The Rising Cost of Non‑Compliance and How Financial Services Can Stay Ahead
Understanding regulatory expectations in the finance sector is no longer just a legal requirement. It has become a core part of maintaining credibility, protecting customers, and sustaining long-term growth for companies of all sizes.
In the UK, this regulatory landscape is shaped by two key institutions, namely the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). These bodies operate under a framework designed to strengthen both market conduct and financial resilience. While their mandates differ, together they play a critical role in how the UK financial services market operates.
The UK’s regulatory framework follows what is commonly known as the “twin peaks” model. Under this model:
The FCA focuses on market conduct, consumer protection, and competition
The PRA focuses on financial stability and institutional resilience
Both play important roles in shaping the UK securitisation regime. This regime promotes policies which ensure effective regulation of securitisation in the UK financial market. These regulatory principles apply across a wide range of activities, including insurance brokerage. They affect market participants on both sides of transactions, from ‘sellers’, such as originators, sponsors and original lenders, to ‘buyers’, such as institutional investors.
For firms operating in regulated markets, this means compliance obligations extend far beyond policy documentation. Regulatory requirements influence governance structures, operational processes, supplier oversight, reporting, and senior management accountability.
The Cost of Non-Compliance
Regulatory breaches rarely occur in isolation. What may begin as a small compliance gap can quickly escalate into broader operational and reputational challenges.
Financial penalties imposed by the FCA can reach into the millions of pounds, particularly where customer harm has occurred. In addition to fines, firms may be required to conduct remediation programmes to compensate customers, often at high cost. For example, in 2024 HSBC was fined £6.2 million by the FCA for failures in its treatment of customers in financial difficulty [1]. Following this, HSBC launched a proactive remediation and redress programme to address the identified customer harm, demonstrating how the overall impact can be far more than the penalty itself.
Beyond the financial impact, enforcement actions are typically made public. This can lead to reputational damage, strained relationships with insurers, and reduced client confidence. In an industry built on trust, these consequences can be difficult to recover from.
Increasingly, regulators are also focusing on individual accountability through frameworks such as the Senior Managers and Certification Regime (SMCR). Senior leaders are expected to demonstrate clear oversight of regulatory obligations, and failure to do so can result in personal sanctions or industry bans.
As regulatory requirements continue to expand, many financial institutions are finding that maintaining compliance is becoming more complex and resource intensive. This is where SME support can add value.
How Can Deecon Support Compliance?
One of Deecon’s recent client engagements illustrates how a proactive approach to compliance can deliver tangible value.
In response to evolving FCA and PRA expectations on how financial services firms manage and oversee their supply chains, our client commissioned an initial review of the contracts governing its business-critical insurance brokerage platforms, to ensure the arrangements would withstand increased regulatory scrutiny.
The approach
Deecon mobilised a blended team with proven expertise in Financial Services regulation, negotiations, and contract law, to ensure that our recommendations were both regulator-aligned and commercially executable.
The team provided a detailed assessment of each contract, to identify structural weaknesses and key risks. Deecon reviewed brokerage agreements against regulatory expectations and produced supplier‑ready amendments with a clear regulatory rationale. Targeted negotiation playbooks and governance support ensured changes could be implemented efficiently and with appropriate internal oversight.
The results
Deecon strengthened our client’s baseline contracting position to reflect current and emerging regulatory expectations, creating a future-proof benchmark that can be applied consistently across the wider supplier portfolio going forward. The review enabled the client’s Procurement function to negotiate efficiently with suppliers and reduce exposure to regulatory challenges.
New Changes
Regulatory expectations continue to evolve. Earlier this year, the PRA and the FCA proposed a series of amendments to the UK securitisation framework [2] [3]. Final rules are expected later in 2026, but the direction of travel is already clear.
For ‘sellers’: The proposed reforms are designed to increase structuring flexibility while reducing operational complexity and ongoing compliance costs. In particular, the introduction of the Lshaped risk retention model and targeted exemptions from the re-securitisation ban opens the door to new transaction structures. These changes may also improve access to funding and liquidity, including eligibility for certain central bank facilities.
For ‘buyers’: Streamlined due diligence requirements are intended to ease administrative burdens and lower compliance costs. However, this simplification places greater emphasis on firms’ internal risk assessment and judgement. UK institutional investors will still need robust frameworks to identify, assess, and monitor risk and many will need to revisit their existing compliance and reporting processes to align with the new regime.
Firms that invest in strong compliance cultures and seek expert guidance where needed will be better positioned to navigate regulatory change and maintain a competitive edge. Deecon is well-placed to provide support in the adoption of regulatory change.
Words by Sevara Amanullaeva
Edited by Kate Randall