The FCA’s PS25/14 marks a turning point for investment firms, finally severing the awkward ties between MIFIDPRU and the banking-focused UK Capital Requirements Regulation. For compliance teams who have spent years juggling multiple regulatory sources, this is genuinely welcome news.
The reforms create a standalone capital definition framework specifically for investment firms, eliminating the labyrinth of cross-references that have plagued the sector. With approximately 70% less regulatory text, compliance functions at many investment firms should find life considerably easier with the new requirements.
What This Means in Practice
While the FCA promises substantive neutrality, meaning no changes to actual capital requirements. Firms should not assume this is a “do nothing” scenario. With implementation set for 1 April 2026, there is genuine work ahead:
Firstly, capital adequacy policies will need rewriting to reference the new consolidated rules rather than the currently dispersed UK CRR provisions. Board papers, ICARA documents, and regulatory reporting procedures must all be updated. Staff training materials referencing the old framework will become obsolete too.
More critically, firms need to conduct gap analyses to ensure the “substantively neutral” promise holds true for their specific capital structure. The clarified definitions of “own funds” and removal of bank-specific provisions may have nuanced implications depending on your capital composition.
Firms should consider the practical questions: Does every element of the existing Tier 1 and Tier 2 capital still qualify under the new standalone definitions? Are there transitional provisions in the UK CRR firms have been relying on that may not have perfect equivalents in the new framework? What about deduction and filter rules; do these operate identically when removed from their banking context?
Firms should also examine their capital planning models and stress testing assumptions. If your ICARA process references specific UK CRR articles or contains calculations based on the old framework’s logic, this will need validating against the new structure. The risk is not dramatic change but rather the risk of misalignments late in the implementation timeline.
A thorough gap analysis now, comparing your current capital position line-by-line against the new consolidated requirements, provides assurance and identifies any technical queries to raise with the FCA well before the April 2026 deadline.
The Smart Move
Forward-thinking firms are already mapping their transition strategies rather than waiting. Getting ahead of the curve means smoother implementation, confident regulatory engagement, and avoiding the last-minute scramble that inevitably leads to oversights.
