1. Localisation of regulation

There is a big move towards the localisation of regulation, according to Polly Tsang, Senior Financial Services Regulatory Manager at ICAEW. This has moved ‘beyond fragmentation’, she says. For example, over 70% of banks report using agentic AI, according to Tsang, but AI regulation varies greatly across different jurisdictions.

“We’re seeing rules evolving at different speeds, often diverging, with an increasing element of protectionism” she says. “So as the board of a company that operates in multiple jurisdictions, that’s something to keep an eye on, as well as the potential for additional costs associated.”

Tsang adds this fragmentation can also be seen in the differing approaches and delays to the worldwide implementation of prudential regulation, Basel 3.1, which is the final set of international banking reforms designed in response to the 2008 global financial crisis.

In the UK, the Consumer Duty framework is also being revised. Widely regarded globally as being at the forefront of financial consumer protection, it establishes a clear duty of care requiring financial services firms to deliver good outcomes for retail customers, Tsang says. By contrast, other jurisdictions, including the US, are taking a different regulatory direction, she notes.

Consumer Duty is principles based, an approach with which some firms have struggled, but Tsang adds that it will be interesting to see how other jurisdictions look at the UK’s adoption of this regime and how it might influence the evolution of their own regulatory frameworks.

2. Digital asset growth

Another key trend this year will be the continued growth of digital assets, Tsang says. “We’ve seen traditional finance increasingly embrace digital assets, particularly stablecoins, so this will be a pivotal year for the sector.”

She notes that the UK is now halfway through the Financial Conduct Authority’s (FCA) two-year crypto roadmap, with crypto firms set to come within the regulatory perimeter by 25 October 2027.

Tsang adds that the real test will be how mainstream stablecoin adoption works in practice. Regulatory approaches still diverge massively across jurisdictions, she says, raising the question of whether greater convergence will emerge or whether firms will have to operate within a fragmented global framework.

Tokenisation, the digital representation of real-world assets on blockchain, is another area to watch, with stablecoins increasingly providing the settlement mechanism to support its growth.

3. Provision 29 of the UK Governance Code

The introduction of Provision 29 of the UK Governance Code, effective from January 2026, will also be a another focus this year, Tsang says.

She describes the requirements as a “huge ask” for premium-listed London Stock Exchange companies, as boards will be required to attest that their internal controls are operating effectively.
“We’ve been working with industry and the Financial Reporting Council (FRC) on how this will play out in practice,” Tsang says.

“Boards will need to determine what constitutes a material control – in a bank, for example, there can be thousands,” she explains. “There is also the issue of how much should be reported on the effectiveness of those material controls at the balance sheet date, to ensure consistency and comparability across the market.”

4. Climate also at the forefront 

Another issue to keep an eye on in the financial services space is climate risk, as new disclosure requirements begin to take effect this year, says Tsang. The UK Sustainability Reporting Standards — UK SRS S1 and S2 — are expected in early 2026.

One of the issues is Scope 3 emissions reporting in financial services and how it interplays with climate disclosures under S2.  “This is incredibly important, because financial institutions will be the stewards of the transition,” Tsang says. “But some of the practical issues involve double counting of emissions, the limitations of data available and the use of proxy data. We have been working closely with banks, insurers and the International Sustainability Standards Board (ISSB) to discuss these challenges and support consistent, decision-useful reporting as the new standards come into force.” 

In Q2, we will be publishing reference case studies highlighting Scope 3 reporting challenges across different financial services sub-sectors,” Tsang says. “These are intended to support audit teams in their discussions with audit committees ahead of the reporting cycle.”