Financial services disputes in 2026: what are the key risks for banks and financial services providers?

Insights from the Solomonic Year in Review 2025

The latest Solomonic Year in Review 2025 confirms that, despite a modest 5.8% year-on-year reduction, financial services remains the most litigated sector in the English High Court, with 993 claims issued in 2025. 

For financial services providers seeking to manage disputes risk, particularly organisations such as private or challenger banks, the key question is not necessarily volume but where these disputes are coming from and why they arise.  

The data reinforces that disputes are increasingly event‑driven. They tend to crystallise at specific trigger points – typically borrower distress, fraud events and regulatory scrutiny - rather than arising from individual products or disputes over a specific customer’s contractual terms alone.

Four themes stand out from the 2025 data.

1. High insolvency activity 

2025 saw record insolvency activity:

• over 14,500 insolvency applications (+8.5% from previous year)
• over 8,200 winding‑up petitions (+12% from previous year)  

These are the highest levels on record. 

This is significant for lenders, particularly those lending into SME, owner-manager and mid-market businesses, because financial distress is the primary catalyst for disputes. 

In our experience, once a borrower fails, disputes tend to follow quickly, including:

• challenges to security, enforcement strategy and valuation decisions (often with the benefit of hindsight once asset values are realised);
• disputes over priority and recoveries between creditor groups;
• allegations about historic lending conduct and decision-making (e.g. whether facilities should have been extended, amended or withdrawn earlier);
• the emergence of underlying issues such as overvalued security, and related professional negligence claims; and
• a rise in fraud-related claims post‑collapse, particularly involving misuse of funds, asset dissipation or transactions at an undervalue.

Takeaway: Insolvency remains one of the clearest leading indicators of banking litigation risk. Current volumes suggest that banking disputes will continue to increase in number.  

2. Fraud and payment claims are evolving, not disappearing

The Solomonic report shows fraud claims still making up nearly 15% of all available High Court claim forms, underlining the continuing significance of fraud in high-value litigation. Authorised push payment fraud – where a victim is tricked into willingly transferring money to a fraudster – has in recent years been the most prevalent form of fraud.

Philipp v Barclays clarified that the Quincecare duty (by which a bank must refuse to execute a payment instruction once on notice that it may constitute part of a fraud) arises only where an agent of the customer purports to give a payment instruction. Whilst this was positive news for banks, fraud and payment claims against banks and payment services providers have by no means fallen away. 

We are now seeing: 

• “retrieval duty” arguments following an APP fraud (i.e. arguments that banks should have taken steps to recover funds after executing a payment which has turned out to be part of an APP fraud);
• derivative claims, by which an APP fraud victim may attempt to step into the shoes of a bank’s customer - to whom the victim has been tricked into paying funds which were then paid away to a fraudster - in asserting a Quincecare claim, and so to recover their funds; and
• detailed scrutiny of internal processes, escalation and decision‑making.

The expected 2026 decision in Hamblin v Moorwand — which considers the scope of duties owed by payment service providers in the context of APP fraud structures — is likely to provide further guidance.

Overlaying all of this is the importance of overarching contractual frameworks: liability will often turn on how PSPs’ and banks’ terms and conditions define and limit their duties, and allocate risk in fraud scenarios.

Takeaway: Fraud and payment claims remain a material risk, with liability increasingly turning on T&Cs, internal processes, decision-making and record-keeping.

3. Mass claims strategy is becoming a real exposure risk

While motor finance commission litigation may not directly affect all financial services providers, it illustrates a broader procedural risk: claimant firms are becoming increasingly sophisticated in structuring and scaling claims. 

The Court of Appeal judgment is anticipated shortly in Angel v Black Horse, which considers whether thousands of “unfair relationship” claims under s140A Consumer Credit Act 1974 can proceed via “omnibus” claim forms.

Depending on the outcome, this could significantly affect:

• how claimant firms scale claims;
• cost exposure and provisioning; and
• early settlement strategy versus defence.

The interesting case of Vanquis v TMS Legal shows a bank fighting back against mass claims by asserting unlawful means conspiracy on the part of TMS, a law firm which had advanced tens of thousands of allegedly unmeritorious claims against Vanquis, causing it significant loss. Our separate article on this can be found here.

Takeaway: The risk is no longer the underlying claim alone; it extends to how efficiently claimant firms can package and pursue it at scale. Risk can in certain circumstances flow both ways, however, as Vanquis illustrates.

4. Sanctions disputes are a growing operational risk

Sanctions‑related litigation continues to arise where banks refuse or delay performance of contractual obligations.

The Solomonic report highlights cases such as EuroChem v Société Générale, where the court held that sanctions prevented lawful payment under bonds worth over €280 million, despite contractual obligations to pay.

While the courts have shown willingness to uphold refusals where performance would be unlawful, recent cases underline how disputes can arise through:

• Delay in implementation;
• Communication failures with counterparties; and
• Process misalignment across jurisdictions and internal teams.

Takeaway: For banks with internationally exposed clients or cross‑border elements in their loan books, this remains a material operational and reputational risk area.

What can financial services providers do to reduce disputes risk?

One of the clearest messages from the Solomonic Year in Review 2025 is that disputes risk is driven by trigger events.

In 2026, the key risk themes for financial services providers are:

• The disputes which follow when financial stress crystallises;
• How historic conduct and internal processes are examined in hindsight; and
• How claims are structured, scaled and funded.

Institutions that anticipate these themes early are better placed to manage exposure, control cost and protect reputation in an increasingly complex disputes landscape.

Across the market, we are seeing banks respond by:

• stress testing fraud response processes and payment controls;
• focusing early on dispute resolution strategies in distressed borrower scenarios;
• identifying follow-on disputes (such as professional negligence claims underlying lending decisions) early;
• tightening documentation discipline, record-keeping and advisor oversight, especially where transactions intersect with insolvency; and
• using litigation data to support portfolio‑level disputes risk analysis and anticipate emerging pressure points.

The Solomonic half‑year report expected in September 2026 is likely to provide further data on how the key risk themes are developing.

How Burges Salmon can help

The Burges Salmon financial services litigation team provides risk management advice and litigation support to UK and international clients. We assist financial institutions across a wide range of disputes, from bespoke advice on complex, one-off issues through to the strategic management of high value, multi-party litigation.

If you would like to discuss this article, please contact Caroline Brown, Rebecca Byczok, Elizabeth Pouget or your usual Burges Salmon contact.