FCA makes AI a priority

Britain’s Financial Conduct Authority has made artificial intelligence governance and off-channel messaging formal supervisory priorities for 2026 across financial services. (fca.org.uk) The regulator rolled out nine annual Regulatory Priorities reports between February 24 and March 25, 2026, replacing more than 40 portfolio letters with sector-by-sector supervision plans. The Financial Conduct Authority said the new format is meant to give firms clearer priorities and a more consistent message. (fca.org.uk) In those reports, the Financial Conduct Authority is telling firms to adopt AI “safely and responsibly,” with boards and senior managers expected to review governance, testing, third-party risk and customer outcomes. The watchdog is also steering firms toward its Innovation Pathways, Regulatory Sandbox and AI Live Testing program. (fca.org.uk, fca.org.uk, fca.org.uk) Off-channel messaging means business communications that happen outside a firm’s approved, recorded systems, such as personal apps or unmonitored devices. In an August 2025 multi-firm review, the Financial Conduct Authority said firms had improved controls but still showed weaknesses in surveillance, breach handling, management information and consequence management. (fca.org.uk) The 2026 wholesale markets report says off-channel communications remain a live issue for banks, even after that review. Trade publication coverage of the new priorities said the regulator found “progress and persistent shortcomings” and is keeping the issue under direct supervisory attention this year. (fca.org.uk, fintech.global) The Financial Conduct Authority is pairing those technology controls with culture rules that take effect on September 1, 2026. Its new non-financial misconduct framework extends conduct rules in non-banking firms to certain work-related bullying, harassment and violence, and tells firms to update policies, breach reporting, fitness assessments and regulatory references before that date. (fca.org.uk, pinsentmasons.com) Market structure rules are moving at the same time. In Consultation Paper 25/29, the Financial Conduct Authority proposed a phased rewrite of UK short-selling rules, including aggregated net short position disclosures, with phase 1 scheduled for 2026 and phase 2 for December 1, 2026. (fca.org.uk) The regulator’s broader 2026/27 work program ties those changes to its four strategic priorities: deepen trust, rebalance risk, support growth and improve lives. For firms, that means 2026 is not just about experimenting with AI tools; it is also about proving the controls, records and governance around them will stand up in supervision. (fca.org.uk, fca.org.uk)