Financial services firms are ending the first quarter of 2026 with three major themes in focus: deregulation, broader adoption of Artificial Intelligence, and new UK fraud legislation with global reach. In the U.S., regulators are moving through one of the most significant deregulatory periods since the years following the 2008 financial crisis. Federal agencies are working to reduce compliance burdens, ease capital requirements, support digital assets, accelerate bank M&A activity, and shift supervision toward “material financial risk.” For the largest banks, the Federal Reserve, Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation are developing changes across stress testing, the supplementary leverage ratio, the Basel III framework, and the G-SIB surcharge, with proposals expected toward the end of March.
The Securities and Exchange Commission is also advancing multiple deregulatory initiatives. These include Project Crypto, a review of Regulation S-K with a comment deadline of April 13, 2026, and a proposal to prioritize semi-annual reporting versus quarterly reporting. At the same time, some states are increasing enforcement and rulemaking, creating a patchwork system as they argue federal actions may raise systemic risk and harm consumers. In the UK, the Mansion House Reforms in July 2025 produced 50 pro-growth initiatives that are expected to shape the 2026 regulatory agenda. The removal of prudential regulation SS20/15 was also described as a landmark step for the building society sector and the streamlining of conduct-related regulation.
Investment in Artificial Intelligence is accelerating across banks, insurers, and asset managers as firms seek productivity gains, better risk management, modernized systems, and improved customer experience. Artificial Intelligence spending across financial institutions globally reached an estimated $45 billion in 2024 and is projected to rise to $126 billion by 2028. Banks account for roughly two-thirds of that growth, with 70% of banks expecting firm-wide deployment of generative Artificial Intelligence within two to three years, up from 24% today. Yet execution remains difficult. Last year, MIT found that despite soaring investment in generative Artificial Intelligence, only 5% of pilots deliver measurable business returns. Legacy platforms continue to weigh on progress, absorbing 60 to 70% of technology budgets for many institutions.
Agentic Artificial Intelligence is emerging as a new stage of adoption, with autonomous systems able to handle multi-step work such as credit underwriting, fraud investigations, and treasury operations. Scaling those systems requires operating model changes and stronger governance to address new risks. In the UK, the Financial Conduct Authority launched a review in January 2026 into how Artificial Intelligence will transform retail financial services, while its Artificial Intelligence Live Testing initiative and Supercharged Sandbox are intended to support innovation before deployment. In the U.S., there is still no single Artificial Intelligence framework for financial services, and regulators continue to rely mainly on existing laws and guidance, even as state-level rules expand.
Fraud prevention is becoming a parallel governance priority because of the UK’s failure to prevent fraud offense under the Economic Crime and Corporate Transparency Act 2023. As of September 2025, large organizations worldwide can be prosecuted and face unlimited fines if an employee, agent, subsidiary, or other associated person commits a specified fraud offense intended to benefit the organization. The law applies to organizations meeting at least two of three thresholds: More than 250 employees, turnover over £36 million (about $48 million), and total assets over £18 million (about $24 million). A defense is available only if the organization can prove it had reasonable fraud prevention procedures in place, with guidance centered on top-level commitment, risk assessment, proportionate procedures, due diligence, communication, and monitoring and review.
