The FCA’s new CASS 15 Supplementary Regime, effective May 2026, introduces enhanced safeguarding rules for payment and e-money firms.
On 7 August 2025, the Financial Conduct Authority (FCA) published Policy Statement PS25/12, introducing significant changes to the existing safeguarding rules for payment and e-money institutions. These changes address weaknesses in how customer funds are protected under the current legislation of Payment Service Regulations (PSRs) 2017 and Electronic Money Regulations (EMRs) 2011, especially in cases of firm failure.
The new rules, known as the Supplementary Regime, are designed to enhance compliance with existing safeguarding requirements. The changes were previously referred to as the “Interim State” changes in the FCA’s Consultation Paper CP24/20 and will come into force on 7 May 2026, following a nine-month implementation period. After that, the FCA may seek to implement the Post-Repeal regime (previously known as the end state rules as per CP24/20), depending on the effectiveness of the Supplementary Regime.
To whom do these rules apply?
The new rules apply to all authorised payment institutions (excluding those offering only payment initiation or account information services); authorised and small e-money institutions; and credit unions issuing e-money in the UK.
Small Payment Institutions (SPIs) may opt in voluntarily.
What is changing?
The following are the highlights of the Supplementary Regime:
- Safeguarding reconciliations – * Firms are no longer required to conduct safeguarding reconciliations on weekends and public holidays. The rules have been amended so that safeguarding reconciliations are now required at least once each “reconciliation day” rather than business day. Reconciliation days exclude weekends, bank holidays and days on which relevant foreign markets are closed.
- Resolution pack – * There is now a requirement to maintain a resolution pack (CASS 10A), detailing fund locations, agents, distributors, and safeguarding procedures. A resolution pack is a structured set of documents that support the timely return of relevant funds in the event of insolvency.
- Safeguarding audits – * Annual safeguarding audits are now only mandatory for firms holding over £100,000 in relevant funds. The FCA has considered the issue of proportionality and costs for those holding small amounts of relevant funds. * Annual safeguarding audits must be conducted by qualified auditors. Before the changes, unqualified consultants were also allowed to conduct the safeguarding audits. *Audit reports will need to be submitted to the FCA within four months of the firm’s financial year-end.
- Monthly regulatory returns – * Firms will be required to submit a monthly regulatory return to the FCA on safeguarding arrangements. * This new return replaces the current questions on safeguarding in existing regulatory returns and should contain comprehensive information about: – safeguarding method(s) used; – amounts of relevant funds safeguarded; – safeguarding reconciliation in the period, the excess or shortfall identified, and adjustments made to rectify these, as well as the frequency of internal and external reconciliations; – relevant funds bank accounts and relevant assets accounts; and – notifiable breaches.
- Safeguarding via insurance – * The FCA has also clarified that firms using insurance or a comparable guarantee to safeguard relevant funds must have a contingency plan to enable them to switch to the segregation method at least three months before the expiration of the insurance policy in the event that the insurance policy is not renewed
What should firms do now?
As we prepare for the new rules to come into effect on 7 May 2026, here is what your firm should do in the meantime:
- Assess audit readiness – If your firm has been audited by consultants, now is the right time to initiate discussions with qualified auditors.
- Update internal processes and systems – Your processes and systems must be ready to deal with the new monthly reporting requirements and daily reconciliations.
- Evaluate insurance cover – If safeguarding is being done through insurance, review the policy cover dates and establish contingency plans in case insurance cover is no longer an option.
The FCA’s consultation process on these changes received responses from various sector stakeholders. Notably, there were concerns raised about the financial burden that these changes would add to payments firms. It is accepted that implementing these changes will not be easy. However, it is considered that the overall benefits of these changes to all the market participants will outweigh the costs of implementation.
How we can help
As qualified auditors, PKF has been closely following these changes and understands the significant impact they will have on payments and e-money firms. We are well-positioned and available to help should you have any queries on the impact of the new regime on your firm or safeguarding in general. You can contact Azhar Rana <[email protected]> or Knowledge Muchemwa <[email protected]> who will be able to assist with any queries you may have.
