiatives Grid, setting out the regulatory pipeline over the next 24 months. The Grid is a joint publication by nine UK regulatory bodies, co-chaired by the FCA and BoE, designed to help firms plan for upcoming regulatory changes with significant operational impact. The Grid features 135 live initiatives, of which 33% are joint initiatives reflecting continued efforts to streamline regulatory activity and minimise duplicative requests from industry.
The May 2026 edition covers the following:
- the Government's Financial Services and Markets Bill, which is referenced as reinforcing the priority of growth while maintaining high regulatory standards;
- streamlining product-level sustainability reporting requirements in Q2 2026;
- a review of the Investment Firms Prudential Regime, with a call for input expected in H2 2026 followed by a consultation in 2027;
- HMT and the PRA's final rules on overseas prudential requirements regimes, expected to be published in Q3 2026;
- a consultation on the resolution regime for cryptoasset firms, expected in H2 2026;
- collaborative Smart Data initiatives (Open Banking and Open Finance), with consultations and statutory instruments planned through Q1 2027; and
- review of updates to the FCA's rules following introduction of the Consumer Duty, including a consultation planned for Q2 2026.
