
Financial institutions operate in a world in which requirements and expectations rarely stay static. Whether it's financial regulatory requirements, change to corporate, commercial and employment law, keeping up to date with industry best practices or having a weather eye on what happens when things go wrong, there's never a dull day for those in the corporate hot seat.
In this article, we've highlighted 10 things likely to affect all, or many, financial institutions in 2025; each brought to you by Womble Bond Dickinson's sector and service specialists:
1. Operational resilience – DORA and more
(Emma Radmore and Sheilah Mackie)
Arriving soon after the 17 January deadline for affected institutions to comply with the EU's DORA requirements, UK regulated institutions have until 31 March to comply with the FCA's new operational resilience requirements. Given that the FCA finalised the requirements in 2022, so has given firms three years to meet its expectations, we're not likely to see much sympathy from it for firms that have not at least done their best by March. Added to which the UK regulators are now consulting on expanding their operational incident and third-party reporting rules. So there has never been a more important time to check your third-party contracts give you the rights and protections you need, and your incident response plans are up to speed. For more information, read our article here.
2. Non-financial misconduct and DEI
(Emma Radmore and Karen Plumbley-Jones)
We were expecting the FCA's Policy Statement on tackling non-financial misconduct by now – bringing a range of behaviours within the scope of unacceptable actions that firms must address. And later in 2025 we expect final rules on DEI in financial services, introducing some new requirements for all firms and significant changes for larger firms. Whatever the final rules, it's certain that firms' HR and financial regulatory compliance policies and processes will need updating, and staff will need to be trained to understand the new requirements.
3. Consumer Duty follow up
We should all know by now that the Consumer Duty is not "once and done". Compliance with it is an ongoing requirement and the FCA has already started to review selected firms' first Board Reports (the second set will be due by the end of July). Pretty much any regulatory interaction, from change in control through variation of permission and just day to day supervision could bring a firm's Consumer Duty compliance to the FCA's attention, so keeping on top of it and constantly monitoring compliance is crucial.
4. Failure to prevent fraud – a new corporate offence
For large organisations in all business sectors, the corporate offence of failure to prevent fraud takes effect on 1 September. Affected businesses need to assess the risks they face from staff and associates committing fraud to benefit the business and put in place appropriate prevention procedures taking into account Home Office guidance. This would also be a good opportunity to check other financial crime prevention policies and procedures are up to date and fit for purpose. Read our article for more information here.
5. Transparency reforms at Companies House
2025 and beyond will see the phased implementation of important reforms at Companies House. Identity verification (either directly with Companies House or through an Authorised Corporate Service Provider (ACSP)) will be a key component of these reforms. By Spring 2025, Companies House intends to start carrying out checks on ACSPs to allow them to provide identify verification services. By Spring 2025, individuals (new directors, LLP members, persons with significant control (PSCs) and relevant officers of relevant legal entities) should be able to verify their identify on a voluntary basis. By Autumn 2025, Companies House intends to make identify verification compulsory on incorporation and will begin a 12-month transition period for existing directors and PSCs. The long-awaited prohibition on corporate directors will also be introduced although the exact implementation date is still to be confirmed. Read our article for more information here.
6. Launch of new platform for trading shares in private companies (PISCES)
The Private Intermittent Securities and Capital Exchange System (PISCES) will be an innovative new type of trading platform aimed at creating a regulated secondary market for trading shares in private companies. This is an exciting development which will open up private companies to a wider range of investors, improve liquidity and make it easier for investors to secure an exit. The proposed framework will be established under a FMI sandbox created by the Treasury, which will in turn give the FCA powers to implement and oversee its operation. The PISCES Sandbox is anticipated to run for five years. Read more here.
7. Employment Rights Bill
This is expected to be passed in the summer, although most of its provisions won't come into force until 2026. It affects almost every area of employment law and employers need to start preparing for it. The key changes are:
- Employees will have the right to claim unfair dismissal from their first day of employment, with a statutory probationary period that's expected to be nine months
- Large employers will have to create action plans setting out what they will do to address the gender pay gap and support women through the menopause
- There will be increased protection for pregnant women, women on maternity leave and new parents who have returned from family leave
- Employers will have to take "all reasonable steps" to prevent sexual harassment at work and to prevent their employees being harassed at work by third parties
- Flexible working rights will be enhanced: a refusal will have to be reasonable and employers will need to explain the grounds for refusal and why it's reasonable
- Collective consultation will be triggered if redundancies reach a defined number across the business as a whole (rather than at a particular site or workplace)
- It will become easier for trade unions to be recognised, and restrictions on industrial action will be eased
- Fire and rehire will be almost impossible, unless the employer is in financial distress
- A new Fair Work Agency will have the power to enforce various employment rights
- The time limits for bringing claims in the employment tribunal will be increased to six months.
Other changes that will affect employers this year include: the increases in employers' National Insurance contributions, the national minimum wage, statutory sick pay and statutory family payments, which all happen in April; the new right to neonatal leave and pay, which is expected in April; and the new right to paternity leave for bereaved fathers from day one of employment, which is also due to come into force in April.
8. Reforms to parts of the UK's data protection and privacy framework and the introduction of new Smart Data schemes
(Sheilah Mackie and Victoria Ferguson)
The Data (Use and Access) Bill is currently under review in the House of Lords and may become law in 2025, it contains proposed changes to the UK's data protection framework (though less extensive than previously proposed under the last Government). The provisions in the Bill on Smart Data aim to improve data portability between suppliers, enhancing data sharing for consumers and businesses. This will support open banking in the UK and extend its benefits to an open finance scheme. The Government factsheet about the Bill notes that new Smart Data schemes in the banking sector will increase competition in the market and allow for open banking to grow. The Bill also proposes to allow automated decision-making involving personal data to be more flexible under the UK GDPR than under the EU GDPR.
9. API and EMI special administration
(Amy Gallimore and Laura Wiles)
Payments and e-money is a sector driven by innovation. It has seen a lot of investment in recent years, but there have been varying degrees of success for firms in this area, with firms and regulators alike striving for the right balance between innovation, and managing risk and regulatory obligations. The special administrations regimes applicable to certain financial institutions, which modify the mainstream administration process to provide administrators with special additional objectives tailored to the importance of the underlying financial service, are is still in their relative infancy, with the Payment and Electronic Money Special Administration Regime (PESAR) in particular only having been introduced in 2021. It can already be seen though that the numbers of firms entering into insolvency via this route is steadily increasing, particularly with the current financial climate and the heightened regulatory pressures outlined elsewhere in this article. The Government opened a statutory review of PESAR on 12 December 2024, seeking to understand, among other things, how individual customers have been impacted by special administrations of payments and e-money firms under PESAR; whether the regime would be fit to effectively manage the failure of a larger payment firm effectively (as it has thus far only been used with smaller entities); and how well the FCA, BoE, HM Treasury and the Insolvency Service have been cooperating under the regime. Although there is no formal consultation requirement, industry stakeholders are invited to share their views by 30 May 2025. The Government expects to set out its initial conclusions in an interim update in September, and issue its final report by the end of the year. We can expect the findings to provide clarity on how well the PESAR is meeting its objectives, and specific issues arising in insolvencies of regulated entities, which will no doubt have read across to the efficacy of the broader financial services special administration regimes.
10. A new Scottish security regime
Major changes to how to grant and take effective fixed security over certain types of Scottish assets (including rental income, debt claims, insurance policies, material contracts, and other moveable assets (like stock, plant and machinery, vehicles and intellectual property and potentially shares)) – including future Scottish assets (not possible at the moment) - under the Moveable Transactions (Scotland) Act 2023 take effect on 1 April 2025. It will be possible to take new statutory pledges or assignation of claims over those Scottish assets from individuals and various types of entities (even if the owner of the assets is not Scottish), and those taking security should consider whether debt documents entered into before 1 April 2025 should include an "improved" further assurance provision, specific undertakings and/or a condition subsequent that these new (and in certain circumstances, better from a lender's perspective) forms of Scottish security have to be provided when the new regime "goes live".
It was hard to pick only 10 headline issues. We haven't even mentioned other key developments, like regulation of Buy Now Pay Later (probably not taking effect until 2026 but likely needing action in 2025, the possible long-overdue Consumer Credit Act Reform, the need continually to adapt to the possibilities AI offers, ESG disclosures and climate transition planning, the next instalment in the motor finance commission cases…). For more information on any item we've featured, please get in touch and we'll connect you with the right member of our Financial Institutions sector team.
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This article is for general information only and reflects the position at the date of publication. It does not constitute legal advice.