The UK Financial Conduct Authority has warned that weaknesses in data management and operational resilience could undermine wholesale banks’ readiness for the move to T+1 securities settlement on 11 October 2027.
In its latest Wholesale Banks Supervision Insights, the regulator said banks have continued to strengthen their resilience arrangements, but there is still room for improvement, particularly around T+1.
Firms with settlement-related important business services should consider how the shorter cycle may affect post-trade processing, dependencies, scenario testing, ability to recover within impact tolerance and remediation priorities, the FCA said. They should also assess whether tighter timelines could cause disruption for clients, counterparties or wider market activity.
The review draws on recent supervisory work and highlights several operational failings. In one case, a bank failed to detect missing data in a key control for an extended period. The FCA also pointed to weaknesses in how AI and automated systems are tested and overseen.
AI oversight
The regulator has been engaging with banks on how they use and govern AI, with a focus on effective human oversight as AI-generated outputs grow in volume and autonomy. In one incident, inaccurate AI-generated code recommendations slipped through human review and caused a loss of service. The firm has since added controls, including test cases and stronger feedback mechanisms, to improve the accuracy of AI recommendations.
Industry reaction
James Maxfield, chief client officer at operations platform Duco, said T+1 leaves banks with far less room for error, making manual data management and reconciliation harder to rely on.“With less time to identify and fix errors, firms can’t afford to rely on manual checks and disconnected systems. They need to spot discrepancies earlier, understand what’s causing them and resolve them before they disrupt settlement.”
Maxfield added that AI agents and automation can speed up reconciliation and the investigation of breaks, helping avoid settlement fails, but only if firms maintain proper oversight. “Banks need to focus on using automation to identify problems earlier, resolve them faster and prevent them from escalating into settlement failures.”