The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

The Barometer provides a measure of the regulatory change pressure faced by financial services firms in the UK and EU. From March 2023 to March 2024, we’ve seen a small increase in the aggregate score which now stands at 7.3 (out of 10), up from 7.2 in September 2023, reflecting the sustained regulatory burden facing the industry.

The regulatory impact scores for each of the nine key regulatory themes are based on attributes such as volume of regulatory updates, materiality, complexity (including the extent of transformation required) and time to implementation. The scores are informed by KPMG’s work helping firms implement regulatory change and data that we track daily using our Regulatory Horizon tool. Readers can drill down into each theme to learn more about important regulatory initiatives in that area and the resulting considerations for firms.

Financial Resilience and ESG and Sustainable Finance continue to have the highest impact scores overall – which will surprise nobody working in the industry – although Financial Resilience has edged ahead for the first time.

Perhaps more interestingly, the score that has moved the most this half year is Governance. High profile failures of firms in the US and Europe in 2023, as well as continuing volatile markets and tough economic conditions, have led to heightened supervisory focus on firms’ governance and risk management structures. We are seeing more granular expectations of boards, including recent revisions to the UK Corporate Governance Code, that require them to report on the effectiveness of material controls. Consumer Duty raises the bar in terms of expectations on board oversight – including, but not limited to, the annual report on assessment of customer outcomes explored further here. In its 2024 supervisory priorities letters, the PRA stressed the need for Boards and Executives to continuously challenge themselves to ensure they have appropriate structures, processes, capabilities and information in place, and the FCA’s recent update to its supervisory strategy for asset managers emphasised the importance of good governance in times of uncertainty and change. There are also efforts to increase diversity of thought and effectiveness of challenge with measures around diversity and inclusion, and non-financial misconduct.

The Barometer also highlights the changing environment within which regulation is being made. Regulators now need to consider the impact of their proposals on competitiveness and economic growth and this has led firms to be more vocal in their objections, increasingly citing the impacts of regulatory compliance on profitability and competitiveness. The tension between reducing the regulatory burden whilst promoting safety, soundness and consumer protection when operating in an increasingly unpredictable world is increasing.

As we continue to monitor regulatory pressure in future editions of the Barometer, we expect to see further compromise and ultimately a tapering of regulatory pressure. While there may be a swing towards reducing the overall burden, novel risks mean that regulation will necessarily keep evolving, for example around AI, digital assets and the impact of big technology firms on the sector. The difference between good and bad regulation will be whether it achieves the intended outcomes without unnecessary cost, complexity or commercial implications.