The FCA and PRA share details on their annual progress across capital reform, compliance costs, authorisations, supervision, and innovation support in financial services.

By Becky Critchley, Nicola Higgs, and Rob Moulton

On 9 July 2026, the House of Lords Financial Services Regulation Committee published correspondence from the FCA and the PRA setting out how each regulator has progressed its secondary competitiveness and growth objective over the past year. The correspondence acts as a helpful stocktake of recent work undertaken by the regulators. This blog post sets out the substantive initiatives each regulator has delivered, and those it is now progressing.

The FCA

Capital Markets and Retail Investment

The FCA emphasises how it has carried out significant reform of the UK’s capital markets, revising the listing rules and the prospectus regime in an effort to make it easier for firms to raise capital (see the Latham blog posts here and here). The FCA has established a consolidated tape for bonds and revised the transparency regime for bonds and derivatives, enabling market participants to see far more trades within minutes of execution. The FCA also highlights the launch of PISCES (Private Intermittent Securities and Capital Exchange System), a new venue for trading private company shares, intended to make it easier for scale-up companies to raise capital (see this Latham blog post). Future reforms signposted by the FCA in this area include introducing a consolidated tape for equities, the move to T+1 securities settlement from October 2027, and changes to the securitisation rules.

On mortgages, the FCA reports that its affordability reforms have already enabled lenders to offer borrowers around £30,000 more on average. The FCA is now proposing further changes to widen affordability assessments for borrowers with variable incomes, older borrowers, and those with past credit difficulties, while maintaining consumer protections. The FCA also notes that it has relaxed contactless payment limits and plans to consult on exempting performance fees from the pensions charge cap, which would widen the range of asset classes available to pension savers.

Innovation and Scale-Up Support

The FCA underlines that it has enabled significantly increased use of its innovation and testing services, which let firms trial new technology, including AI, in its “sandbox” controlled environment, with the number of participating firms up 89% year on year. The FCA states that firms which used these services have gone on to secure more than £1 billion in investment.

The FCA has also indicated that it expanded its dedicated support for firms preparing to apply for authorisation and for those overseeing fast-growing businesses, in each case to meet rising demand. It has opened its joint scale-up support unit with the PRA to solo-regulated firms following what it described as a successful pilot.

Supervision and Proportionality

The FCA states that it refocused supervisory engagement on fewer, higher-impact priorities, replacing 43 portfolio-specific CEO letters with its nine Regulatory Priorities reports. The FCA has introduced automation to handle lower-value cases, cutting processing time from up to four hours to under six minutes. Ahead of broader reform of the SMCR, the FCA notes that it has already reduced the number of certification roles required by around 15% (see this Latham blog post).

Efficiency and Technology

The FCA reports that it has driven down the Financial Services Compensation Scheme levy. Under its “smarter regulator” approach, it has decommissioned unnecessary data requirements and consulted on changes to transaction reporting, in order to deliver what it considers to be meaningful annual savings for industry. It has also rolled out its MyFCA platform across the whole regulated population, which it credits with improving compliance and reducing late returns. In addition, it has introduced new voluntary targets for authorisations and is now determining the vast majority of applications within these revised targets, as well as giving some firms earlier certainty through “minded to approve” decisions.

Savings, Investment, and Defence Initiatives

The FCA has introduced targeted support for investments and pensions, with firms now able to seek dedicated support through the FCA’s pre-application support service as they bring these new offerings to market. Separately, the FCA has clarified how sustainability rules interact with defence investment, convened industry and government stakeholders to discuss defence-related resilience, and highlighted its commitment to prioritising the authorisation of defence-focused funds.

The PRA

Proportionality for Domestic Lenders

The PRA emphasises its work on finalising its Strong and Simple regime for smaller, domestically focused banks and building societies, simplifying their capital requirements. It notes that the great majority of eligible firms have already opted in to this regime. Alongside this, the PRA has finalised the UK’s Basel 3.1 rules, and made progress on making internal model approaches more accessible to medium-sized firms.

The PRA also reports that it has raised the thresholds that determine which firms fall within the more onerous parts of the regulatory perimeter. It has significantly increased the asset threshold for coming into scope of the MREL (minimum requirement for own funds and eligible liabilities) framework from £15 billion–£25 billion to £25 billion–£40 billion and has similarly raised the retail deposit threshold for Resolution Assessment reporting and disclosure rules from £50 billion to £100 billion in retail deposits.

On mortgage lending, the PRA is consulting on removing the firm-specific 15% cap on high loan-to-income lending and reports that it has already allowed lenders to move away from that cap on an interim basis while the wider, market-level limit remains in place. It has also launched a scale-up unit with the FCA to support fast-growing banks and building societies and is developing a broader approach to indexing regulatory thresholds, aiming for firms not to become disproportionately burdened simply because of nominal economic growth. Following the government’s recent review of the regime, the PRA is consulting on giving ring-fenced banks more flexibility to share operational resources across the ring-fence and will separately examine how ring-fencing interacts with the capital framework. It notes that it will also review ring-fencing-specific reporting requirements once the revised regime is in place and expects to report in 2028.

Capital Requirements

The Financial Policy Committee (FPC) has reduced the overall benchmark for bank capital requirements by one percentage point to 13% of risk-weighted assets, on the view that this level better supports long-term UK growth while reflecting improved risk measurement and a smaller systemic footprint for some banks. Alongside this, the PRA states that it and the FPC are working to make regulatory capital buffers more usable in practice, so that banks have less incentive to hold capital well above their regulatory minimums and are separately reviewing how the leverage ratio is functioning. The FPC’s analysis suggests UK capital requirements for large banks sit broadly in line with the euro area and below the US, though it has conceded that the UK’s leverage ratio requirements for large domestically focused banks appear comparatively higher.

It is worth noting that in its July 2026 Financial Stability Report, the FPC reaffirmed this benchmark and set out a package of leverage ratio reforms, including the reduction of the minimum leverage ratio requirement from 3.25% to 3% and the introduction of a new, releasable general leverage ratio buffer of 25 basis points. Taken together, the FPC expects these changes to reduce the leverage ratio that large UK banks need to hold by around 20 basis points on average, bringing requirements for large domestically focused banks more closely into line with other jurisdictions.

Investment

The PRA states that it has prioritised the supply of long-term finance for investment, with a particular focus on high-growth firms. It has carried out a literature review on barriers to investment in these firms jointly with HM Treasury and engaged extensively with financial sector, government, and academic stakeholders, and the PRA notes that it plans to engage directly with capital allocators this year to understand what is holding back investment in high-growth firms seeking to scale up.

On insurance, the PRA states that it has launched the Matching Adjustment Investment Accelerator, which lets insurers recognise the capital benefit of qualifying investments more quickly, and has already approved several applications under the scheme. The PRA is also seeking views on how UK life insurers can access alternative third-party capital, as part of designing a new bespoke regime for insurance captives that it expects to implement around mid-2027.

In the banking sector, the PRA adjusted its final Basel 3.1 rules, following consultation feedback, to reduce the impact on SME and infrastructure lending relative to its original proposals, including through changes to Pillar 2A requirements. The PRA expects aggregate capital requirements for SME lending to be slightly lower as a result.

Compliance Costs

The PRA is targeting a net reduction in administrative burdens of around £100 million, in line with the government’s commitment to cut such costs by 25% prior to the end of the Parliament. It reports that it has already cut banks’ reporting costs by around £26 million annually from the first stage of reforms under its Future Banking Data programme, and is engaging with industry on further reductions via DP1/26.

The PRA further notes that it has already reduced insurance reporting requirements by around one third through Solvency II reforms and has reduced the frequency with which SDDTs (small domestic deposit takers) must submit capital and liquidity self-assessments. The PRA is also in the process of making the UK’s securitisation framework less prescriptive, looking at adjustments to due diligence, risk retention, transparency, re-securitisation, and credit-granting requirements. The FCA has consulted in parallel to keep the two regulators’ approaches coherent.

Operational Effectiveness and Authorisations

The PRA highlights that it achieved full compliance with existing statutory authorisation deadlines between March 2025 and February 2026. In tandem with HM Treasury’s intention to shorten new firm authorisations from six to four months, permissions from 12 to 10 months, and senior manager approvals from three to two months, the PRA calculates that it is processing lower-risk applications faster than the legislative minimum. HM Treasury also plans to legislate for a more proportionate alternative to the Certification Regime and to reduce the number of senior managers requiring pre-approval. The PRA and FCA are working jointly toward a 50% reduction in the SMCR’s overall regulatory burden, with a further consultation expected later in 2026.

The PRA has also introduced an enhanced process for internal ratings based (IRB) model approvals for certain applications from January 2026: for firms already using IRB models, it reports that it now reviews complete applications for model changes within six months, with a target of taking final decisions within 18 months.

Quality of Supervision

While the House of Lords Financial Services Regulation Committee had recommended that the PRA consider developing a formal secondment scheme to move staff between the PRA and regulated firms, the PRA rejected this, citing concerns about conflicts of interest, regulatory capture, and confidentiality, and it has instead kept a more selective approach combined with internal capability-building. It continues to benchmark staff pay across the Bank of England rather than targeting private-sector levels, and manages supervisor deployment by rotating managers periodically and monitoring staff movement more broadly.

What This Means Going Forward

Taken together, the two regulators’ updates point to a shared, sustained focus on growth and innovation, spanning faster authorisations, a lower capital benchmark, more proportionate thresholds for smaller firms, and continued investment in sandboxes, scale-up support, and digital infrastructure. Looking ahead, the FCA has already signalled further work across alternative investment funds, pensions value for money, and digital innovation including open banking, open finance, and tokenised funds, and restated its continuing commitment to an evidence-led approach even where individual reforms attract strong industry views.

Both regulators are nonetheless clear that regulatory reform is only one part of the growth picture, and that sustained progress will depend on continued coordination between government agencies and Parliament on the wider legislative and economic conditions needed to support UK financial services.