February 2026 marked a meaningful turning point in how the FCA communicates its expectations to regulated firms. Rather than issuing more than 40 individual portfolio letters, the regulator introduced a new suite of annual, sector-specific Regulatory Priorities reports.
According to Theta Lake, the series began with insurance on 24 February, before expanding to cover wholesale markets, retail banking, consumer investments and other sectors through March.
Theta Lake recently detailed the FCA’s 2026 priorities and how emerging regulatory expectations for AI and off-channel communications impact compliance.
The FCA has been clear that these reports are intended as direct guidance for boards and senior management, and firms are expected to read them carefully and respond where action is required.
Two themes run prominently through the published reports: the responsible use of artificial intelligence (AI), and the ongoing challenge of off-channel communications.
Artificial intelligence
The FCA’s position on AI in 2026 reflects a notably collaborative tone. The Insurance Regulatory Priorities Report, the first in the new series, makes explicit that growth and innovation are now formal regulatory priorities — a shift from previous communications that focused more narrowly on consumer harm remediation. Within this framework, the regulator encourages firms to experiment with AI and to engage with its sandbox services and Innovation Pathways, including the Supercharged Sandbox which is aimed at smaller market participants.
The FCA has confirmed it will evaluate AI deployment across the insurance value chain — covering underwriting, claims and consumer services — during the current quarter, and will publish findings from its AI Live Testing initiative by the end of the year.
The Wholesale Markets Regulatory Priorities Report echoes this position, calling on wholesale firms to engage with regulatory sandboxes and industry initiatives, and to implement robust governance for emerging technologies while managing third-party and data risks. The Consumer Investments Regulatory Priorities Report similarly commits the FCA to supporting AI innovation, offering to help firms test applications through the sandbox and publishing results from AI Live, detailed Theta Lake.
Across all reports, the FCA is consistent in one critical respect: innovation is encouraged, but it does not diminish firms’ accountability for customer outcomes. The regulator expects firms to closely monitor the results of any AI deployment, regardless of sector. Read the full article.
