Managing the new era of regulatory implementation: UK Financial Services outlook 2026–2027
· Posted on: January 27th 2026 · read
Welcome to the Q1 2026 edition of the MHA Horizon Scanning Bulletin, your essential guide to the evolving regulatory and risk landscape impacting the UK financial services sector over the next 18 months.
The first quarter of 2026 marks a decisive shift in the UK financial services landscape, as regulatory bodies move from policy development to a rigorous focus on supervisory delivery and execution.
In the latest MHA Horizon Scanning Bulletin, we analyse how the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) are increasingly prioritising evidence of robust governance and practical operational readiness over mere technical compliance.
Strategic priorities and execution quality
The regulatory agenda for the next 12 to 18 months is dominated by a transition from "rule-setting" to "supervisory testing".
Boards and senior management are expected to demonstrate credible execution capabilities across several critical domains:
- Basel 3.1 and Capital Reforms Firms must validate standardised and model-based Risk Weighted Asset (RWA) calculations ahead of the 1 January 2027 go-live date.
- Operational and Digital Resilience Compliance with the Digital Operational Resilience Act (DORA) is paramount, with regulators moving towards active testing of "Important Business Services" and third-party dependencies throughout 2026.
- Solvent Exit Planning Since new requirements came into force in late 2025, firms are under pressure to prove they have credible, actionable plans for an orderly market exit if required.
- Consumer Duty and Conduct The focus has shifted to independent testing of actual customer outcomes, fair value assessments, and the effectiveness of Board oversight in embedding these standards.
Macroeconomic and Stability Context
The financial environment is influenced by the Autumn 2025 Budget and recent Bank of England (BoE) committee decisions. The Monetary Policy Committee (MPC) recently reduced the Bank Rate to 3.75%, despite weakened GDP growth and persistent services inflation. Meanwhile, the Financial Policy Committee (FPC) has reduced the Tier 1 capital requirement benchmark to 13% of RWAs, reflecting improvements in risk measurement and a reduction in the systemic importance of some institutions.
Future Outlook
As firms navigate 2026 and 2027, the demand for management-initiated assurance and s166-style reviews is expected to rise. The message from regulators is clear: the ability to govern change effectively and provide high-quality data integrity will be the primary measure of success in this new era of intensified scrutiny.
Next Steps
As regulatory expectations rise, MHA is committed to helping clients turn compliance into strategic advantage through pragmatic, risk-aligned solutions.
Should you wish to discuss how MHA can support your next regulatory milestone or explore tailored assurance solutions, our GRC team would be pleased to help.
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