FCA's Vision for 2025

Vicky

Hello and welcome back to the B-Compliant AI podcast. So this week the FCA released their strategic priorities for 2025 and 2026. There are four main ones, and they’re pretty ambitious: becoming a smarter regulator, supporting growth in financial services, enhancing consumer decision-making, and tackling financial crime.

Rachel

Yeah, and they’re really aiming high with that first one, "smarter regulation." I mean, the new My FCA portal is an exciting step, isn’t it? Managing all those regulatory tasks in one place? That’ll save firms so much hassle—assuming it works as smoothly as they say it will, which lets face it, hasn't been the general experience with FCA system upgrades in the past has it?

Vicky

No it hasn't, there have always been a few issues for firms when the FCA changes or upgrades their systems, but they are saying that this is more than just the portal. They’re also talking about more targeted supervision. Things like using intelligence to spot problems earlier and tailoring their approach based on a firm’s conduct, which could hopefully streamline compliance for well-behaved businesses.

Rachel

Hmm, flexible engagement, right? It does sound promising. But, let’s be honest, it’s the whole supporting growth priority that firms will find the most encouraging. They're reviewing capital requirements for trading firms, simplifying rules for commercial insurance, and even promoting responsible AI use.

Vicky

Yeah, the responsible AI part really caught my eye given how we're trying to embrace AI to enhance our business. It’s about innovation, but they’re doing it cautiously, making sure it aligns with consumer protection. What’s your take on that?

Rachel

Honestly? I think it’s long overdue! Like, firms have been asking for clarity on AI for a while now, and given how quickly AI is advancing it’s about time, isn’t it?

Vicky

Definitely. And moving on to consumer outcomes, they’re really leaning on tech there as well—especially in mortgages and pensions. The alignment with the Consumer Duty should encourage firms to deliver better advice and outcomes.

Rachel

Totally. They’ve highlighted how tech can help consumers make more informed decisions. And it’s not just about information—it’s about making sure it’s actually useful, accessible, and timely. I mean, how often do people get lost in the jargon of pensions and mortgage advice?

Vicky

All the time Rach, all the time. Then there’s the £783.5 million Annual Funding Requirement. That’s a hefty jump, up 3.8% from last year. Firms, especially smaller ones, are already feeling the squeeze when it comes to compliance costs, so this increase might, you know, add a bit more weight to that burden.

Rachel

Right, but they’ve justified it with investments in areas like pensions dashboards, access to cash, and smarter systems. Still, there are always going to be questions about how these increases impact firms at the ground level.

Vicky

And let’s not forget the big sustainability push. Positioning the UK as a global hub for sustainable finance is no small task. There’s international collaboration happening, but as our ESG specialist, what do you think it’ll mean for firms in practice?

Rachel

Well, it basically means more engagement on ESG metrics and sustainable investments. It’s a chance for UK firms to lead on all things green finance, but—with the usual trade-off—meeting these new expectations probably won’t be cheap or easy.

Vicky

And that’s the balancing act firms are navigating—how to innovate and grow while staying compliant and avoiding unnecessary costs or risks.

Vicky

Speaking of balancing acts Rach, the FCA’s new Call for Input tackles that head-on for Alternative Investment Fund Managers—or AIFMs. Their aim is to simplify regulation and tailor it more effectively to the UK market. What’s your take on that?

Rachel

Yes! The introduction of a tiered regime based on net asset value is definitely interesting. You’ve got the small firms under £100 million, mid-sized ones in that £100 million to £5 billion range, and then the large firms over £5 billion. Finally, right? Hopefully saying goodbye to the risk of the cliff-edge effects from the old EU approach.

Vicky

Totally. It could be a much more proportionate system, plus the FCA’s moving towards a thematic structure for rules. Instead of wading through disconnected bits of regulation, firms will navigate by themes like product design, investor disclosures—practical stuff that reflects how they actually work.

Rachel

Ooh, yes, that thematic approach sounds like it could be positive. But what really caught my eye was the special conditions they’re thinking about for certain types of funds. Like those venture and growth capital fund managers.

Vicky

Right, because those are the ones financing early-stage, innovative businesses. The FCA’s recognising their unique role, which, I think, makes sense. And they’re also exploring more proportionate rules for other types, like closed-ended investment companies—addressing things like liquidity and leverage.

Rachel

Yeah, especially leverage. I mean, their concern about highly leveraged hedge funds? That’s pretty clear. It’s all about systemic risks and making expectations more transparent when it comes to managing that leverage responsibly. What do you think—are firms ready for this sort of clarity?

Vicky

I think they’re ready, and probably waiting. Clearer rules help everyone. But, of course, it’ll take time for firms to adjust—they’re not just changing thresholds; they’re also making those risk management expectations much clearer across the board. It’ll be a lot to process.

Rachel

Of course. Firms only have until June 9th to respond to the Call for Input which is not a massive amount of time to digest this and send back their thoughts.

Vicky

No, it’s not. Especially considering the FCA’s next step is consulting on detailed rules early next year. By then, I imagine, a lot of firms will already be feeling the push to adapt.

Rachel

But if done right, this could genuinely be a turning point. A more flexible, tailored regime could help these firms innovate without being bogged down by one-size-fits-all rules. That’s the hope, anyway.

Vicky

Alright, Rachel, after unpacking all those FCA changes, let’s pivot to something else on the horizon that might have an impact on the firms listening—new changes to Companies House requirements in line with the Economic Crime and Corporate Transparency Act.

Rachel

Right, starting with the new identity verification rules. Oh, and it’s not just for company directors—it’s also for Persons with Significant Control and anyone filing on behalf of companies. They’re rolling it out voluntarily this month, but it becomes mandatory this autumn.

Vicky

Absolutely. And mandatory is the key word here. This is going to be a big deal for businesses because, without verification, filings just won’t go through. It’s all aimed at maintaining the integrity of the register and cutting down on inaccurate or misleading information.

Rachel

Yeah, and tougher penalties too, right? We’re talking fines up to ten thousand pounds for non-compliance, and even criminal charges in the more serious cases. I mean, that’s a serious incentive to stay on the right side of things.

Vicky

It definitely is. These reforms show the direction Companies House is heading—towards a more robust and transparent system. And let’s be real, it’s a reminder that compliance isn’t just about the FCA. Firms need to have their house in order—pun intended.

Rachel

Oh, nice one, Vicky! But seriously, these changes align with the broader push we’ve been seeing this episode—more accountability, better use of technology, and reducing vulnerabilities to crime. It’s not always easy, but it’s necessary.

Vicky

It certainly is. And with that, I think we’ve given everyone plenty to think about for this week. From FCA priorities to AIFM rules and now Companies House, there’s a lot going on. But we’re here to help you navigate it all.

Rachel

Absolutely. Thanks for sticking with us today, folks. We’ll see you next time!

Vicky

Take care, everyone!