February 2026 marked a significant shift in how the FCA communicates with regulated firms. In place of more than 40 individual portfolio letters, the regulator launched a suite of annual, sector-specific Regulatory Priorities reports—beginning with insurance on 24 February and expanding to wholesale markets, retail banking, consumer investments and others through March. For compliance teams, these reports are designed to serve as a direct guide for boards and senior management, and the FCA has been explicit: firms should read them carefully and act where necessary.
Two themes emerge with particular force across the published reports: the responsible adoption of artificial intelligence, and the persistent problem of off-channel communications. Here is what you need to know.
Artificial Intelligence
The FCA’s tone on AI in 2026 strikes a collaborative note. The Insurance Regulatory Priorities Report, the first published in the new series, is explicit that growth and innovation are now formal regulatory priorities, which is a departure from communications that were more exclusively focused on consumer harm remediation. Within that framing, the FCA encourages firms to experiment with AI and to use its sandbox services and Innovation Pathways, including the Supercharged Sandbox for smaller market participants.
Theta Lake takes this direction to heart and was included in the FCA’s AI Spotlight and is currently participating in the FCA’s AI Lab Supercharged Academy. We’ll be presenting at the FCA’s Global AI Governance and Innovation Showcase on April 24—grab your ticket now!
The FCA will evaluate AI deployment across the insurance value chain, including underwriting, claims and consumer services, during this quarter, and will publish an evaluation report from its AI Live Testing initiative by year-end.
The Wholesale Markets Regulatory Priorities Report reaffirms this direction. The FCA calls on wholesale firms to engage with regulatory sandboxes and industry initiatives and to implement robust governance for emerging technologies, managing third-party and data risks accordingly. It specifically commits to supporting responsible AI adoption through its FCA Innovation Hub initiatives.
For consumer investment firms, the Consumer Investments Regulatory Priorities Report similarly commits the FCA to supporting AI innovation by helping test applications through the sandbox and publishing an evaluation report from AI Live.
Critically, the FCA couples its encouragement of AI with a clear requirement for firms to closely monitor customer outcomes. The regulator’s message is consistent across every report: innovation is welcome, but it does not reduce firms’ accountability for the results.
Off-Channel Communications
For wholesale firms in particular, the FCA’s messaging on off-channel communications has sharpened in 2026. The Wholesale Markets Report explicitly identifies banks’ off-channel communications as one of the specific areas the FCA reviewed and found both areas of progress and areas that need improvement.
It is worth nothing here that thew the FCA conducted a multi-firm review of 11 wholesale banks in 2025 and found that while all firms had made improvements to their frameworks over the past two years, breaches of internal policies continue to occur across all staff grades. Most alarmingly, 41% of those breaches involved individuals at director grade or above—the very people responsible for setting the tone from the top.
One further development worth noting: from September 1, 2026, changes to the FCA’s non-financial misconduct rules will expand the Code of Conduct to cover behaviors such as harassment, bullying or discrimination, even when communicated via informal channels. Persistent use of off-channel communications will therefore carry additional regulatory exposure beyond recordkeeping obligations alone.
Takeaways for Compliance and Governance Teams
From a compliance perspective, documenting your firm’s AI use cases across underwriting, claims, consumer services and investment decision-making is key. Moreover, firms must ensure proper governance of those use cases. For example, using audit standards like ISO 42001 for AI Management Systems or the CSA STAR for AI, demonstrate that internally or externally developed AI tools have trusted and tested practices for the development, training, deployment, and maintenance of AI systems.
Review off-channel communications policies to cover the full range of modern channels, including cloud calling systems and messaging apps. Consider how governance and oversight of AI assistant prompts and responses and notetakers is covered in your risk profile and apply supporting compliance technology accordingly.
Taking steps to improve AI and off-channel compliance protocols now should increase confidence as FCA reviews and enforcement take shape in 2026.
