FCA’s PS25/12: Strengthening the Safeguarding Regime for Payments & E-Money Firms

The Financial Conduct Authority (FCA) has published its long-awaited Policy Statement PS25/12, introducing significant changes to the safeguarding regime for payments and e-money firms. These changes follow last year’s consultation (CP24/20) and deliver the FCA’s “supplementary regime” — an interim but enhanced framework designed to address weaknesses in current safeguarding practices.

While the FCA’s more radical “post-repeal regime” has been deferred, firms should not underestimate the scale of operational and compliance changes required under the supplementary regime. The new rules take effect on 7 May 2026, giving firms nine months to prepare.

At K2 Regulatory Consultants, we see this as a pivotal moment for payments and e-money firms to get safeguarding right — both to meet new regulatory expectations and to strengthen customer trust.

Why the Supplementary Regime Matters

Safeguarding is the cornerstone of consumer protection in the payments and e-money sector. Yet, the FCA has found that many firms lack sufficiently robust safeguarding practices, creating unacceptable risks to consumers and market integrity.

The supplementary regime aims to:

• Drive higher compliance with the Electronic Money Regulations 2011 and Payment Services Regulations 2017.

• Improve accuracy and consistency in record-keeping.

• Enhance reporting and monitoring to identify shortfalls and support more effective supervisory oversight.

In short, this is about tightening controls, improving transparency, and making it easier for both firms and the FCA to detect and address safeguarding risks before they harm customers.

Key Changes You Need to Know

1. Daily Reconciliations

Firms must carry out internal and external safeguarding reconciliations at least once a day, excluding weekends and public holidays. This will require many firms to increase reconciliation frequency and ensure methods meet the FCA’s codified standards.

2. Resolution Packs

Firms must maintain a resolution pack — key documents and records to enable the swift return of funds in an insolvency scenario. These must be retrievable within 48 hours and reviewed for accuracy on an ongoing basis, with annual reporting to the governing body.

3. Recording of Unallocated & Unidentified Funds

A new category of “unidentified relevant funds” has been introduced, requiring system and process changes to correctly classify and track such monies until they are allocated or confirmed.

4. Annual Safeguarding Audits

Independent safeguarding audits will be required annually, with some exemptions for smaller firms. The FCA and Financial Reporting Council are also developing a new auditing standard for safeguarding.

5. Monthly Safeguarding Returns

A new FCA regulatory return will require monthly reporting of safeguarding arrangements, balances, and any breaches.

6. Safeguarding Individual

A designated senior individual must oversee safeguarding compliance and report regularly to the governing body.

7. Strengthened Third-Party Oversight

Enhanced due diligence, diversification considerations, and stricter criteria for selecting secure, liquid assets and insurance providers will all become standard expectations.

How Firms Should Prepare

With the clock already ticking towards the May 2026 deadline, firms should:

1. Review PS25/12 in full to understand all requirements and dependencies.

2. Map current safeguarding arrangements against the new rules to identify gaps.

3. Engage with safeguarding banks and third-party providers early, as some changes will require their cooperation.

4. Plan for system and process updates — especially for daily reconciliations, classification of funds, and reporting.

5. Allocate clear accountability to the appointed safeguarding individual.

   
   

Our View at K2 Regulatory Consultants

The FCA’s decision to delay the post-repeal regime offers firms breathing space, but the supplementary regime is not a light-touch interim step. The new rules will demand:

• Greater operational discipline in reconciliations and fund categorisation.

• Stronger governance through designated safeguarding oversight.

• Enhanced transparency via monthly returns and annual independent audits.

  
  

We expect short-term supervisory activity to increase, as firms and auditors identify and report deficiencies that may previously have gone unreported. Those who approach this as a box-ticking exercise risk increased scrutiny and possible restrictions.

Ultimately, firms that invest in getting safeguarding right now will be better placed to adapt to future changes — and may avoid more disruptive reforms if the FCA’s review after a full audit cycle finds the supplementary regime effective.

How K2 Can Help

K2 Regulatory Consultants can support you through:

• Safeguarding gap analyses against PS25/12 requirements.

• Implementation planning for reconciliations, reporting, and resolution packs.

• Governance structuring to ensure the safeguarding individual has the right mandate and oversight.

• Audit preparation to ensure readiness for both FCA and independent reviews.

  
  

If your firm wants to take a proactive, confident approach to safeguarding reform, now is the time to act.