US-UK Financial Regulatory Working Group Winter 2026: Navigating Regulatory Cooperation in a Changed World
Credit: The Guardian
Context:
The 12th official meeting of the US-UK Financial Regulatory Working Group was held at the US Department of the Treasury in Washington DC, on 25 February 2026, the first in-person meeting since the onset of the Middle East conflict significantly altered the macroeconomic backdrop. The Group was established in 2018 to formalise bilateral regulatory cooperation following Brexit, and meets biannually. The next meeting is planned for summer 2026.
The meeting brought together senior officials from HM Treasury, US Treasury, the Bank of England, FCA, Federal Reserve, CFTC, FDIC, OCC, and SEC. Both treasuries opened by emphasising the importance of facilitating economic growth and cross-border activity while modernising regulation and protecting financial stability, a framing that reflects the shared pro-growth regulatory agenda of both the Labour government's Edinburgh Reforms successor programme and the current US administration's financial regulation posture.
The backdrop was unusually complex: the Middle East conflict has created energy price volatility affecting both economies; the US-UK tariff environment following the Trump administration's trade policy announcements remains uncertain; and both jurisdictions are simultaneously implementing major domestic regulatory overhauls (Basel 3.1/Basel III endgame; SMCR/operational resilience reform in the UK; and SEC/CFTC rule changes in the US) that could create divergence as well as alignment.
Rules and Guidelines:
The joint statement identifies four areas of focus. First, economic and financial stability: participants exchanged views on the impact of the Middle East conflict on global energy markets, non-bank financial intermediation (NBFI) vulnerabilities, and the resilience of banking systems. Both sides noted the importance of continued international engagement on NBFI risks, including private credit and leveraged loan market opacity, which featured prominently in the Bank of England FPC's April 2026 record.
Second, regulatory developments: HMT updated participants on the UK's programme of capital markets reforms, including a commitment to move to T+1 settlement in October 2027, which will require significant operational alignment with the US market, which moved to T+1 in May 2024. The Working Group affirmed the importance of technical cooperation on cross-border settlement interoperability. Third, digital finance and innovation: participants discussed crypto regulation developments, AI applications in financial services, and cyber and operational resilience, including the joint FSB work on AI-related financial stability risks. Fourth, capital markets: HMT set out the UK government's programme of reforms to reinvigorate capital markets, including PISCES, the consolidated tape, and listing rule reform.
The Working Group emphasised the Trans-Tasman Mutual Funds (TTMF) framework progress and received a progress report. It also noted shared commitments to the Financial Stability Board (FSB) and G20 processes, including the ongoing review of non-bank financial intermediation.
Businesses Affected:
UK banks, broker-dealers, and asset managers with US market activities, particularly those affected by T+1 settlement alignment, where operational changes must be complete before the UK goes live in October 2027.
Digital assets and cryptoasset firms operating in both jurisdictions, for whom regulatory divergence between the UK (new FSMA regime from October 2027) and the US (evolving SEC/CFTC crypto frameworks) creates compliance complexity.
AI governance teams at financial institutions, who must navigate both jurisdictions' evolving expectations on AI explainability, model risk, and systemic AI risk.
NBFI entities (private credit managers, leveraged buyout funds, infrastructure funds) with cross-border investment activity whose opacity has been identified as a shared supervisory concern in both jurisdictions.
Next Steps:
Monitor US regulatory developments on crypto (SEC/CFTC) and AI (Executive Orders, agency rulemaking) in parallel with UK developments. The Working Group's role in managing divergence is valuable but it does not guarantee alignment; firms must conduct independent gap analysis.
Engage with the FSB's NBFI workstream. The Working Group's identification of NBFI risks as a shared concern signals potential for coordinated supervisory action on private credit disclosure and leverage monitoring.
Track the summer 2026 Working Group meeting for any specific commitments or joint statements on digital assets, AI regulation, or T+1 implementation, which may refine the bilateral regulatory roadmap.
Source | HM Treasury | UK-US Working Group
