Dec 2025 : Independent review into the PESAR
Zakir Karim
Inside this issue
December’s theme: practical outcomes, failure handling, usable Open Finance infrastructure, and provable conduct standards.
- PESAR: step forward, but slowed by operational complexity, especially where transfer/ continuity beats long unwind.
- Open Finance: Sprint 2025 outputs + continued experimentation via Smart Data Accelerator/ TechSprints into early 2026.
- Conduct: FCA wants proof of best execution in wholesale, and clear accountability in co-manufactured products under Consumer Duty.
Independent review into the PESAR
What Happened
In December, HM Treasury published an independent review of the Payment and Electronic Money Institution Insolvency Regulations 2021 (PESAR). The review concludes the regime is a meaningful step forward, but it’s not consistently delivering on what the reviewer describes as the core goal in real failures: Objective 3 (enabling a transfer/continuity outcome where that better protects customers), largely because delays and operational complexity still slow down outcomes for customers.
Regulatory/market implications:
The review recommends changes clustered around five themes: (1) clarifying whether PESAR objectives should have a hierarchy (including giving greater priority to rescue/transfer where it better protects customer funds), (2) creating out-of-court options and reducing cost/friction, (3) improving the return of customer funds (including making interim/partial access more feasible) and reconsidering FSCS-style protection as the sector matures, (4) improving international coordination, and (5) a set of practical “miscellaneous” fixes.
Why it matters (what firms should take from it):
The direction of travel is clear: faster failure-handling depends on better safeguarding quality, cleaner reconciliation data, and credible transfer readiness before anything goes wrong. For payment firms and EMIs, this is another signal that safeguarding isn’t just “compliance”—it’s a resilience capability that will be judged harshly in a stress event.
Open Finance: From Vision to Building Blocks
In December, the FCA published its Open Finance Sprint 2025 outputs, describing a 2-day sprint (run earlier in 2025) that brought together 100+ stakeholders to move beyond principles and define the practical foundations needed for open finance that preserves trust, resilience and inclusivity. The work focuses on four opportunity areas (wellbeing, growth, resilience, and digital identity/verification), and repeatedly comes back to essentials: data portability/standardisation, interoperability, transparent consent, and trust/accountability frameworks.
Crucially, the FCA frames “what happens next” as applied experimentation: it points to the Smart Data Accelerator and follow-on TechSprints (including SME finance and mortgages) running into early 2026, signalling that the open finance debate is increasingly being shaped by tested journeys and evidence, not only discussion papers.
Wholesale Conduct: FCA findings on best execution in UK equities
The FCA published findings from a multi-firm review of best execution practices at wholesale banks in UK listed cash equities. While the FCA noted generally stronger practices than in past work, it also highlighted governance and oversight weaknesses in some firms, particularly around the quality of monitoring and how well management information supports challenge and improvement. It’s a timely reminder that in wholesale markets, the FCA still expects firms to prove outcomes, not just policies.
Consumer Duty: FCA clarifies expectations for co-manufacturing
The FCA published a statement aimed at firms that jointly manufacture products or services under the Consumer Duty, after seeing confusion in the market about who is “in scope” and how responsibilities should be split. The message is practical: be clear on which firms are manufacturers, align roles through written agreements, and make sure accountability doesn’t fall between parties. This is a push toward proportionate clarity, less duplicated oversight, but no dilution of outcomes responsibility.
Our Thoughts
- Payments insolvency is becoming a stress test of operational readiness. The PESAR review makes clear that speed and quality of outcomes hinge on practical capabilities.
- The FCA is focusing on the foundations and pushing the ecosystem toward tested journeys via the Smart Data Accelerator and TechSprints.
- Wholesale conduct remains “outcomes-first.” The best execution review signals that policies aren’t enough; firms need monitoring, governance, and MI that clearly supports challenge and continuous improvement.
- Consumer Duty accountability is being clarified Where products are co-manufactured, the FCA is pushing for explicit role-splitting through written agreements so responsibility doesn’t fall between parties.
