The Financial Conduct Authority has published a consultation proposing to streamline the rules that determine what types of funds investment firms can count as regulatory capital to absorb losses and remain resilient under stress. The proposals leave unchanged the amount of capital firms must hold and focus instead on simplifying and consolidating what qualifies as regulatory capital. The existing definition of capital rules were designed for banks and are described as complex and not tailored to investment firms’ business models. The FCA proposes removing large sections that are not relevant to the vast majority of firms, simplifying other parts, and replacing EU-derived provisions with clearer, more accessible rules, reducing the volume of legal text by around 70%. The FCA does not expect firms to change their capital arrangements as a result. The proposals are set out in the consultation paper “Definition of capital for FCA investment firms.”
Financial Conduct Authority 2025-12-05
UK Financial Conduct Authority consults on simplifying investment firm regulatory capital definitions without changing capital levels
The Financial Conduct Authority (FCA) has issued a consultation to simplify rules on what funds investment firms can count as regulatory capital, without altering the required capital amounts. The initiative aims to replace complex, bank-oriented definitions with clearer rules, reducing legal text by approximately 70%. The FCA anticipates no changes to firms' capital arrangements.