The UK’s financial services sector is on the cusp of significant transformation, with 2025 shaping up to be a pivotal year for regulatory change. This in-depth guide will navigate the key themes, evolving regulatory approaches, and sector-specific shifts that financial services professionals must understand to thrive in this dynamic environment.
Key Regulatory Themes for 2025
- Growth: The drive for economic growth and international competitiveness will be a central theme in 2025. We anticipate the UK government’s formal publication of its strategy on financial services growth, which will likely include measures to streamline regulations and foster innovation. This includes reforms to UK MiFID and transaction reporting aimed at boosting UK competitiveness are underway. Regulators like the PRA and FCA are also aligning their priorities with this growth agenda, seeking to reduce unnecessary burdens on firms whilst maintaining high standards.
- Data, Technology, and AI: The UK is keen to position itself at the forefront of financial innovation, with a strong emphasis on the adoption of AI. Regulators are actively exploring how to provide clarity and support for the responsible use of AI, as seen in the FCA’s AI initiatives. This focus extends to the regulation of cryptoassets, with consultations expected throughout 2025 to establish a robust framework for this evolving area.
- Consumer Duty, Fair Value, and Vulnerability: The FCA’s Consumer Duty will remain a cornerstone of its regulatory approach, with a strong emphasis on ensuring fair value for consumers and protecting vulnerable customers. Firms can expect increased scrutiny of their pricing practices, product governance, and treatment of customers in vulnerable circumstances.
- Governance and Risk Culture: Regulators continue to prioritise strong governance and risk culture within financial institutions. The PRA, in particular, is focusing on “risk culture” – the shared values and behaviours that influence risk-taking. We also anticipate developments around the Certification Regime, with potential reforms on the horizon.
- Financial Crime: The fight against financial crime remains a critical priority, with the FCA including it as one of the four key themes in its 2025-2030 strategy. Areas of focus include reducing investment fraud, authorised push payment (APP) fraud, and money laundering, as well as ensuring robust sanctions compliance.
- Operational Resilience: The deadline for firms to meet the operational resilience requirements has just passed (31 March 2025). Regulators will be closely monitoring firms’ ability to withstand disruptions and maintain essential services, with increased supervisory scrutiny expected.
- Financial Stability: Maintaining the stability of the financial system is paramount. In 2025, this includes the implementation of Basel 3.1 standards, ongoing supervision under the new UK Solvency II regime, and addressing risks related to non-bank financial institutions (NBFIs).
The UK Regulatory Approach
Both the FCA and the PRA are committed to a supervisory-led, outcomes-focused regulatory approach. This means a shift away from a purely rules-based system towards one that emphasises firms’ behaviours and the actual results they achieve for consumers. We can expect to see:
- Assertive Supervision: Regulators are prepared to use their full range of powers to ensure compliance and achieve desired outcomes.
- Data-Driven Regulation: Both the FCA and PRA are investing heavily in technology and data capabilities, enabling them to identify trends, assess risks, and intervene effectively.
- Proactive Intervention: Increased use of tools like skilled person reviews (s166s) and thematic reviews to address specific concerns and drive improvements across the industry.
What This Means for Financial Services Recruitment
These regulatory trends have significant implications for financial services recruitment:
- Heightened Demand for Compliance Expertise: Firms will need professionals with in-depth knowledge of specific regulations, including the Consumer Duty, operational resilience requirements, and financial crime prevention.
- Emphasis on Data and Technology Skills: The growing reliance on data and AI will drive demand for individuals with expertise in data analysis, data governance, and technology implementation within a regulatory context.
- Focus on Risk Management and Governance: Professionals with strong risk management, governance, and internal control skills will be highly sought after, particularly in areas like financial stability, conduct risk, and operational resilience.
- Adaptability and Change Management: The ability to navigate regulatory change and implement new requirements will be a key attribute for candidates in the financial services sector.
Sector-Specific Insights
- Retail Banking and Payments: Key themes include financial stability in the wake of global events, potential motor finance redress, embedding the Consumer Duty, protecting vulnerable customers, ensuring access to financial services, and combating financial crime.
- Insurance: The insurance sector faces intense regulatory scrutiny, with a focus on fair value in products, operating model transformation, financial resilience, and Solvency II reforms.
- Capital Markets: The government’s focus on growth and competitiveness will drive regulatory changes in capital markets, with continued emphasis on risk management, conduct, culture, and sustainability.
- Wealth and Asset Management: This sector is undergoing significant change, with regulatory attention on vulnerable customers, fair value, financial crime prevention, and the impact of consolidation.
Conclusion
The UK financial services sector in 2025 will be defined by a complex interplay of growth ambitions, evolving regulatory expectations, and technological advancements. Financial services professionals must proactively adapt to these changes, embracing a mindset of continuous learning and development. For recruitment in this sector, identifying and placing individuals with the right blend of technical expertise, regulatory knowledge, and adaptability will be crucial for organisational success.