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The UK’s financial watchdog has closed 100 investigations without taking enforcement action in less than three years, slashing the number of active probes to the lowest for almost a decade.

The unprecedented cull of legacy cases highlights a strategic change at the Financial Conduct Authority since Therese Chambers and Steve Smart became co-heads of its enforcement arm in April and June 2023 with the aim to focus on fewer but higher impact investigations.

The FCA completed 24 investigations between April and November last year, of which nine were closed with no enforcement outcome and 15 resulted in it taking action, according to data the watchdog provided to the Financial Times.

The watchdog also dropped 91 probes without any enforcement action over the two years to March 2025, taking the total since Chambers and Smart were appointed to 100, the biggest cull since it was created in 2013.

In some of its closed cases, the FCA said it had imposed supervisory measures or action had been taken by a different authority.

“We committed to carrying out fewer, more focused investigations and we are delivering,” said an FCA official. “We continue to take action where we see the most egregious misconduct and are getting outcomes in more of our cases.”

City of London lawyers who represent companies in cases brought by the FCA said the watchdog had become more selective in which investigations it opened, focusing on clear-cut cases where it was more confident of an enforcement outcome.

“This is good news from an efficiency point of view,” said Tracey Dovaston, a partner at law firm Pallas. “Cases no longer appear to be being opened merely for diagnostic purposes, which means less matters are opened and referred to enforcement.”

The biggest fines the FCA imposed last year were for breaching its anti-money laundering rules, including a £44mn penalty for the building society Nationwide and a £39mn fine for Barclays Bank.

The watchdog opened 23 investigations in the year to March 2025 and 25 the previous year, a drop from previous years when it regularly opened more than twice as many. Its stock of active cases almost halved from 230 in 2022 to 124 in October. 

The government has been pushing the FCA and other financial regulators to ease business restrictions to support the UK’s struggling economy. 

In response, the watchdog has tried to speed up its investigations. Last year it announced an outcome in seven investigations within 16 months of launching them, compared with a historical average of 42 months.

However, the FCA has expanded its powers by launching a new regulatory regime for cryptoasset providers that will come into force in 2027.

It has also introduced rules for non-financial misconduct, such as bullying, violence and harassment, that take effect in 2026 and it is due to take on supervision of anti-money laundering in professional services.

Lorraine Johnston, a financial regulation partner at law firm Ashurst, said the watchdog’s expanded remit would not necessarily mean more investigation activity.

“They have been clear that there is still quite a strong enforcement culture,” said Johnston. “But I still think the numbers will come down.”

Officials at the watchdog said its enforcement output — measured by the number of criminal prosecutions, fines, bans, consumer redress payments or public censures it imposes — remained higher than usual, despite the closure of many inconclusive probes. 

In 2024 it announced 41 enforcement actions, and in the 2025 calendar year there were 33, both above its historic annual average of between 20 and 25.

“We are conducting fewer investigations, faster,” Chambers said in a recent speech. “But fewer investigations does not mean fewer outcomes. In fact, we are delivering more.”

“Fewer investigations are ending with no further action,” she said. “Historically less than a third of our enforcement operations ended with an FCA enforcement outcome. Today the majority do.”

One note to start: In this special edition, we’re looking ahead to some of the biggest themes that will affect dealmaking, private equity, corporate finance and much more in the coming months. We’ll be back to our regular scheduled programming on Tuesday January 6. Thanks for reading and happy New Year from Arash, JFK and the whole DD crew.

1. Were First Brands and Tricolor one-offs or signs of blow-ups to come?

Jamie Dimon captured the popular imagination when he described the shock bankruptcies of auto lender Tricolor (for which JPMorgan Chase had securitised most of its debts) and car parts supplier First Brands Group as “cockroaches” in the credit market. For those unaware of the adage, the idea is that when you see one cockroach scuttle out from under the floorboards, there are usually more lurking.

These blow-ups have led to an epic blame game between public and private credit markets.

In the case of First Brands, its $12bn debt pile had a bit of everything: financing from banks, syndicated loans placed with collateralised loan obligations, and opaque off-balance sheet financing largely provided by specialist private credit funds.

Expected losses now stretch into the billions of dollars, with even a typically bombproof debtor-in-possession loan crashing to distressed levels in December.

This is what makes First Brands so unnerving. Until the FT first revealed serious issues with the company’s balance sheet weeks before its bankruptcy, its senior debt was trading close to face value.

Predicting when a credit market will turn is a fool’s errand, but it’s safe to assume that when the finest minds on Wall Street are oblivious to an impending $12bn car crash, there are likely to be more accidents to come.

2. Will OpenAI, SpaceX and Anthropic go public?

After years of false dawns in the US IPO market, investors are hoping 2026 delivers “an epic bonanza” in the form of three of the biggest listings of all time.

Elon Musk’s rocket maker SpaceX and Silicon Valley’s most high-profile artificial intelligence start-ups, OpenAI and Anthropic, are all gearing up for public offerings.

SpaceX is the most advanced, with executives telling investors they plan to go public next year barring major market ructions. Its backers argue that the 23-year-old company has such a dominant position in its field that it could list even in a downturn.

Anthropic and OpenAI have taken steps towards IPOs: the former hired law firm Wilson Sonsini and the latter is in talks with various firms, including Cooley. Both are exposed to market sentiment on AI, which cooled in the last weeks of the year. They are also heavily lossmaking, complicating their paths to the public markets.

SpaceX is valued at $800bn by investors and OpenAI at $500bn, while Anthropic is working on a funding round likely to be priced north of $300bn.

Any of the three would rank among the biggest IPOs of all time — a list topped by Saudi Aramco’s 2019 flotation, which raised $29bn. All three going public would make 2026 a banner year.

“The likelihood of all these companies listing next year is small, but possible, and would mean an epic bonanza for VCs, bankers and deal attorneys,” said Peter Hébert, co-founder of venture firm Lux Capital.

3. Will the megadeal boom continue?

The takeover battle for Warner Bros Discovery was a fitting end to 2025. It minted the biggest announced deal of the year, whether Netflix’s $83bn deal or Paramount’s $108bn hostile bid prevails. 

Some 68 deals worth more than $10bn were announced in 2025, a record high, according to LSEG data. Will this continue? Yes and no.

At first it may accelerate as chief executives dust off the combinations they’ve been wanting to do for years, but that have been held up by boards, financing, antitrust risks and/ or investors. 

Defence and offence will drive them. Look to the oil and gas sector, where oil prices have crashed to a four-year low, for defensive consolidations. On the offensive utilities giants are ready to empire build, cashing in on a share price surge driven by artificial intelligence.

But the boom may be shortlived if an economic downturn or shift of power at the US midterm elections ruins the appetite for riskier deals.

The first half of this year was slow thanks to US President Donald Trump’s “liberation day” tariffs, but the second half was gangbusters. In 2026, expect the opposite.

As one investment banker put it: 2026 will come “out of the gate like a lion and leave like a lamb”.

4. Will corporate Europe get its act together? 

European companies, spurred on by former European Central Bank president Mario Draghi’s 2024 report on competitiveness, understand the need for massive investment and cross-border mergers to compete with foreign rivals.

But the barriers are still too high to forge stronger global competitors.

Domestic politics stymied several potential cross-border deals in 2025, particularly in banking — where the region’s industry is losing out to American competitors. And in AI, Europe remains far behind the US and China when it comes to innovation and investment.

In other sensitive sectors, particularly aerospace and defence, European champions are needed but the bureaucratic hurdles are high. For example, in October the groups Airbus, Thales and Leonardo struck a long-awaited deal to combine their space businesses, but they don’t expect the new entity to be operational until 2027.

The backdrop is that Europe’s economy remains anaemic. That helps explain why so much dealmaking in Europe features investment groups searching for undervalued companies to acquire. 

There are causes for hope such as Germany’s approval last year of new chancellor Friedrich Merz’s plan to inject up to €1tn into the nation’s military and infrastructure, the kind of bold spending that will be required to bolster European defence. 

European leaders are well aware that massive investment, decisive strategy and cross-border takeovers are needed to strengthen the region’s industry, which still features some of the world’s leading companies. But Europe’s gap only seems to grow.

5. Will banks start lending again?

At the start of 2025, one topic was top of mind for bankers: deregulation. 

The advent of another Trump presidency had US bank executives hoping that post-2008 crisis rules would finally be scrapped. Meanwhile, European and UK bank executives were worried they’d be left behind.

Deregulation soon arrived in the US. Michelle Bowman, vice-chair for supervision at the US Federal Reserve, has presided over one of the most significant rule rollbacks in decades, with the aim of getting banks to lend more and take on more risk. 

It seems regulators are waking up to the fact that risk hasn’t left the banking system, it has just been rerouted. While the riskier activity that banks used to do has moved into much more lightly regulated areas, such as private equity and private credit, banks are deeply intertwined with those firms through the extensive financing they provide. 

It will be interesting to see how far banks will push their newfound freedoms. The US reforms are expected to free up $2.6tn in lending capacity, mainly by limiting the amount of capital lenders have to hold in case something goes wrong.

Across the pond it’s creating an existential question. Fail to meet the US wave of deregulation and European banks are certain to lose more ground to their rivals. But as the architects of some of the most stringent rules they’ll have to undertake even more sweeping changes if they want a European banking champion.

This year’s predictions:

Take these with a grain of salt. We made only one accurate prediction last year.

Will BP still be a standalone company at the end of 2026?

Yes. Sometimes there’s smoke and fire. Sometimes there’s just smoke. 

Will there be the first pharmaceutical megamerger in years?

Yes. Big Pharma had been busy striking deals with Trump. Now expect them to strike deals with each other. At least one. Maybe two. 

Will a boutique bank crack the 60% comp ratio?

Lazard’s Peter Orszag said this year that he was hoping his firm could soon fall to a number starting with 5. But it’s not looking great at Lazard (or any of its publicly traded competitors) even as deal fees from M&A, restructuring and private capital are soaring. 

Bankers are hot free agents and firms do not want to cede any market share. Revenue-to-pay is closer to 70 per cent across the industry, with bosses not even apologising to their shareholders for the bonus guarantees that they’re passing out like candy.

Will Goldman Sachs buy a private capital giant?

Public and private markets are converging quickly and Trump’s deregulatory efforts have tempted the imaginations of C-suites. Goldman will grow its asset management unit using a signature acquisition.

Will a PE firm blow up?

They say PE firms are hard to kill. But a decade of financial engineering has left many groups leveraged in a myriad of different directions, a recipe for disaster.

Will Jared Kushner win the PE industry’s first Nobel Prize?

We’ll take the over on Kushner’s chances of winning the prize, alongside his father-in-law, and the under on his private equity returns.

Will Fannie Mae and Freddie Mac make their stock market debut?

Yes. Bill Pulte, the director of the Federal Housing Finance Agency, has been laying the groundwork for months. If he had his way, they would have IPOed months ago. What we don’t know yet is which banks will lead the deal, and reap the fees.

Will Izzy Englander finally step back from his hedge fund Millennium?

Not so fast. We bet he’ll stay on for at least another year.

Will UBS move its headquarters from Switzerland to the US?

No, the place that brought you the Swiss Army Knife is too pragmatic to let its most important financial institution leave.

Will banks start getting aggressive financing buyouts?

Yes. Large money-centre banks have been chomping at the bit to compete with private credit shops. With the Trump administration rescinding so-called leveraged lending guidance, which restricted banks from financing the riskiest buyout loans, they will start taking shots again.

Bankers expect they’ll still be working side-by-side with giants of the private credit industry, but they’re hopeful their risk committees will start to stretch when potentially lucrative financings from the likes of Blackstone, Thoma Bravo and KKR roll in.

Some of our favourite work from the past year: 

The secretive First Brands founder, his $12bn debt and the future of private credit

How Trump is exploiting Big Law’s identity crisis

Inside the downfall of trading titan and Blackpool FC owner Simon Sadler

How Blackstone and its biggest rivals are drifting apart

The hedge fund billionaire aiming to be king of Queens

The billionaire elite who answered Donald Trump’s call on Panama Canal

Inside the collapse of Microsoft-backed UK tech unicorn Builder.ai

‘JPMorgan has crossed a line’: How Altice’s debts ensnared US banking giant

Kirkland & Ellis trains lawyers on communication style after investor tensions

Kushner, Gulf money and desperate texts: inside Paramount’s hostile bid for Warner Bros

Elliott’s ‘lone wolf’: the hedge fund maverick waging war on Big Oil