The FCA’s latest consultation, CP26/3, will turn R2B2 into a mandatory annual return. Firms that cannot already evidence subproduct profitability, reconcile MI to financials and defend their methodology will face pressure when the rules land. Thistle’s James Fraser explains what is changing, who is affected and what firms should be doing now.
With just over two weeks left to respond to CP26/3, firms should be asking themselves a simple question: "Could we currently evidence subproduct profitability and defend it to the FCA?"
For most, the honest answer is “not without a lot of manual work.”
That is exactly why this consultation matters. The challenge isn’t that firms lack data. It’s those definitions, allocation methods, controls and ownership that are inconsistent, meaning product MI often cannot be reliably reconciled back to financial statements. When the output of CP26/3 lands, these weaknesses become regulatory vulnerabilities.
Whether you're currently in scope or not, the expectation is shifting, the FCA wants clear, consistent and defensible product economics.
Why CP26/3 Matters Now
CP26/3 converts the FCA’s Retail Banking Business Models (R2B2) data, previously an ad-hoc exercise, into a mandatory annual return. This aligns with the FCA’s broader shift toward data-led supervision, focusing not only on what firms report but also on how they produce the information, evidence its integrity, and demonstrate consistent governance.
What The FCA Is Trying to Achieve and What Will Be Required of You
The regulator wants an annual return that is predictable, comparable across firms, and operationally less disruptive than periodic bespoke requests, having already removed more than 200 data points from earlier drafts to reduce complexity, but the core expectation remains high.
Firms will need to provide three components:
- Subproduct financial and volumetric data
Across mortgages, personal and business banking, personal lending and wholesale funding. - Reconciliation data
Linking granular views back to the firm’s P&L, balance sheet, risk-weighted assets and capital ratios. - “Off-the-shelf” documents
Business plans, customer research and annual accounts, whether these already exist to support the FCA’s understanding, not to create new documentation obligations.
How Will This Affect My Firm?
CP26/3 applies to firms meeting both of the following:
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Over 200,000 UK customer relationships; and
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At least £5m revenue at each of the last three accounting dates.
The FCA expects 33 firms to fall in scope, representing around 97% of UK retail banking relationships, and it proposes group-level reporting where multiple entities qualify.
Not In the First 33? Don’t Tune Out
Even where formal reporting duties won’t immediately apply, CP26/3 signals the FCA’s long-term supervisory expectations. The move toward granular, repeatable evidence of product performance affects every retail banking provider, including challengers, smaller banks and credit unions.
For these firms, the message is simple: start small, but start now. Establish consistent product and subproduct splits, build repeatable MI, and ensure it reconciles back to financials. Firms with these foundations will respond confidently to future supervisory questions and avoid rebuilding under pressure later. Using CP26/3 as a best practice template will also enhance pricing discipline, customer outcome monitoring and broader governance.
What Do I Need to Do?
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Influence the final rules and prepare your operating model now (respond by 4 March 2026)
Firms should align internally on:- Which subproduct splits are within scope;
- Where reconciliation presents risk; and
- Which areas require clearer definitions or proportionality from the FCA.
- Build capability toward November 2026, starting now
Work backwards from the proposed first submission:
- Establish product/subproduct taxonomy and ownership;
- Build effective MI and reconciliation controls;
- Run a dry run early enough to identify and remediate breaks.
- A single product and subproduct classifications used by Finance, Risk and Product;
- A documented profitability methodology with clear allocation rules;
- Reconciliation controls that explain differences rather than hide them.
How Thistle Initiatives Can Help
CP26/3 is not just a reporting change; it is a test of whether firms truly understand and can evidence how retail products perform. The firms that act early will avoid last-minute pressure, strengthen their Consumer Duty evidence base, and build capabilities that scale with growth.
Thistle can help you run a rapid CP26/3 readiness assessment that identifies gaps in MI, reconciliation logic, product taxonomy and governance. We can also draft (or quality assure) your consultation response to ensure you present clear, evidence-based arguments that reflect operational reality and mitigate unnecessary burden.
Following the consultation response, Thistle can support with the full end-to-end design, provide templates for target operating models, map data flows, define allocation methodologies, and ensure reconciliation is auditable and defensible. This includes providing independent challenge and readiness assurance supporting the implementation, where multiple teams and systems must align to achieve consistency.
Get in touch at info@thistleinitiatives.co.uk or call 020 7436 0630 to speak with our team.
Meet the Expert
James Fraser, Senior Manager 
James has worked with Thistle since 2017, managing end-to-end compliance support for a spectrum of consumer credit and mortgage providers and intermediaries. James’ experience ranges from working with fintech start-ups looking to undertake FCA authorisation for the first time through to ongoing compliance and regulatory consultancy for established firms that have been operating in the regulated space for a number of years.