Money Covered: The Week That Was – 30 May 2025

Welcome to The Week That Was, a round-up of key events in the financial services sector over the last seven days.

The third episode of Season 4 of our podcast, Money Covered – The Month That Was, where the team discusses developments that we expect to see in 2025 in relation to Financial Services and Accountants is now available.

To listen to this and all previous episodes, please click here.

Headline Development

FCA takes steps toward crypto asset regulation

The FCA has released a Consultation Paper (CP25/15) setting out its proposed approach to regulating 'stablecoins' – crypto assets which peg their value to a government-issued currency such as the Pound or the US dollar.

The Consultation Paper proposes prudential rules and guidance for issuing a qualifying stablecoin and safeguarding qualifying crypto assets. In due course, the FCA will also consult on applying prudential rules to firms safeguarding qualifying crypto assets while also offering additional services, such as operating a trading venue or staking. The Consultation Paper sets out:

•           Requirements for stablecoin issuers, focusing on ensuring stability, transparency, and proper asset management.

•           Custody rules to protect client's crypto assets, using and adapting the existing CASS framework.

•           A new Crypto asset sourcebook (CRYPTO) and amendments to the FCA Handbook via the Stablecoins and Crypto asset Safeguarding Instrument.

At present, regulation in this space is limited to the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017, the financial promotions regime and consumer protection legislation. It is anticipated that clear prudential rules and expectations will reduce regulatory uncertainty, encouraging firms to set up crypto asset services and giving firms and consumers greater confidence to do business.

Despite the proposed regulation, the FCA maintain that crypto assets remain high risk, speculative investments and that consumers should be prepared to lose all their money if they buy them.

The FCA have requested responses on the Consultation Paper by 31 July 2025.

The FCA have also published an associated consultation paper (CP25/14) on prudential rules, and the FCA recommends reading both consultation papers together (CP25/14 AND CP25/15).

To read CP25/14, please click here; and to read CP25/15, please click here.

Auditors

ICAEW publish Audit Monitoring Report for 2025

The ICAEW's latest Audit Monitoring Report for 2025 offers insight into the state of audit quality. It is based on 790 audits at 401 firms and highlights areas of strength and challenges. Some key takeaways include:

•           While 67% of audits were rated as good or generally acceptable, this is a slight dip from 71% in 2023.

•           A consistent 10% of audits reviewed required "significant improvement." This figure is unchanged from last year.

•           Larger firms, particularly the big four, demonstrated stronger results, with 90% of their audits deemed good or generally acceptable.

•           The report emphasises that attracting and retaining skilled audit staff remains a significant pressure point, impacting audit quality, especially for smaller firms.

•           There is a trend of more complex audits shifting to smaller firms, requiring them to rapidly upscale their risk and quality processes.

•           Focus on Quality Management (ISQM 1) - the report highlights the ongoing implementation of ISQM 1.

•           Ongoing issues identified include challenges in risk assessment, fraud and error considerations, estimates and judgments, and the involvement of experts and service organisations.

The ICAEW states that it is committed to supporting firms in addressing these challenges.

To read the report please click here.

FRC launches roundtable to shape Future Audit Supervision Strategy

The Financial Reporting Council (FRC) is inviting auditors, professional bodies, and audit committee members to participate in a series of roundtables aimed at shaping the Future of Audit Supervision Strategy (FASS). This initiative is part of a wider review to ensure the FRC's regulatory approach remains effective, adaptable, and supports public interest whilst minimising unnecessary regulatory burdens. The roundtables are the first phase of engagement, designed to gather insights for a future audit supervision model.

Sessions for auditors begin on 9 June, with further meetings planned throughout June and July.

To read more please click here.

Financial Institutions

PRA consulting on management of climate risks

On 30 April 2025, the Prudential Regulation Authority (PRA) published a consultation paper making a number of proposals relating to the management of climate risk by institutions in the banking and insurance sectors.

In particular, it aims to consolidate previous guidance to effectively require firms to, undertake an assessment of the risks posed to themselves by the climate, (bearing in mind the potential 'black swan' nature of climate events) and develop a strategy which is responsive to the nature and extent of those risks. Firms should prepare to support the conclusions reached if required to do so.

To assist firms in reaching those conclusions, it is proposed to expand the supporting supervisory statement into seven chapters, including one covering particular risks for the banking and insurance sectors, rather than four.

You can review the consultation paper, and respond by 30 July 2025, here.

Regulatory developments for FCA regulated entities

FCA launches first consumer duty probe in wealth sector

The Financial Conduct Authority (FCA) has launched its first enforcement operation in the wealth and asset management sector for potential breaches of its Consumer Duty, which came into effect in July 2023. The ongoing investigation involves both a firm and an individual, though the FCA has not disclosed further details.

This marks the only enforcement activity initiated under the Duty within the sector to date, highlighting a cautious approach by the regulator. Whilst the FCA has signalled it will prioritise serious breaches and poor implementation, broader enforcement remains limited. The investigation outcome is expected to clarify regulatory expectations and show how the Duty will be applied in practice.

Industry professionals are particularly interested in the case origin—whether through complaint or internal review—and its relevance to mainstream or niche services. Meanwhile, the FCA continues its broader review of fund managers’ value assessments, with noted areas for improvement including fee transparency and independent oversight.

You can read more here.

FCA provides details on rebalancing risk in order to help fuel growth

On 20 May 2025, Dominic Holland, the director of market oversight at the FCA, gave a speech on the FCA's approach to rebalancing risk to fuel economic growth, in line with the government's objectives. Holland stressed that the FCA is focused on decreasing the regulatory burden, but not at the expense of consumer protection.

Holland highlighted the need for collaboration in order to help the FCA become better informed about challenges that businesses face. He also noted that the reporting burden can be complicated and expensive, and the FCA wants to ensure that any obstacles are useful, proportionate to serve a purpose. Holland added that the FCA has proposed various changes to further promote capital funding by companies to help promote growth. Finally, he noted that the FCA is committed to grasping the opportunities that new technologies bring while managing the associated risks.

To read the entire speech, please click here.

With thanks to this week's contributors: Shauna Giddens, Haiying Li, Nitin Mathias, Damien O'Malley, Daniel Parkin, Faheem Pervez, and Joe Towse