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The UK’s Financial Conduct Authority (FCA) has announced a major change in its supervisory communications, aiming to simplify how firms access key regulatory insights.
Starting April 30 2025, the FCA will discontinue portfolio letters, which have been a key communication tool used to outline regulatory expectations for different firm types.
Instead, it will introduce a smaller number of market reports, which will consolidate insights from its supervisory work and provide relevant updates for various financial sectors.
As part of this shift, the regulator will also retire historical portfolio letters and Dear CEO letters.
Although these documents will still be available online, they will be clearly marked as "historical" and no longer current, with the aim of ensuring that firms rely on the most up-to-date guidance.
However, the FCA confirmed that it will continue to use Dear CEO letters to address senior management on urgent or significant issues.
The FCA says the move aligns with its Consumer Duty Requirements Review, which focuses on smarter, more effective. regulation.
By streamlining supervisory communications, the financial regulator wants to make it easier for firms to navigate their compliance obligations without sifting through outdated materials.
In terms of next steps, until the first market reports are published later this year, firms should continue referring to existing portfolio letters and Dear CEO letters for guidance.
The FCA also indicated it will continue reviewing historical communications to ensure regulatory transparency and clarity.
What does this mean for payments firms?
The change here could be both beneficial and have its downsides for those in the payments space.
It is obvious that the FCA wants to encourage growth, as well as shift to a more outcomes-focused approach after Brexit, and the change could lead to a reduction in information overload from the FCA and encourage smarter self-assessment by firms.
Portfolio letters and Dear CEO letters have existed in a kind of regulatory grey area.
They are widely used — just look at LinkedIn on the day one is published — and are also highly influential, but they are not formal instruments of regulation.
The letters are not rules or guidance under the FCA Handbook, so do not go through public consultation or appear in standard regulatory references.
In addition, although many portfolio letters address risks or themes that are time-sensitive, such as compliance with incoming rules like the Operational Resilience framework, it can often be unclear when, or if, the content is outmoded.
Going forward, payments and e-money firms will need to adapt their compliance processes to track broader regulatory signals from the watchdog.
Firms will need to interpret these in context, rather than relying on tailored, prescriptive letters.
The FCA says it will make it easier to find up-to-date information, which may help smaller firms or those with limited compliance resources.
However, with historical letters being marked as outdated, firms can no longer rely on older guidance unless it is specifically retained. This increases the importance of checking for current materials regularly.
A new approach
This development is part of the FCA’s broader shift, especially under the Consumer Duty, toward holding firms accountable for outcomes rather than just compliance with rules.
Payments and e-money firms will need to interpret broader insights in market reports and apply them thoughtfully to their own operations.
For example, in 2023, the FCA sent out a portfolio letter to payments and e-money firms that highlighted specific around safeguarding customer funds, prudential management and wind-down planning. This letter laid out precise actions and expectations tailored to those firms.
Under the new model, those same issues might now be covered in a section of a market report that discusses retail financial services more broadly, or simply insights from firm supervision.
Firms would need to review the entire report, identify which insights apply and adjust accordingly, without the clarity of a letter addressed specifically to their business model.
Since the implementation of frameworks such as the Operational Resilience rules and the Consumer Duty, City insiders have appeared less than pleased with the flexibility, with some even saying they preferred the prescriptiveness.
Although financial players love to moan about regulation, perhaps at least with the more prescriptive requirements, they knew where they stood.
