The GRC Navigator

INVESTMENT FIRMS, ASSET MANAGEMENT

On 15 October the FCA cut investment firm capital rules text by 70% while maintaining prudential standards. The reform eliminates 30,900 words of outdated banking provisions incompatible with investment firm business models.

• Legal text reduced from 44,100 to 13,200 words across all IFPR documentation.
• Simplified regulatory capital definitions, with clearer own funds calculations.
• Removal of complex banking-derived provisions that added compliance burden without risk benefit.
• Implementation date confirmed as 1 April 2026 providing adequate preparation time.
• Capital requirement levels maintained ensuring no reduction in prudential standards.

BANKING, INVESTMENT FIRMS

Joint PRA/FCA Policy Statement PS21/25, published on 15 October, restructures banker bonus rules:

• Apply to banks, building societies, PRA-designated investment firms, and UK branches of third-country banks.
• The new framework establishes a uniform four-year deferral period across all material risk takers, including senior managers, with pro-rata vesting permitted from the grant date for SMFs. 40% of bonus up to £660,000 is deferred, rising to 60% on amounts above that threshold.
• Structural requirements are relaxed. No mandatory retention periods on deferred awards, greater flexibility mixing cash and instruments, and permission to pay dividends or interest on deferred elements (while maintaining the 50% instruments floor overall). The material risk taker definition shifts to a 0.3% top-earners test plus qualitative factors, introducing an individual proportionality threshold where staff earning under £660,000 total compensation with variable pay below 33% can escape certain structural requirements.
• The SM&CR connection tightens, with explicit expectations for pay adjustments up the management chain following adverse outcomes and requirements to embed PRA priorities in senior scorecards. The FCA has reduced SYSC 19D to essentially a cross-reference to PRA rules, eliminating duplication.
• Implementation begins 16 October 2025 with mandatory application from the first performance year starting thereafter-2026 awards for calendar-year firms-though early adoption remains possible for 2025 awards and existing unvested arrangements.

ASSET MANAGEMENT, WEALTH MANAGEMENT, DIGITAL ASSETS

The FCA's 27th October publication confirmed its decision to permit retail investor access to crypto Exchange Traded Notes on 08 October 2025, effective immediately. Crypto ETNs must trade exclusively on FCA-approved UK Recognised Investment Exchanges.

• MiFID II permissions mandatory for firms distributing to retail clients
• Full Consumer Duty obligations apply including value demonstrations and outcome monitoring
• Enhanced target market identification and product governance requirements
• Mandatory complex product warnings and risk disclosures

ASSET MANAGEMENT, ESG-FOCUSED ENTITIES

On 27 October 2025 the Government laid before Parliament the Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025, which will bring ESG ratings providers into the FCA perimeter once approved. It addresses transparency and reliability concerns in sustainable finance markets.

• The new regime is scheduled to commence on 29 June 2028, with ESG ratings providers required to obtain FCA authorisation by then, subject to transitional provisions.
• Code of conduct aligned with IOSCO principles for ESG ratings providers
• FCA enforcement powers including fines and public censure for non-compliance
• £3 million allocated for FCA framework development in 2025/26

ASSET MANAGEMENT, INVESTMENT FIRMS

CP25/29, published 28 October, proposes reforms to UK short selling transparency and reporting requirements, with consultation closing 6 November. The proposals aim to improve market liquidity while keeping appropriate oversight.

• Aggregated net short position reporting replacing individual position disclosure
• Simplified reporting processes reducing administrative burden on market participants
• Reduced barriers to legitimate short selling activity enhancing market efficiency
• Enhanced transparency mechanisms for systemic risk monitoring
• Alignment with international best practice while maintaining UK competitive advantage

ASSET MANAGEMENT, INVESTMENT FIRMS

PS20/25: The Strong and Simple Framework (28 October 2025)

• PS20/25 is the capital pillar of the Strong and Simple framework - it turns the SDDT regime into a full alternative prudential regime for smaller, domestic banks and building societies. It applies to firms with assets ≤£20bn and a UK-focused, low-trading, non-IRB profile, and confirms that the simplified capital regime will apply from 1 January 2027.
• Substance-wise, it recuts the whole capital regime for SDDTs: Pillar 1, Pillar 2A, buffers, the PRA buffer, capital definitions and reporting are all simplified for low-complexity balance sheets. ICAAP moves onto standardised templates, with stress testing embedded in the annual ICAAP cycle rather than via separate, ad hoc exercises. Pillar 3 disclosures are pared back to the basics, limiting market-facing complexity that adds little for non-systemic firms.
• This means a materially lighter process burden, clearer expectations and far fewer bespoke modelling demands which is attractive for building societies and smaller challenger banks. But it's not a soft option: capital floors and Pillar 2 mechanics are designed to keep overall resilience broadly in line with Basel 3.1 outcomes, and the PRA is explicit that this is proportionate simplification, not a loosening of standards. For boards, the real risk is transitional: mis-planning the move from CRR/Basel 3.1 into Strong and Simple could leave firms over- or under-capitalised just as the new regime bites.

PS18/25: Retiring the Refined Methodology (28 October 2025)

• PS18/25 ends a long-running feature of UK capital policy. The "refined methodology" allowed selected firms using the standardised approach to benchmark their Pillar 2A capital against IRB-derived risk weights, softening perceived conservatism in the old CRR standardised regime. With Basel 3.1 re-calibrating credit risk and introducing the output floor, the PRA's view is that the original rationale has largely evaporated.
• The PS confirms the decision to retire the refined methodology for all firms, with implementation aligned to 1 January 2027, i.e. when Basel 3.1 goes live in the UK - not 2026 as originally trailed in CP9/24. In parallel, it finalises clarificatory tweaks to Pillar 2A treatments for IRRBB and pension obligation risk (effective 1 July 2026), and hard-wires these into SoP5/15 and SS31/15.
• Conceptually, PS18/25 trades bespoke relief for simplicity and consistency. Firms lose a powerful lever that could offset high standardised RWAs on low-LTV mortgages and similar assets, so some will see upward pressure on total capital requirements. But they gain a cleaner, more transparent framework in which Basel 3.1 is the primary driver of risk sensitivity, not supervisory benchmarking. The risk for smaller banks is that, absent careful portfolio and product-pricing review, the removal of refined methodology benefits quietly erodes RoE just as other Basel 3.1 impacts land.

PS19/25: CRR Restatement (28 October 2025)

• PS19/25 is the legal plumbing that makes the post-Brexit capital world hang together. It takes the remaining live chunks of the EU Capital Requirements Regulation and ports them into the PRA Rulebook and associated statements of policy, ahead of CRR revocation and Basel 3.1 implementation in 2027.
• The PRA emphasises continuity of substance: most requirements on level of application, counterparty credit risk, settlement risk and various "other CRR" provisions are restated largely as-is, with changes focused on tidying cross-references and embedding them into domestic instruments. Where there is policy movement is around securitisation. The PS finalises targeted changes on the SEC-SA p-factor, STS securitisation risk weights, treatment of mortgage guarantee schemes, and expectations for unfunded credit protection in synthetic SRT transactions, plus an updated framework for ECAI mapping.
• PS19/25 means that by 1 January 2027 firms will be operating under a fully "PRA-native" capital framework: Basel 3.1 rules, SDDT regime where relevant, and restated CRR all in one coherent suite. That reduces legal risk and ambiguity around assimilated law, but raises an operational challenge: documentation, policies, model inventories and permissions all need to be re-mapped to new Rulebook parts and SoPs, with particular care around securitisation and groups.

Together these reforms substantially simplify the prudential regime for smaller UK banks. The SDDT regime has the backing of the Financial Policy Committee, which supports it as a proportionate approach that simplifies compliance for smaller firms while maintaining the resilience standards required of the broader banking system. The framework offers tailored requirements that let smaller domestic-focused banks compete without compromising prudential standards.

• Sam Woods, CEO, Prudential Regulation Authority

PRIVATE EQUITY, HEALTHCARE

GHO Capital Partners raised more than €2.5bn for its largest healthcare-focused fund to date, closing the vehicle on 29 October. The latest programme will back specialist healthcare companies across Europe and North America, with an emphasis on buy-and-build platforms. The strong response shows continued LP appetite for healthcare as a non-cyclical growth theme, even as broader private equity fundraising remains competitive.

PRIVATE EQUITY

BC Partners secured about $1.8bn in commitments for its latest European buyout fund ahead of first close on 24 October. The vehicle, which is targeting a materially larger final size, has drawn strong interest from European pension schemes and sovereign wealth funds despite a slower global fundraising backdrop. The early momentum suggests that established brands with proven deployment and exit track records continue to capture a disproportionate share of new capital.

HEDGE FUNDS, PRIVATE EQUITY

D1 Capital Management is targeting $1bn for its first dedicated private equity fund, launched in mid-October. The vehicle will formalise the firm's growing roster of private deals, focusing on high-growth businesses where D1 already has public-markets expertise. For investors, the strategy offers a way to access D1's crossover approach in a closed-end structure. It is another example of large hedge fund platforms building out parallel private equity franchises.

PRIVATE EQUITY, MID-MARKET

German investor Armira has reached roughly €1bn in its latest fundraising efforts, adding fresh capital to its mid-market private equity platform. The capital will be deployed into founder- and family-owned businesses across the DACH region and wider Europe, often via long-term partnership structures. The larger fund size points to LP demand for regional managers with deep local networks and the ability to source off-market deals in a competitive mid-cap market.

HEDGE FUNDS, PRIVATE CREDIT

Multi-strategy giant Millennium is raising a new private markets fund targeting about $5bn, one of the firm's larger moves beyond liquid trading strategies. The vehicle is expected to focus on private credit and structured equity solutions for corporates and sponsors, using Millennium's existing sourcing relationships and risk infrastructure. For allocators, the launch offers exposure to private markets under a manager best known for its multi-PM hedge fund model, and shows hedge funds and private capital moving closer together.

WEALTH MANAGEMENT, FINANCIAL ADVICE

BANKING, PRIVATE CREDIT

PENSIONS, PRIVATE MARKETS