United Kingdom: Financial Conduct Authority adopted guidance on material third party arrangements (FG26/4)

On 18 March 2026, the Financial Conduct Authority (FCA) adopted the guidance on material third-party arrangements (FG26/4). It applies to designated investment firms, authorised electronic money institutions or authorised payment institutions, and other financial institutions. The guidance requires firms to assess arrangements' potential to cause intolerable harm to clients ("materiality") or pose risks to the stability and resilience of the financial system. Regulated firms must maintain a structured register of these arrangements and submit it annually to the FCA to assist in identifying potential critical third parties (CTPs) for designation by the Treasury. The framework covers both external and intragroup arrangements, particularly where external third-party dependencies exist, and outlines factors for assessment such as business continuity, operational risk, and the ability to substitute service providers. Firms are expected to evaluate materiality on a case-by-case basis, considering the complexity of supported functions and the impact of potential failures on regulatory compliance and data integrity obligations.