Product Architect

MPs demand FCA inquiry over hidden credit liabilities claims. MPs are calling for a judge-led inquiry into the Financial Conduct Authority's handling of alleged hidden credit liabilities. They claim the regulator failed to properly investigate what they describe as a major financial scandal affecting UK businesses. The issue will be debated in Westminster Hall today (14 April), led by chair of the All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services, John McDonnell. The APPG is urging the government to establish a fully independent statutory inquiry into both the alleged hidden credit liabilities scandal and the FCA's role in overseeing the matter. According to the APPG, thousands of SMEs may have been sold complex derivative products alongside loans, with the products allegedly carrying undisclosed liabilities that affected firms' credit positions and financial stability. The group said it has gathered evidence from victims, specialist advisers and whistleblowing service BankConfidential, which it claims shows many SMEs seeking straightforward loans were instead sold products such as interest rate swaps presented as protection against rate rises. It alleges these products concealed significant undisclosed credit line liabilities booked against customers' assets from the outset. Derivatives and capital markets lawyer Lorraine Morris told the APPG: "These instruments were deliberately engineered to transfer significant, undisclosed, and uncapped risk directly onto the customer. "The mechanism was the concealed creation of a credit-line liability, booked against the customer's assets from day one. This contingent obligation was not a notional figure; it was a hard liability that directly impacted the customer's credit grade." The APPG claims the issue contributed to viable businesses being pushed into distress and transferred into bank restructuring units. McDonnell said: "This debate is about justice, long overdue justice, for thousands of business owners and their families who were systematically defrauded." He added: "Behind every case file are human beings. People who lost their business, their home, their health, or their life. Parliament cannot allow this to continue. We need an independent inquiry now." Ian Byrne said the scandal followed "a deeply familiar and troubling pattern" seen in other national injustices, including the Hillsborough and Post Office scandals. David Chadwick added that the alleged use of hidden credit liabilities and mis-selling of financial products had caused "significant harm". Prem Sikka said: "How can we have trust and confidence in our regulatory framework when the FCA consistently sides with the banks, not the citizens that the regulator has been tasked by Parliament to protect?" Responding to the claims, an FCA spokesperson said: "Money Marketing recognise that many small businesses suffered following the financial crisis and there have been a number of reviews into how loans were sold. "The IRHP redress scheme, set up over a decade ago, led to fast, fair redress of over £2.2bn for 14,000 small businesses. "Money Marketing carefully reviewed the specific concerns raised with Money Marketing about Ulster Bank's past SME loan practices, which were a different type of product. "We are satisfied that these loans fall outside our regulations, and we found no evidence warranting further action. However, we welcome that £1.8m was paid to 26 impacted Northern Irish businesses in this case." The FCA said the products sold by Ulster Bank were distinct from the interest rate hedging products covered under the 2012 IRHP redress scheme and fall outside its regulatory remit. It added that it had investigated concerns raised about Ulster Bank's fixed-rate loan products and found no evidence warranting further supervisory action. However, the regulator said it is considering whether similar allegations made against another retail banking group involve materially new information or evidence.

FCA and Malted AI small language model experiment "extremely encouraging" Elizabeth Greenberg 09 April 2026, 04.48pm The experiment saw a small language model be tested for a myriad of financial services. The Financial Conduct Authority has said the results of its small language model for financial services with Malted AI, the Edinburgh-based startup, had "extremely encouraging" results. Edmund Towers, head of advanced analytics and data science units at the FCA, detailed the experiment, which began in 2025 with Malted AI, the bespoke AI language model firm, in a blog on Linkedin. The experiment was led by Towers and Alister Shepherd, chief scientific adviser and CISO at the FCA, and aimed to work with Malted AI to see where small language models (SLMs) can add value to the FCA and financial services, as well as any tradeoffs SLMs have versus large language models. The focus on SLMs is largely due to LLM's comparatively large costs and compute requirements, where as SLMs use a fraction of these required parameters. SLMs also offer specialist performances tailored to specific datasets, with lower energy and infrastructure requirements and costs, fast inference, and greater auditability. The FCA partnered with Malted AI to create a SLM prototype for the high-volume task of multilabel classification, which deals with a range of issues from vulnerability detection to customer routing. The prototype used a 400 million parameter model and was trained on 10,000 records, running on a single tenant environment with no data sub-processors. This provided the researchers with full control over the data. Further, the experiment allowed for precision-recall threshold calibration to match potential risk. The SLM results showed "zero missed high risk classifications, alongside materially higher accuracy than a prompted general LLM on the same task," Malted CEO Iain Mackie said. "We also observed significantly faster latency, with large reductions in compute cost and energy usage for the use cases in scope." Towers wrote: "This proof of concept reflects the FCA's commitment to innovation that is grounded in responsible choices. As AI continues to evolve rapidly, it is essential to understand how technical design decisions connect directly to risk appetite, transparency, and trust." Recommended reading. SLMs were viewed as being capable of delivering speed and strong data control benefits for the right use cases, while LLMs were still the best choice for more complex generative operations and open-ended reasoning. "We're increasingly seeing UK firms adopt a blended approach focused on use case return on investment - using large models for general workflows, while deploying smaller, specialised models where performance, privacy, and scale really matter," Ewen Fleming, head of financial services at Malted said. While the experiment showed the promise of SLM, Towers emphasised that they should be seen "as an important component within a broader AI strategy, rather than a replacement for general purpose models."

UK FCA annual work programme 2026/27. LinkedIn Facebook X The UK Financial Conduct Authority (FCA) has published its annual work programme for 2026/27 setting out its planned activity for the second year of its five-year strategy. The programme is structured around the following four strategic priorities: * Being a smarter regulator: to improve regulatory efficiency and proportionality, the FCA will continue to invest in digital, data and AI capabilities, reduce administrative burdens by simplifying rules and streamlining data returns (including removing three regular returns in April), and improve the authorisation process by further reducing authorisation timelines and continuing to report against new, shorter voluntary targets. In a press release published on the same day, the FCA announced it is developing a new internal AI-enabled authorisation tool, integrated into its existing systems. The FCA will also use generative AI to review documents received from firms, which, following successful testing, it will begin rolling out more widely across authorisations and supervision. * Supporting growth: the FCA highlights initiatives to unlock capital investment and liquidity across UK markets, accelerate digital innovation to improve productivity and support firms to start up and grow. This includes: (i) making rules for alternative investment fund managers more proportionate and streamlined; (ii) reforming capital requirements for solo-regulated investment firms to improve liquidity; (iii) simplifying the securitisation framework; (iv) establishing a bonds consolidated tape and progressing one for equities; (v) developing the long-term regulatory framework for open banking and advancing open finance work; (vi) expanding overseas presence; and (vii) supporting UK participants to adopt a trade plus 1 day (T+1) settlement cycle next year. * Helping consumers navigate their financial lives: the FCA confirms it will begin regulating deferred payment credit (previously known as buy now, pay later) from July, including carrying out affordability checks and assessing authorisation applications. It will also continue to prioritise financial inclusion and support for customers in vulnerable circumstances by undertaking a multi-firm project of smaller payment firms to identify good practice and areas for improvement on treatment of consumers with vulnerable characteristics. * Tackling financial crime: the FCA plans to strengthen its approach to financial crime and online safety by creating a single, end-to-end, intelligence-led service to detect and stop the highest risk financial promotions more quickly, consistently and at lower cost, as well as increased use of data analytics and AI tools. In the summer, the FCA will publish its annual report and accounts, to reflect progress made towards its outcomes and metrics in the first year of its strategy.