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.
Off-channel communications
For wholesale firms, the FCA’s messaging around off-channel communications has become more pointed in 2026. The Wholesale Markets Report explicitly identifies banks’ off-channel communications as an area the regulator reviewed, noting both progress and continued shortcomings.
As Theta Lake states, this follows a multi-firm review of 11 wholesale banks conducted in 2025, which found that although all firms had strengthened their frameworks over the preceding two years, breaches of internal policies continued to occur across all staff grades. Significantly, 41% of those breaches involved individuals at director level or above — the very individuals expected to set standards from the top.
There is a further regulatory development worth noting. From 1 September 2026, changes to the FCA’s non-financial misconduct rules will extend the Code of Conduct to cover behaviours such as harassment, bullying and discrimination, including when those behaviours occur through informal channels. This means persistent off-channel communications will carry regulatory exposure that goes well beyond recordkeeping obligations.
What compliance and governance teams should do now
According to Theta Lake, for compliance professionals, several practical steps follow from these priorities. Documenting AI use cases across underwriting, claims, consumer services and investment decision-making is now essential, as is ensuring that appropriate governance frameworks are in place. Standards such as ISO 42001 for AI Management Systems or the CSA STAR for AI can help demonstrate that AI tools — whether internally or externally developed — are built, trained, deployed and maintained to a trusted and tested standard.
Firms should also review off-channel communications policies to ensure they reflect the full range of channels in use today, including cloud calling systems and messaging applications. Governance of AI assistant prompts, responses and automated notetaking tools should be factored into risk profiles, with compliance technology applied accordingly.
Acting on these areas now will place firms in a stronger position as FCA reviews and enforcement activity develop further across 2026.
Read the full Theta Lake post here.
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