Building a Proactive Regulatory Engagement Strategy
In UK financial services, firms interact with regulators across a wide spectrum, from securing initial authorisation to navigating crises under intense scrutiny. Whatever the circumstances, a clear, strategic approach to regulatory engagement is crucial. The PRA and FCA expect firms to be open, transparent, and accountable. A well-crafted engagement strategy not only helps firms to meet these expectations but also build trust, streamline communication, and reduce the risk of surprises. When regulators have confidence in a firm, the benefits can be substantial, such as reduced regulatory scrutiny, fewer demands on senior leaders, and a more collaborative approach to resolving issues.
In this blog post, we’ve set out some thoughts on how to build and embed an effective regulatory engagement strategy. Get in touch if you’d like to discuss how to improve your regulatory relationships.
Understand the Regulatory Landscape
Regulators will typically engage with individuals from across a firm, including board members, senior executives, risk and compliance functions, and business leaders. These interactions will vary depending on the nature of the firm’s activities and its supervisory status, including whether a named supervisor is assigned. In this context, firms should start by identifying the key internal and external stakeholders involved in regulatory engagement. Internally, this involves understanding who is best placed to speak to the regulator on specific issues, and ensuring these individuals are aligned in their messaging. Externally, firms should be clear about who their regulatory contacts are and what their respective roles entail.
Establish Governance and Ownership
Clear governance and defined ownership are essential to managing a firm’s regulatory relationships effectively. While regulators will often speak to a wide range of individuals across the business, they expect firms to demonstrate that these engagements are coordinated and well-controlled. Without clear lines of responsibility, regulatory interactions risk becoming fragmented, inconsistent, or reactive - particularly in firms that operate across multiple business lines or jurisdictions.
The starting point is to assign ownership of the regulatory engagement strategy at a senior level, typically within the second line of defence. This responsibility often sits with the Head of Regulatory Affairs, Chief Risk Officer, or Compliance Director, depending on the size and structure of the firm. This individual or function should have a mandate to set expectations for how engagement is managed across the organisation and to ensure that these expectations are being followed in practice.
Ownership should be supported by a clearly defined governance framework that sets out the roles and responsibilities of different teams and individuals in regulatory interactions. This includes determining:
Who can engage with regulators and under what circumstances
How information is shared internally
How regulatory messaging is aligned.
Formalising these expectations in a Regulatory Engagement Policy can be a useful step. This policy should set out the purpose of regulatory engagement, define internal roles and responsibilities, outline expectations for planning and documenting meetings, and establish escalation and approval pathways.
For smaller or less complex firms, the governance structure can be more streamlined, but the underlying principles still apply. A single point of contact for all regulatory matters, a log of interactions, and a simple process for coordinating responses can go a long way to demonstrating to regulators that the firm takes engagement seriously and minimising the risk of miscommunication.
Prepare Internal Stakeholders
Firms should ensure that individuals engaging with regulators are properly briefed and supported ahead of any formal or informal interaction. This includes understanding the current supervisory context: what has been raised in past interactions, what information has been provided, and what the regulator is currently focused on. It is useful to provide tailored briefing materials for participants, covering both firm-specific content and broader regulatory developments that may shape the tone or expectations of the discussion.
Training can be a valuable tool for those who are not regularly involved in regulatory dialogue. Many individuals, including technical specialists or business leads, may not be familiar with regulatory priorities, communication styles, or the level of scrutiny applied in supervisory reviews. Helping these individuals understand the regulator’s objectives, how to frame responses effectively, and when to seek support can contribute to a more constructive and credible engagement.
Preparation should also include aligning internal messaging across different parts of the business. Regulators often speak with multiple teams separately, and inconsistencies in narrative or interpretation, particularly on risk appetite, governance, or strategy, can undermine confidence. A joined-up approach, supported by briefing calls, rehearsals for key meetings, and centrally coordinated responses to regulatory queries, can help ensure the firm presents itself in a coherent and well-managed way.
Set Organisational Priorities
Firms should also take time to agree on a set of organisational priorities for the regulatory relationship. These priorities might include ensuring that the regulator understands a new business model, improving confidence in the effectiveness of second line functions, or seeking more engagement on specific areas of policy development. As opportunities to engage with regulators are limited, firms should be clear about the messages they want to convey and consistent in how these are communicated.
Ensure Internal Visibility
Providing regular internal reporting on regulatory engagement can help maintain transparency and support better decision-making. Sharing updates on recent meetings, ongoing supervisory activity, and upcoming deadlines can help ensure that everyone involved is aware of the broader context and can respond appropriately. However, given the sensitivity of some issues discussed in regulatory meetings, judgement and discretion is required from the central team on what is shared, and with whom.
Use Regulatory Intelligence Effectively – “Join the Dots”
A well-rounded regulatory engagement strategy involves more than responding to individual interactions. It requires firms to build a broader view of how they are perceived by regulators and where supervisory attention is likely to focus in future. This means “joining the dots” across a range of regulatory signals - some direct, some more subtle.
Supervisory feedback, formal and informal, should be reviewed not only for its immediate implications but also for patterns over time. Firms should look across feedback letters, meeting summaries, requests for information, and supervisory themes to identify areas where the regulator may perceive increased risk or poor performance.
In addition, firms should assess how these insights align with what is publicly known about the regulators’ priorities. Speeches by senior regulators, business plans, thematic reviews, and Dear CEO letters often offer clear signals about where supervisory focus is heading. Comparing internal feedback with these public pronouncements can highlight misalignments - or validate that the firm is focused on the right issues.
Support Regulators in Understanding Your Business
Supporting regulators in understanding the firm’s business and operations is a practical and often under-appreciated aspect of engagement. This includes clearly explaining the implications of strategic changes, offering insight into market developments, and helping contextualise new products or business lines. Where firms are responding to requests for information or participating in supervisory reviews, providing clear, well-structured responses that anticipate likely questions and include relevant context can help facilitate more effective and constructive engagement. Ensuring that submitted materials are accurate, internally quality-assured, and clearly presented will support a smoother supervisory process.
Review the Effectiveness of Engagement
Monitoring the effectiveness of regulatory engagement is another important component of a sound strategy. Firms should take stock of both formal feedback - such as letters and supervisory findings - and informal cues from meetings and correspondence to assess whether their approach is contributing to a stronger relationship. Periodic reviews can help determine whether key messages are being understood, whether concerns are being addressed, and whether the firm is building trust and credibility.
Maintain Good Records
Maintaining proper records of regulatory engagement is essential. A central log or diary of meetings, correspondence, and actions arising helps support governance and accountability. It also provides a valuable resource for tracking progress over time and for preparing for future supervisory interactions.
Engage Through Industry Channels
Finally, while firm-specific engagement is important, industry-level engagement also plays a role in an effective strategy. Active participation in trade associations, working groups, and regulatory consultations can offer firms an opportunity to stay ahead of emerging expectations and to contribute to the development of new policy. These forums can also provide insight into how the regulatory landscape is evolving and where there may be scope to help shape future direction.
Final thoughts
A well-managed approach to regulatory engagement helps firms maintain effective, constructive relationships with their regulators. It supports better communication, reduces the risk of misunderstanding, and enables firms to demonstrate that they are serious about their regulatory obligations and understand the expectations that regulators have of them. This builds trust and can in turn lead to firms being given space by regulators to address issues without immediate or intrusive supervisory action.
By embedding regulatory engagement into broader business planning, governance and risk management processes, firms can ensure they are meeting both the letter and the spirit of regulatory expectations.