THE GRC NAVIGATOR

Your Bi-Weekly GRC Intelligence Briefing

Issue 4 | 30 June 2025

Executive Summary

The final weeks of June have delivered transformative developments across UK financial services regulation. The Government's new Industrial Strategy positions financial services as one of eight priority sectors, while comprehensive pension reforms introduce a £25 billion consolidation threshold. The FCA has announced sweeping reforms to enhance insurance market competitiveness and launched the revolutionary PISCES sandbox for private company share trading. A critical House of Lords report demanding culture change at regulators adds urgency to the sector's evolution. Meanwhile, the Bank of England advances its monetary framework overhaul, and the PRA signals major changes for credit union investment powers. Warren Buffett's record $6 billion Berkshire share donation provides a notable market backdrop, while potential motor finance redress schemes could reshape consumer protection approaches across the industry.

Top Story: Government Unveils Financial Services as Priority Sector in New Industrial Strategy

ALL FINANCIAL SERVICES

The UK Government has published its comprehensive Industrial Strategy, identifying financial services as one of eight priority sectors (IS-8) with the highest growth potential. The strategy positions fintech, insurance and reinsurance markets, sustainable finance, capital markets, and asset management as frontier industries critical to the UKs economic future.

KEY COMMITMENTS:

◆ Financial Services Sector Plan to be published 15 July alongside Chancellor’s Mansion House speech

◆ Rebalancing regulation for growth with 25% reduction in administrative regulatory costs

◆ Bespoke financial services ‘concierge service’ for international firms

◆ New Treasury unit dedicated to cutting red tape for fintech firms

◆ Enhanced mutual recognition agreements to boost UK services exports

This represents the most significant government commitment to financial services competitiveness since Brexit.

Regulatory Updates

FCA Announces Major Insurance Market Reforms

INSURANCE, INTERMEDIARIES

The FCA has announced comprehensive rule changes aimed at enhancing UK insurance market competitiveness while preserving consumer protection. The proposals, detailed in Consultation Paper CP25/12, represent the most significant insurance regulatory overhaul in years.

◆ Streamlined rulebook removes outdated and duplicated requirements

◆ More tailored approach for commercial insurance vs. consumer products

◆ Reduced reporting obligations for Employers’ Liability insurance

◆ Enhanced flexibility for commercial insurance intermediaries

Mortgage Market Faces Comprehensive Review

MORTGAGE LENDING, BANKING

The FCA has published a discussion paper (DP25/2) on the future of the mortgage market, marking the most comprehensive review of mortgage regulations since the Mortgage Market Review implementation. Comments are due by 19 September 2025.

◆ Review covers affordability assessments, product innovation barriers, and market access

◆ Focus on balancing consumer protection with market competitiveness

◆ Potential implications for lending criteria and product development

Payment Services Contract Termination Rules

PAYMENTS, FINTECH

New Payment Services and Payment Accounts Regulations 2025 impose enhanced consumer protections for payment service providers, requiring minimum 90 days’ notice before account closure or service termination, effective 28 April 2026.

◆ Clear written explanations required for customers

◆ Applies to indefinite period contracts

◆ Strengthens consumer rights in digital banking relationships

House of Lords Demands Regulatory Culture Change

ALL FINANCIAL SERVICES

A House of Lords Financial Services Regulation Committee report published 13 June has called for fundamental culture change at UK financial regulators, criticizing “deeply entrenched risk aversion” that conflicts with growth objectives.

◆ Regulators exhibit risk aversion hampering government’ growth agenda

◆ Lack of clarity on balancing growth with consumer protection

◆ Cultural transformation required rather than mere rule changes

◆ Greater transparency demanded in regulatory decision-making

PRA Developments

Pension Consolidation Legislation

PENSIONS, ASSET MANAGEMENT

The Government has introduced the Pension Schemes Bill, implementing the most significant pensions sector reforms in decades with a £25 billion consolidation threshold for multi-employer defined contribution schemes.

◆ DB surplus return rules relaxed for ongoing schemes

◆ New ‘superfunds’ framework for closed DB scheme transfers

◆ LGPS investments must be managed through asset pools

◆ Enhanced powers for consolidating underperforming schemes

Credit Union Investment Powers Expansion

CREDIT UNIONS, MUTUAL FINANCE

The PRA has launched consultation CP13/25 proposing significant expansion of credit unions investment capabilities, allowing investment in Credit Union Service Organisations (CUSOs) for the first time.

◆ Amendments to restrictive investment rules enabling shared services access

◆ Technology platforms and compliance support services included

◆ Comments due 24 October 2025, implementation expected 2026

◆ Could enable greater efficiency and cost savings across the sector

Capital Buffers Framework Modernisation

BANKING

The Capital Buffers and Macro-prudential Measures Regulations 2025 restate provisions following FSMA 2023, with the FPC retaining countercyclical capital buffer authority while the PRA assumes capital conservation buffer responsibilities.

Fund Launches & Capital Raises

Warren Buffett's Record Philanthropic Donation

GOVERNANCE, ASSET MANAGEMENT

Warren Buffett has announced a record $6 billion Berkshire Hathaway share donation, marking the largest single philanthropic commitment in the company’s history with implications for corporate governance and succession planning.

◆ May accelerate governance discussions around post-Buffett structure

◆ Asset managers should assess portfolio concentration impacts.

KKR Builds Record $42bn Real Estate Credit Pipeline

PRIVATE CREDIT, REAL ESTATE

KKR has amassed a record $42 billion private real estate credit pipeline, demonstrating the continued expansion of alternative credit into commercial real estate markets amid traditional bank lending constraints.

◆ Represents one of the largest real estate credit accumulations in industry history

◆ Highlights growing institutional appetite for real estate debt strategies

◆ Alternative lenders continue gaining market share from traditional banks

Neuberger Berman Closes $4bn+ GP-Led Secondaries Fund

PRIVATE EQUITY, SECONDARY MARKETS

Neuberger Berman has raised over $4 billion for its latest GP-led secondaries vehicle, NB Strategic Capital Fund II, reflecting robust institutional demand for secondary market strategies.

◆ Significant increase from previous fund demonstrating sector growth

◆ GP-led secondary transactions continue to evolve as exit strategy

◆ Institutional investors seeking diversified private market exposure

Major European Private Equity Fund Raises

PRIVATE EQUITY

Several significant European fund closings highlight continued capital deployment across mid-market and specialized strategies:

Cinven is raising between €1.5-2 billion for a new mid-market fund, targeting European growth companies.

Aurelius held the final close of Aurelius Opportunities Fund V at €830 million, focusing on special situations investments.

Marlin Equity Partners completed the final close of its third European fund, Marlin Heritage Europe III, at its €1 billion hard cap.

◆ Mid-market strategies continue attracting institutional capital

◆ European private equity maintains momentum despite economic uncertainties

◆ Specialised and opportunistic strategies showing strong fundraising performance

Energy Transition and Asia-Focused Strategies Gain Momentum

ENERGY TRANSITION, ASIA-PACIFIC

Greenbelt Capital Partners closed its inaugural energy transition fund at a $1 billion hard cap, exceeding its $750 million target by 33%. Ares Management Corporation is reportedly seeking to raise more than $2 billion for a new Asia-focused special situations fund.

◆ Energy transition investments continue to attract significant capital

◆ Asia-Pacific special situations strategies gaining institutional interest

◆ ESG-focused funds consistently oversubscribing target amounts

Innovation in Retail Private Market Access

RETAIL DISTRIBUTION, PRIVATE MARKETS

Carlyle Group is launching new retail-focused funds aimed at affluent individual investors to expand its presence in the private equity secondaries market.

CVC Capital launched CVC Catalyst, a new private equity strategy for mid-market businesses across Europe, focusing on equity investments under €250 million.

◆ Private equity firms increasingly targeting retail investor segments

◆ Lower minimum investment thresholds expanding market access

◆ Regulatory frameworks evolving to accommodate retail private market participation

SWEN Blue Ocean Strategy Advances

SUSTAINABLE INVESTING

SWEN Capital Partners raised €160 million in the first close of its SWEN Blue Ocean 2 fund, targeting sustainable ocean economy investments and marine conservation technologies.

◆ Specialized ESG strategies continue to attract dedicated capital

◆ Ocean economy represents emerging sustainable investment theme

◆ Impact investing maintains strong institutional support

Meta's $29bn Private Credit Financing

PRIVATE CREDIT, TECHNOLOGY INFRASTRUCTURE

Meta has entered discussions with private credit providers for $29 billion in data center expansion financing, highlighting the growing intersection between technology infrastructure and alternative credit markets.

Enforcement Watch

Enhanced FCA Enforcement Transparency

ALL FINANCIAL SERVICES

The FCA has updated its Enforcement Guide, introducing three new disclosure scenarios beyond the “exceptional circumstances” test, marking the most substantial overhaul of enforcement disclosure in recent years.

◆ Investigations into unauthorised/unregulated activity

◆ Investigations already made public by another party

◆ Anonymised announcements supporting public understanding

◆ Over 250 pages removed from previous guidance

E-Money and Payments Firm Supervision Review

FINTECH, PAYMENTS

FCA review of 14 firms with e-money and payments permissions found underdeveloped risk management frameworks, with no firms fully meeting regulator expectations.

◆ Enterprise-wide risk approach deficiencies identified

◆ Wind-down planning inadequacies across the sector

◆ Liquidity risk and group risk considerations require enhancement

Motor Finance Redress Scheme Development

MOTOR FINANCE, CONSUMER CREDIT

The FCA has outlined comprehensive plans for a potential industry-wide motor finance redress scheme, pending Supreme Court judgment in Hopcraft & Anr v Close Brothers, with potential multi-billion pound liability.

◆ Decision expected within six weeks of Supreme Court ruling

◆ Implementation anticipated in 2026 if proceeding

◆ Could affect millions of motor finance customers

◆ Industry shares already experiencing volatility

Market Developments

PISCES Revolutionary Trading Platform Launch

CAPITAL MARKETS, FINTECH

The FCA has launched the groundbreaking PISCES sandbox enabling intermittent trading of private company shares through regulated market infrastructure, potentially revolutionizing private market access.

◆ Stamp duty exemptions effective from 3 July 2025

◆ Streamlined disclosure requirements following industry feedback

◆ Sandbox runs until 2030 with permanent framework expected

◆ Positions London as global leader in private market innovation

Bank of England Monetary Framework Transition

BANKING, MARKET INFRASTRUCTURE

The Bank of England has published feedback on its transition to a repo-led, demand-driven operating framework for central bank reserves, despite industry concerns about predictability during stress scenarios.

◆ Broad industry support for framework effectiveness

◆ ILTR recalibration receives backing despite stress concerns

◆ PRA confirms routine liquidity usage viewed favorably

◆ Represents most significant monetary operations change in decades

UK Emerges as Fastest Growing G7 Economy

MACROECONOMIC

Official data confirms the UK was the fastest-growing G7 economy in Q1 2025, with nominal GDP forecast to have grown by 1.5%, providing positive backdrop for the government’s growth-focused regulatory agenda.

Regulatory Simplification Initiatives

ALL FINANCIAL SERVICES

The FCA has confirmed immediate removal of multiple reporting requirements through Policy Statement PS25/7, including FSA039 client money reporting, RMA-F Section F, and Form G event-driven notifications.

Regulatory Calendar

July 2025

August 2025

September 2025

Question of the Week

With the Government’s Industrial Strategy positioning financial services as a priority sector
and promising a 25% reduction in administrative regulatory costs, how should firms balance
preparing for regulatory simplification with maintaining robust compliance frameworks
during this transition period?

Insights

Creating a regulated platform for intermittent trading of private company shares, coupled with stamp duty exemptions, indicates a strong desire to bridge the gap between private and public markets and boost UK capital markets competitiveness.
This initiative could unlock significant liquidity for private companies and new investment avenues for both institutional and qualified retail investors, potentially reshaping the exit landscape for private equity. It also demonstrates the regulator’s
willingness to use “sandboxes” for genuinely innovative, market-redefining initiatives.
The move to a repo-led, demand-driven system for reserves is a shift in how the Bank of England manages liquidity. While there are industry concerns about predictability during stress, the PRA’s favourable view on routine usage offers some
comfort. Treasury and risk management functions need to fully understand the implications of this new framework. This is less about immediate financial impact and more about ensuring operational resilience and prudent balance sheet management
in a changing monetary environment.