Balancing Innovation, Resilience & Competition

Author: Priscilla Gaudoin - Head of Risk & Compliance - published October 2025

Topics: Innovation, Competition, Resilience, Crypto, AI

Regions and Regulators: UK - PRA, Bank of England, FCA

"Innovation can… [help make] the financial system stronger and more resilient. For example, via the use of third-party services, including cloud-based ones, to replace inefficient legacy in-house systems and processes with more resilient and flexible ones."

Bank of England, David Bailey, Executive Director, Prudential Policy, June 2025

On 18 June 2025, David Bailey, Executive Director of Prudential Policy, delivered a keynote speech at Risk Live Europe titled, “Innovation and regulation, Striking the balance”. He set a clear path for the PRA to foster innovation whilst maintaining prudential robustness, nurturing both resilience and competition in the UK’s banking and insurance sectors.

The Secondary Competitiveness & Growth Objective (SCGO)

Mr Bailey opened by reaffirming the PRA’s 2023 Secondary Competitiveness & Growth Objective (SCGO). Introduced under FSMA 2023, the SCGO formally obliges the PRA to support growth, alongside its primary remit of safety and soundness.

An example is when the PRA slashed Solvency II reporting obligations by roughly one-third for UK insurers, a clear nod to efficiency and proportionality. This shift mirrors other Bank of England signals, such as Vicky Saporta’s remarks in September 2023 regarding tailored policy frameworks boosting competitiveness.

Regulatory Fragmentation vs Global Consistency

Addressing concerns over divergent regulatory systems across the UK, EU, and US, David Bailey reassured the industry that the PRA does not seek fragmentation for its own sake. Instead, it aims for coordinated yet autonomous evolution, tailoring regulation to UK market dynamics without creating barriers. This aligns with broader market initiatives like the UK’s Crypto Regulatory Taskforce, and upcoming Basel 3.1, now under UK regulatory discretion.

As global RegTech uptake accelerates, such alignment is critical, firms increasingly depend on interoperable regulatory tools that can adapt to both UK bespoke frameworks and international standards.

Embracing Innovation for Resilience

There was a clear message that innovation is a strategic pillar of resilience. Whether it’s stablecoin, real-time payments, or AI-powered risk tools, emerging technologies are central to a durable financial system. The Bank of England has affirmed its intent to publish crypto bank exposure rules by 2026, signalling regulatory readiness to address novel risks whilst safeguarding systemic integrity.

This echoes Andrew Bailey’s speech emphasising the importance of scenario planning and cultural readiness for shocks. In the PRA’s recent annual report, GenAI and RegTech were highlighted as disruptors requiring policy and supervisory agility.

RegTech: Enabling Smart Supervision

David Bailey underscored the PRA’s increasing reliance on RegTech, not just for efficiency, but for strategic oversight. The Bank of England recently signalled stronger engagement with AI and machine learning via the FS2/23 feedback. Firms are expected to match this by embedding AI-driven analytics internally, enhancing risk detection, stress testing, anti-fraud systems, and scenario modelling.

Additionally, the PRA has signalled interest in RegTech for optimising submission workflows and reducing reporting fatigue, echoing Solvency II streamlining efforts.

Time for Action:

There are a few simple actions that can put firms firmly on the front foot.

Figure 1: Key actions for firms

 Embedding competitiveness and safety in decision-making means firms need to:

• Revise capital and liquidity planning to balance risk control and opportunity growth
• Adopt stress testing and scenario analyses that capture both traditional shocks and innovation-related events (such as cyber or crypto volatility).

Investing in RegTech is a regular message from the regulators. Firms should consider:

• Implementing machine-learning powered tools for transaction surveillance, scenario simulation, risk rating and AML modelling
• Deploy metadata and taxonomy engines to automate and streamline regulatory submissions, especially where PRA has flagged duplications.

Preparing for crypto and digital assets exposure. Here firms need to:

• Anticipate 2026 regulations on bank crypto holdings, perform internal limit setting, risk mapping, and counterparty evaluations now
• Engage in sandbox dialogues and industry working groups to stay ahead of evolving guidance.

Building agile governance and culture requires firms to:

• Align board-level risk frameworks by ensuring capital allocation considerations reflect strategic objectives.
• Invest in cultural transformation programmes to support rapid innovation without compromising risk stewardship, reinforcing resilience form within.

Coordinate globally and comply locally!

Group entities need to consider both global impacts as well as ongoing compliance with local laws and regulations.   Firms need to:

• Use layered compliance frameworks to manage cross-jurisdictional discrepancies, modular RegTech platforms can help.
• For regional entities, align UK-compliant RegTech stacks with overlay features for EU/EBA, US-Fed, FCA or APAC requirements.

Bailey’s Risk Live insights echo key messages from the Bank of England on topics such as: operational resilience, AI governance, macroprudential calibration. Taken together, these reinforce the message that innovation and resilience are “two halves of the same regulatory coin”.

Blueprint for Future-Ready Firms

Regulatory momentum is clear.   The supervisors are prioritising systems that promote innovation, support growth, and reinforce stability.

Now is the time for regulated firms to:

• Embrace agile governance that balances opportunity and threat
• Invest in RegTech-enabled capability that this scalable, auditable, and compliant
• Build cross-border compliance frameworks that prevent fragmentation, not fuel it

By aligning strategy, technology, and culture to the PRA’s evolving ethos, firms can thrive under, and help shape, a more resilient and competitive UK financial ecosystem.

How Ruleguard helps the Financial Sector:

Ruleguard is an industry-leading GRC software platform designed to help regulated firms manage the burden of evidencing and monitoring compliance. It has a range of tools to help firms fulfil their obligations across the UK, Europe, N America, and APAC regions.

Transform the way your firm manages cross-border activities and oversight. From operational risk management and individual accountability to third party oversight.   

Ruleguard’s governance and oversight solutions give you everything you need to stay on top of your regulatory responsibilities, make confident decisions, and thoroughly answer auditors', regulators' and other stakeholders' most probing questions.

Ruleguard is a comprehensive solution that lets you protect and propel your business forward through the complex regulatory landscape.

Related Webinars, White Papers and Blogs

Ruleguard hosts regular events on various regulatory topics. You can watch our webinars on-demand at your convenience, or read our blogs, white papers, infographics, and tune in to our podcasts.

• FCA Establishes Regional Presence in the USA and APAC
• RegTech - Why does it matter?
• Blockers to AI Adoption
• AI and Regulations Podcast
• AI in Finance - Navigating the Regulatory Landscape
• Risk Happens: What GRC Leaders need to know now

About the author

In a career spanning 30 years, Priscilla has worked as a consultant, CCO and MLRO providing regulatory oversight and advice to firms across the financial services industry. She is responsible for our thought leadership programme, writing regular articles and white papers, and hosting webinars on a variety of regulatory matters.

She is a Fellow of the International Compliance Association, a certified GRC practitioner, and a member of the Institute of Risk Management.

 

Contact Priscilla