A&O Shearman | FinReg

UK PRA publishes discussion paper on proposed reforms to IRB approach for residential mortgages

31 July 2025

The UK Prudential Regulation Authority (PRA) has published discussion paper DP1/25 inviting views on potential reforms to the internal ratings based (IRB) approach to credit risk for residential mortgage exposures. The PRA recognises that medium-sized firms face challenges in developing compliant models for loss given default (LGD) and probability of default (PD), which may restrict access to the IRB framework and limit competition. To address this, the PRA is considering a new foundation IRB (FIRB) approach under which firms would model PD while applying fixed supervisory values for LGD and exposure at default (EAD). This would provide a proportionate alternative to the standardised approach (SA) and advanced IRB (AIRB) for firms with limited data or modelling capabilities. In parallel, the PRA is also exploring policy options to ease implementation of PD modelling requirements. These include revising or removing the 30% cyclicality calibration cap, simplifying long-run average default rate estimation and exploring through-the-cycle (TtC) models for medium-sized firms. The PRA is not committing to any policy changes at this stage but seeks views by 31 October. Any changes would take effect after the implementation of the near-final Basel 3.1 rules.

Topic : Prudential Regulation

EBA consults on draft ITS for supervisory reporting for third-country branches under CRD VI

31 July 2025

The European Banking Authority (EBA) has published a consultation paper on draft implementing technical standards (ITS) for the supervisory reporting of third-country branches under the Capital Requirements Directive (CRD VI). The proposals aim to bring consistency to reporting formats, definitions and frequencies across the EU, while also strengthening oversight of third-country branches. To achieve this, the EBA is introducing structured data collection with new templates that capture information on both the branches and their head undertakings. This is intended to address the inconsistencies in national approaches currently in place and ensure supervisors have a clearer view of the financial health, risk profile and group dependencies of these entities.

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Topic : Prudential Regulation

UK FCA findings on digital design of loan processes in customers' online journeys

31 July 2025

The UK Financial Conduct Authority (FCA) has published the findings from its review on digital design in customers' online journeys when accessing consumer credit, with related press release, identifying good practices and areas for improvement. Although the findings relate to consumer credit providers, other firms with a digital presence may find the examples of good and poor practice useful. The FCA found that some firms' digital design supported good consumer outcomes, such as using simplified language and offering explainer videos. Other firms had less well-designed digital platforms. A particular issue was a lack of "positive friction", meaning consumers were driven towards making quick decisions that did not align with their best interests.

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Topics : Consumer / Retail, FinTech

UK SRA and FCA issue warning to law firms and claims management companies over poor practices in motor finance commission claims

31 July 2025

The UK Solicitors Regulation Authority and the UK Financial Conduct Authority (FCA) have issued a joint warning addressed to law firms and claims management companies (CMCs) over poor practices in motor finance commission claims. The warning comes ahead of the pending Supreme Court judgement, expected on 1 August, which, if upheld could expose firms to significant liability for failing to disclose commissions. The FCA has confirmed it will likely consult on a free motor finance redress scheme for affected consumers. The joint warning sets out expectations for law firms and CMCs, including that they inform clients of the existence, or a potential introduction, of a free redress scheme before entering into agreements with consumers, even if the scheme has not yet been confirmed. A decision on a potential FCA-led redress scheme is expected within six weeks of the Supreme Court's judgment.

Topic : Consumer / Retail

UK PRA consults on restatement of CRR definitions in Rulebook

30 July 2025

The UK Prudential Regulation Authority (PRA) has published consultation paper CP19/25, proposing the transfer of definitions from Articles 4, 4A, 4B and 5 of the UK Capital Requirements Regulation (CRR) into the PRA Rulebook Glossary. This follows HM Treasury's (HMT) announcement to revoke remaining CRR provisions, aligning with the UK's FSMA model of regulation. The PRA intends to adopt a "lift and shift" approach, restating most definitions without substantive change. However, targeted amendments to improve clarity and reduce regulatory burden are also proposed. Key proposals include updates to definitions such as 'SME', 'large institution' and 'credit risk' terms, among others, introducing new definitions for terms currently implicitly defined in the CRR, as well as consequential amendments across the Rulebook and supervisory statements. The proposed changes are set out in the PRA Rulebook: Definitions and Interpretation (CRR) Instrument [2026] and the draft amendments to Supervisory Statement SS13/13 on Market Risk. The proposal in this consultation also considers the draft Credit Institutions and Investment Firms (Miscellaneous Definitions) (Amendment) Regulations 2025, published by HMT on 15 July and the PRA expects to consider any relevant subsequent legislative proposals and statutory instruments when finalising its approach. The deadline for comments on the consultation is 30 October, with proposed implementation aligned with the Basel 3.1 package, taking effect on 1 January 2027.

Topics : Prudential Regulation, Regulatory Reform Post Brexit

EC adopts recommendation on a voluntary sustainability reporting standard for SMEs

30 July 2025

The European Commission (EC) has adopted a recommendation on a voluntary sustainability reporting standard for small and medium-sized enterprises (SMEs). The recommendation serves as an interim measure ahead of a formal delegated act, which will establish a future voluntary standard as part of the Omnibus I simplification package. Among other things, the Omnibus I package amends the EU Corporate Sustainability Reporting Directive (CSRD) to make sustainability reporting more accessible and efficient.

The EC's standard is intended to make it easier for SMEs not covered by CSRD to respond to requests for sustainability information from large companies and financial institutions that are subject to CSRD. SMEs may also choose to voluntarily report sustainability information in line with the standard to enhance their access to sustainable finance and improve their internal sustainability performance monitoring. The EC encourages large companies and financial institutions to base their sustainability information requests to SMEs on this voluntary standard as far as possible. The upcoming delegated act, which may differ in content from the recommendation, will also introduce a "value-chain cap" to protect SMEs from disproportionate data demands from their value chain partners. Its adoption will depend on the timing and outcome of negotiations between the co-legislators on the Omnibus I proposal.

Topic : Sustainable Finance

UK PRA extends Phase 1 Pillar 2A review consultation and defers implementation of certain risk areas

30 July 2025

The UK Prudential Regulation Authority (PRA) has announced an extension to the consultation period for CP12/25 which sets out Phase 1 of its Pillar 2A review. The consultation was originally published on 22 May. In response to industry feedback that respondents may benefit from extra time, particularly due to other concurrent regulatory consultations that close in early September, the deadline for responses has been extended from 5 September to 30 September. Additionally, the proposed implementation date for changes relating to pension obligation risk and market and counterparty credit risk (Chapters 4 and 5) have been deferred from 2 March 2026 to 1 July 2026. The implementation timeline for credit risk and operational risk proposals (Chapters 2 and 3) remains unchanged, aligned with the Basel 3.1 implementation date of 1 January 2027.

Topic : Prudential Regulation

UK FCA publishes Wider Implications Framework report 2024/25

29 July 2025

The UK Financial Conduct Authority (FCA) has published its third annual report of the Wider Implications Framework (WIF) for the 2024/25 period, covering 1 April 2024 to 31 March. The report summarises coordinated efforts and actions taken by the FCA, Financial Ombudsman Service (FOS), Financial Services Compensation Scheme, the Money and Pensions Service and the Pensions Regulator to address cross-cutting and systemic issues in financial services. The report highlights joint work conducted on motor finance commission complaints, embedding the consumer duty and implementation of the mandatory reimbursement requirements for authorised push payment fraud. The report also offers insight into how collaboration has been enhanced by updating the WIF's Terms of Reference and the FCA and FOS signing a refreshed Memorandum of Understanding. Alongside the report, the July 2025 Wider Implications Framework Issues Log was also published which provides a detailed overview of the key issues currently under consideration by the FCA and the other regulatory bodies, demonstrating how these matters are being addressed collaboratively.

Topic : Other Developments

BoE consults on extending RT2 and CHAPS settlement hours – Phase 1

29 July 2025

The Bank of England (BoE) has published a consultation paper outlining Phase 1 of its extension to settlement hours for the UK's renewed Real-Time Gross Settlement system (RT2) and CHAPS. RT2 went live in April. The BoE has concluded that the existing 6am to 6pm window for settlement no longer meets industry needs, which operate on a 24x7 basis. The BoE is proposing to extend CHAPS opening hours in phases, with the goal of near 24x7 settlement for RT2 and CHAPS by the end of the decade.

The BoE's Phase 1 consultation proposes opening CHAPS for settlement from 1:30am on existing business days for urgent and non-urgent settlement of any payment available for settlement, with implementation targeted for the second half of 2027. The consultation also seeks early views on extending the CHAPS contingency window from its current hours of 6pm–8pm to 6pm–10pm, and on introducing RT2 settlement on certain bank holiday weekends. The deadline for responses on the consultation is 21 October.

The BoE plans to publish a policy statement on the 1:30am CHAPS extension in early 2026, as well as a Phase 2 consultation paper seeking views on the evening contingency extension and bank holiday settlement. A policy statement on the latter is also expected next year.

Topic : Payment Services and Payment Systems

Commission Decision extending mandate of Payment Systems Market Expert Group published in OJ

29 July 2025

Commission Decision amending Decision 2011/C 253/04 of 29 August 2011 has been published in the Official Journal of the European Union. The amendment, adopted on 25 July, extends the mandate of the Payment Systems Market Expert Group (PSMEG) from 31 December 2025 to 31 December 2030. The PSMEG is comprised of a broad range of payment service providers and users, advising the European Commission on policy development and implementation in the payments sector. The extension reflects the continued need for expert input amid rapid innovation, technological progress and evolving market developments.

Topic : Payment Services and Payment Systems

UK FPC finalises O-SII buffer framework review

29 July 2025

The Bank of England (BoE) has published the Financial Policy Committee's (FPC) final response to the 2024 review of the Other Systemically Important Institutions (O-SII) buffer framework. This follows the March consultation, which proposed increasing the O-SII buffer thresholds to reflect the 20% cumulative growth in nominal GDP between 2019 and 2023 and extending the O-SII buffer review cycle from two to three years. In response to consultation feedback, the FPC has made only one adjustment to the indexation period—starting with the O-SII buffer rates set in 2025, a longer indexation period, from 2019 to 2024, will be used to determine future rates. This means the O-SII buffer thresholds will increase by 27%, rather than the 20% proposed in the consultation. To ensure firms benefit without delay, the revised framework takes immediate effect. Looking ahead, the December review of O-SII buffer rates (applicable from 1 January 2027) will use thresholds indexed to nominal GDP data up to end-2024.

The framework has been largely implemented as consulted on, with the UK Prudential Regulation Authority (PRA) reissuing firms' 2024 O-SII buffer rates, using end-2023 balance sheet data and thresholds indexed by 20%, which apply from 1 January 2026.

Topic : Prudential Regulation

UK FCA appoints new interim chair of FOS

28 July 2025

The UK Financial Conduct Authority (FCA) has announced the appointment of Liam Coleman as interim Chair of the Financial Ombudsman Service (FOS), effective from 10 October. Mr Coleman will chair in this position until a permanent appointment is made, following an initial recruitment campaign that proved unsuccessful. He will step down as a non-executive director of the FCA to assume his new position. His appointment comes as the FCA continue work to modernise the redress system and support prevent delays to compensation.

Topic : Other Developments

UK FCA findings on multi-firm review of data quality control frameworks in benchmarks sector

28 July 2025

The UK Financial Conduct Authority (FCA) has published a new webpage summarising the findings of its multi-firm review into how benchmark administrators (BMA) manage data-related risks. While the FCA found some firms to demonstrate some good arrangements, overall practices varied and often fell short of consistently supporting a strong control environment. The review follows the FCA's portfolio letter in which the FCA discussed its concerns on data quality controls, corporate governance and oversight, benchmark controls, disclosures and operational resilience. Key findings from the review are set out below.

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Topic : Operational Resilience

EBA issues opinion on money laundering and terrorist financing risks across the EU

28 July 2025

The European Banking Authority (EBA) has published its fifth opinion on money laundering and terrorist financing (ML/TF) risks. In the report, the EBA highlights the growing vulnerabilities in the EU financial sector arising from the growth of technologies, new financial products such as crypto-assets, and the increasing interconnection of financial products and services across sectors. The EBA states that while tools such as RegTech and AI offer potential for enhanced compliance, their improper implementation (often due to lack of expertise and oversight) has led to serious compliance failures. Competent authorities have reported high or rising ML/TF risks in Fintech firms and crypto-asset service providers linked to weak AML/CFT controls and governance. Additionally, the use of AI by criminals to automate laundering and forge documents is outpacing institutional defences. The EBA notes that supervisory engagement has improved the capability of some sectors to fight financial crime. The EBA emphasises the importance for consistent application of the new EU AML/CFT legal framework.

Topics : Artificial Intelligence, Financial Crime and Sanctions, FinTech

ECB publishes revised guide to internal models

28 July 2025

The European Central Bank (ECB) has published a revised version of its guide to internal models, reflecting updates under the Capital Requirements Regulation (CRR3) and the revised Basel framework. The update enhances transparency around the ECB's interpretation of key regulatory requirements. The main updates include: (i) a newly introduced section outlining supervisory expectations for the use of machine learning in internal models, which aims to ensure that models using these techniques are adequately explainable and that their performance justifies their complexity; (ii) updates to the 'credit risk' chapter refining expectations on roll-out and permanent partial use, internal validation and audit (in line with the EBA's Internal Ratings-Based handbook), default definitions and risk parameter estimation and clarifying senior management responsibilities; (iii) splitting the topic of 'market risk' into two chapters to reflect supervisory expectations under CRR2 and CRR3 frameworks, acknowledging delays in implementing the new Basel standards—initially to 2026, with a further proposed delay to 2027 pending EU scrutiny; and (iv) expanded guidance under the chapter on 'counterparty credit risk' on modelling exposures, trade risks, and maturity adjustments in accordance with CRR3.

Topic : Prudential Regulation

UK FCA Primary Market Bulletin No.57

25 July 2025

The UK Financial Conduct Authority (FCA) has published Primary Market Bulletin 57 (PMB 57), setting out updates to its technical notes to reflect the implementation of the new UK Listing Regime (UKLR). Specifically, the FCA finalises five technical notes following its April consultation in PMB 55 and reconsults on TN 710 ('Sponsor Services: Principles for Sponsors'), previously consulted on in PMB 48 and PMB 53, seeking to clarify the scope of 'preparatory work' and sponsor obligations under UKLR 4.

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Topic : Securities

Suite of technical standards supplementing the EU Green Bonds Regulation and guidelines published in the OJ

25 July 2025

Three Commission Delegated Regulations supplementing the EU Green Bonds Regulation (Regulation (EU) 2023/2631) have been published in the Official Journal of the European Union (OJ), namely:

Commission Delegated Regulation (EU) - 2025/753 establishing the content, methodologies and presentation of the information to be voluntarily disclosed by issuers of bonds marketed as environmentally sustainable or of sustainability-linked bonds in the templates for periodic post-issuance disclosures.
Commission Delegated Regulation (EU) - 2025/754 specifying rules of procedure for the exercise of the power to impose fines or periodic penalty payments by the European Securities and Markets Authority on external reviewers.
Commission Delegated Regulation (EU) - 2025/755 specifying the type of fees to be charged by ESMA to external reviewers of European Green Bonds, the matters in respect of which fees are due, the amount of the fees, and the manner in which those fees are to be paid.

Topic : Sustainable Finance

ECB finalises revisions to guide on options and discretions under EU banking law

25 July 2025

The European Central Bank (ECB) has published an updated guide outlining its supervisory stance on the exercise of options and discretions provided for under the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD), in the context of prudential supervision of credit institutions. The guide seeks to provide coherence and transparency on the supervisory policies that will be applied in supervisory processes within the Single Supervisory Mechanism, particularly in supporting joint supervisory teams in their oversight of significant credit institutions. The update takes into account the latest revisions to the EU's CRD and CRR. The ECB has also published a feedback statement. A version of the guide with draft revision marks has also been released to clearly outline the changes made by the ECB in response to the consultation that ended in January.

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Topic : Prudential Regulation

UK OFSI updates financial sanctions guidance with new licensing ground

24 July 2025

The UK Office of Financial Sanctions Implementation (OFSI) has updated its general guidance on financial sanctions, introducing a new licensing ground under Section 6.6, permitting the return of funds from designated Money Service Businesses (MSBs) to non-designated persons, subject to strict conditions. To qualify, the MSB must be registered in the UK under the Money Laundering Regulations 2017, the recipient must not be a designated person and no payments will be made to a designated person (whether directly or indirectly), the original payment must have been made prior to the MSB's designation without breaching asset freeze restrictions and the repayment must not undermine efforts to prevent or detect serious crime. OFSI will consult law enforcement authorities to assess crime risk before granting a licence, and only MSBs defined and registered under the 2017 Regulations are eligible. OFSI emphasises that as licensing grounds and exceptions can vary between regimes, it remains essential to consult the relevant, up-to-date legislation.

Topic : Financial Crime and Sanctions

ESMA confirms switch toward single volume cap in October

24 July 2025

The European Securities and Markets Authority (ESMA) has published a press release to confirm that, effective from October, the EU will transition from the current double volume cap (DVC) mechanism to a single volume cap mechanism (VCM) as part of the Markets in Financial Instruments Regulation (MiFIR) Review. Under the new regime, trading under the reference price waiver will be capped at 7% of the total EU trading volume over the preceding 12 months for each equity and equity-like instrument. If this threshold is exceeded, trading venues must suspend the waiver for the affected instrument for three months, based on data published by ESMA under the new VCM webpage. To streamline compliance, VCM calculations will rely on transaction data collected by national competent authorities, and the DVC reporting system will be decommissioned in January 2026. ESMA has submitted amendments to the relevant regulatory technical standard, known as RTS 3, for adoption to reflect these changes, although the VCM transition will proceed regardless of the RTS 3 adoption timeline. ESMA advises interested parties to prepare for the new requirements, with the first publication of the VCM calculation results expected on 9 October.

Topic : MiFID II

UK government announces trade deal with India

24 July 2025

The UK government has announced the signing of a Free Trade Agreement (FTA) with India, agreed in May this year. According to the government’s press release, for financial and professional services the deal provides locked-in market access and legal certainty and ensures UK firms are treated on par with domestic suppliers. Separately, the UK government has also renewed the Comprehensive and Strategic Partnership with India, enhancing cooperation on defence, education, climate and technology. Both countries also agreed to strengthen collaboration in tackling serious fraud, organised crime and illegal migration. This includes agreeing to finalise a new criminal records sharing agreement to support proceedings, maintain accurate watchlists and enforce travel bans.

Topics : Consumer / Retail, Other Developments, Sustainable Finance

ECON adopts opinion on Omnibus I sustainability package

24 July 2025

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) has adopted its opinion on the Omnibus I package that proposes targeted amendments to key directives on corporate sustainability reporting and due diligence. The opinion recommends significantly narrowing the scope of reporting obligations by raising the applicability thresholds from 1000 to over 5000 employees and a net worldwide turnover exceeding EUR 450 million. ECON also proposes aligning reporting standards with international frameworks such as those of the International Sustainability Standards Board. It also calls for the deletion of certain due diligence obligations, including the requirement to implement climate transition plans and suggests capping financial penalties at 5% of net profits. The Council of EU has already adopted its negotiating mandate. Trilogue negotiations between the Council of the EU and European Parliament will begin once the latter has adopted its own formal negotiating position.

Topic : Sustainable Finance

EBA publishes report on direct provision of banking services from third countries under CRD VI

23 July 2025

The European Banking Authority (EBA) has published its report under Article 21c(6) of the Capital Requirements Directive VI on whether to amend the provisions governing the direct provision of core banking services from third countries to EU credit institutions and EU financial sector entities (FSEs). In collaboration with the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority, the EBA conducted a quantitative and qualitative assessment to determine whether third-country undertakings should be allowed to provide core banking services directly to EU FSEs in addition to EU credit institutions without establishing a branch in the EU.

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Topic : Prudential Regulation

FCA Market Watch 82: UK MiFID transaction reporting

23 July 2025

The UK Financial Conduct Authority (FCA) has published Market Watch 82, outlining supervisory findings on transaction reporting under the UK's Markets in Financial Instruments regime. The FCA focuses on three key areas: (i) remedial timelines, where the FCA observed persistent inefficiencies in firms' operational frameworks, including delays in remediation caused by weak governance, fragmented internal processes and insufficient resourcing; (ii) back reporting, with case studies illustrating common causes of delayed back reporting, such as poor data governance and adverse impacts on business-as-usual operations; and (iii) breach notifications, where the FCA provides a table, summarising its supervisory observations of issue descriptions, root cause analysis and governance disclosures while also setting out best practices. The FCA confirms it will continue to monitor the quality of breach notifications closely.

Topic : MiFID II

FMSB consults on statement of good practice on unauthorised trading frameworks

23 July 2025

The Financial Markets Standards Board (FMSB) has published a transparency draft of its Statement of Good Practice (SoGP) on Unauthorised Trading Frameworks for consultation. This draft, which builds on FMSB's prior work on Front Office Supervision, sets out a series of principles-based measures designed to strengthen oversight and control mechanisms aimed at mitigating the persistent risks of unauthorised trading in wholesale financial markets. FMSB notes that, despite the existence of significant risk management frameworks, unauthorised trading continues to pose risks that can result in material financial, reputational and regulatory harm. The SoGP has been designed to promote consistent expectations across jurisdictions and has been developed with input from buy-side and sell-side firms, as well as support from the global regulatory community. The deadline for comments is 15 September.

Topic : Financial Crime and Sanctions

FCA publishes final rules on simplifying mortgage lending rules under the MRR

22 July 2025

The UK Financial Conduct Authority (FCA) has published final policy statement PS25/11, accompanied by a press release, finalising the first set of reforms under the Mortgage Rule Review (MRR). These changes aim to simplify mortgage lending rules and increase flexibility for consumers, in line with the FCA's five-year strategy to support sustainable home ownership and improve consumer outcomes. Following the May consultation, the FCA confirms it will proceed with a majority of the proposed changes as consulted on, with minor amendments in response to feedback. The FCA confirms that it is retiring two pieces of non-Handbook guidance (FG13/7 and FG24/2) and implementing rule changes that streamline the mortgage advice process.

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Topic : Consumer / Retail

Wolfsberg Group issues statement on the RBA for financial crime risk management

22 July 2025

The Wolfsberg Group (the Group) has released a statement reaffirming its commitment to the risk-based approach (RBA) for financial crime risk management. Further to its 2006 RBA guidance, and in line with the Financial Action Task Force, the Group emphasises that an effective RBA requires financial institutions to identify, assess and understand their exposure to financial crime risks, and to take proportionate, prioritised and outcome-focused action. It outlines three core elements that financial institutions should demonstrate when designing their risk-based programme, including proportionality in programme design, prioritisation of higher-risk areas and a focus on effectiveness over rigid rule-based compliance. The Group confirms it will be updating its 2006 RBA guidance and 2015 FAQs on risk assessments. It encourages stakeholders to consider this statement alongside the broader resources listed therein, to support efforts in addressing financial crime and enhancing collaboration.

Topic : Financial Crime and Sanctions

EC consults on the treatment of equity exposures under legislative programmes

22 July 2025

The European Commission has published a targeted consultation, accompanied by a press release, on a draft communication regarding the prudential treatment of equity investments by banks under legislative programmes in Article 133(5) of the Capital Requirements Regulation (CRR). These programmes, established under EU and national laws, aim to channel both public and private financing into strategic sectors of the economy. The draft communication proposes more favourable capital treatment for banks investing in equities through qualifying public programmes, typically involving public subsidies or guarantees and subject to oversight by public authorities. This means banks would be required to hold less capital against such investments compared to other equity exposures.

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Topic : Prudential Regulation

HMT consults on reforms to OFSI civil enforcement processes

22 July 2025

HM Treasury (HMT) has published a consultation paper on proposed reforms to the Office of Financial Sanctions Implementation's (OFSI) civil enforcement processes. The aim is to improve the efficiency, transparency and effectiveness of OFSI's enforcement activities. The reforms would apply solely to OFSI's civil enforcement powers concerning financial sanctions breaches, including Russia-related designated person asset reporting and the UK Maritime Services Ban and Oil Price Cap exception, excluding criminal enforcement or non-financial sanctions.

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Topic : Financial Crime and Sanctions

UK PRA consults and makes low-impact amendments to PRA rules and policy material

22 July 2025

The UK Prudential Regulation Authority (PRA) has published consultation paper LIAC01/25 proposing a series of low-impact amendments to its Rulebook and policy materials. The deadline for comments on the consultation is 2 September. Separately, under LIAF01/25, the PRA has implemented minor corrections to the Solvency II rules and updated Supervisory Statement SS16/16 (on the minimum requirement for own funds and eligible liabilities related to buffers and threshold conditions) to reflect current practices and remove outdated references. These changes, which did not require consultation, will take effect on 24 July.

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Topic : Prudential Regulation

UK lays legislation to implement Berne Financial Services Agreement

21 July 2025

The draft Financial Services and Markets Act 2023 (Mutual Recognition Agreement) (Switzerland) Regulations 2025 have been laid before Parliament and published with a draft explanatory memorandum. The Regulations seek to implement the UK's commitments under the Berne Financial Services Agreement (BFSA), signed with Switzerland in December 2023. The BFSA is an outcomes-based mutual recognition agreement covering a range of wholesale financial services, such as asset management, banking, investment services, insurance and financial market infrastructure, as well as investment services to high-net-worth and sophisticated individuals.

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Topics : Derivatives, MiFID II

UK equivalence regulations for Swiss CCPs and margin for OTC derivatives not centrally cleared

21 July 2025

The OTC Derivatives Risk Mitigation and Central Counterparties (Equivalence) (Switzerland) Regulations 2025 have been laid before Parliament and published with an explanatory memorandum. The Regulations, made on 16 July, grant equivalence to Switzerland's regulatory regimes for over-the-counter (OTC) derivatives and central counterparties (CCPs). The equivalence decision enables UK firms to rely on Swiss risk mitigation standards for OTC derivative contracts, subject to certain conditions being met, and allow Swiss CCPs to provide clearing services in the UK, subject to the CCP being recognised by the Bank of England (BoE). This removes duplicative regulatory requirements and supports cross-border financial market access as expressed under the Berne Financial Services Agreement (BFSA). The equivalence determinations were made following assessments by HM Treasury, with input from the UK Financial Conduct Authority, UK Prudential Regulation Authority and BoE, and are part of the UK's broader move to replace EU-inherited equivalence regimes with tailored Overseas Recognition Regimes. The Regulations enter into force on 1 January 2026. The draft Financial Services and Markets Act 2023 (Mutual Recognition Agreement) (Switzerland) Regulations 2025, which have also been laid before Parliament, will implement other aspects of the BFSA. You may like to watch our webinar of 3 July in which our lawyers discuss the BFSA.

Topics : Derivatives, MiFID II

BoE and FCA issue joint statement on the effectiveness of MoU for supervising FMIs

21 July 2025

The Bank of England (BoE) and the UK Financial Conduct Authority (FCA) have issued a joint statement reaffirming the effectiveness of their Memorandum of Understanding (MoU) on the supervision of Financial Market Infrastructure (FMI). Following an annual review, which included feedback from central counterparties, recognised investment exchanges and recognised central securities depositories, the authorities concluded that the MoU (updated in 2024 to reflect the Financial Services Markets Act 2023) continues to facilitate efficient and coordinated supervision without material duplication. This is demonstrated through the ongoing collaboration across workstreams like the Digital Securities Sandbox and T+1 settlement. The BoE and FCA confirm they will remain committed to addressing firm-identified areas for improvement and enhancing FMI supervisory effectiveness through continued coordination.

Topic : Financial Market Infrastructure

HM Treasury's OFSI warns of crypto sanctions risks in new threat assessment report

21 July 2025

The UK Office of Financial Sanctions Implementation (OFSI), part of HM Treasury, has published a sector-specific threat assessment report highlighting significant compliance risks facing UK cryptoasset firms in relation to financial sanctions. Covering the period from January 2022 to May of this year, the report concludes it is "almost certain" that UK cryptoasset firms have underreported suspected sanctions breaches since being designated as "relevant firms" under the UK sanctions regulations, in August 2022. OFSI identifies inadvertent non-compliance due to direct and indirect exposure to designated persons (DPs) and sanctioned entities such as the Russian exchange Garantex, cyber threats from DPRK-linked hackers exploiting cryptoassets to evade sanctions and transfers to Iranian cryptoasset firms with suspected links to DPs. The report emphasises the importance of timely and accurate reporting, enhanced due diligence and the use of blockchain analytics to detect and mitigate sanctions risks. OFSI urges firms to adopt a risk-based approach, conduct retrospective reviews and report any suspected breaches to OFSI, the UK Financial Conduct Authority and the National Crime Agency.

Topics : Financial Crime and Sanctions, FinTech

UK progresses implementation of new Data Act

21 July 2025

The Data (Use and Access) Act 2025 (Commencement No. 1) Regulations 2025 (SI 2025/904) have been made and published. The Regulations bring certain key provisions of the Data (Use and Access) Act 2025 (DUAA) into force from 20 August. The DUAA is a UK law that updates existing data protection regulations, aiming to promote innovation and economic growth while maintaining strong data protection standards. It introduces changes to how personal and non-personal data is managed. Last week, the Financial Conduct Authority and the Information Commissioner's Office discussed the importance to the UK's open finance vision of secure, consent-driven data sharing, supported by the UK's Smart Data framework and the newly enacted Data Use and Access Act.

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Topic : Other Developments

UK NCA and FCA agree priorities to combat economic crime

21 July 2025

The National Crime Agency (NCA) and the UK Financial Conduct Authority (FCA) have jointly published a set of nine system priorities to combat economic crime in the UK, in line with the UK's second Economic Crime Plan and the National Risk Assessment. Backed by the Home Office, HM Treasury, the National Economic Crime Centre and UK Finance, the priorities seek to enhance public-private collaboration, enabling regulated firms to allocate resources more effectively while maintaining compliance. Key focus areas include money laundering through UK corporate structures linked to certain jurisdictions; fraud originating from international offenders; exploitation of money mules; and criminal cash consolidation via UK banking channels.

Additional priorities target terrorist financing; sanctions evasion by professional enablers; abuse of power by overseas Politically Exposed Persons; and the resilience of the cryptoasset ecosystem against criminal abuse. The only predicate offences explicitly listed in these priorities are those which fall under the definition of economic crimes—namely fraud, sanctions evasion and terrorist financing. However, the priorities concerning money laundering methods are intended to apply to all potential predicate offences, including but not limited to organised immigration crime, drug and firearms offences and human trafficking. A newly established System Prioritisation Governance Group will oversee governance of the priorities, with further guidance expected to be published in due course to support firms in aligning with these objectives.

Topics : Financial Crime and Sanctions, FinTech, Payment Services and Payment Systems

UK CBA Panel issues statement on FCA's consultation paper on regulating BNPL products

18 July 2025

The Cost Benefit Analysis (CBA) Panel has issued a statement in response to the UK Financial Conduct Authority's (FCA) consultation paper on proposed rules to regulate Deferred Payment Credit (DPC) products, commonly known as Buy Now Pay Later (BNPL), following the UK government's decision to bring DPC within the FCA's remit. The CBA Panel welcomes the FCA's rationale and use of data but raises concerns about the clarity and robustness of the accompanying CBA. It makes a series of high-level recommendations, which include clearer articulation of the relationship between the FCA's CBA and HM Treasury's impact assessment as referred to in the consultation, more detailed analysis of alternative policy options and a reassessment of the cost and benefit estimates to ensure a balanced view. The CBA Panel also calls for a simplified and improved presentation, recommending that an executive summary be included to lay out the questions which the CBA sets out to answer, its main lines of analysis and its conclusions.

Topic : Consumer / Retail

UK FCA consults on BNPL rules for 15 July 2026

18 July 2025

The UK Financial Conduct Authority (FCA) has published consultation paper CP25/23, alongside a press release and new webpage, setting out its proposed rules for regulating Deferred Payment Credit (DPC), commonly known as Buy Now Pay Later (BNPL). In the paper, the FCA uses "DPC" to refer specifically to the interest-free, short-term credit products. The deadline for comments on the FCA's consultation is 26 September, with a final policy statement expected in early 2026. The rules will apply from 15 July 2026.

The Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025 brings interest-free BNPL agreements within the regulatory perimeter. This means that from 15 July 2026, third-party lenders offering DPC must be FCA-authorised or hold temporary permission under the temporary permissions regime (TPR). The TPR allows firms to continue operating while the FCA assesses their applications. Firms without authorisation or temporary permission must cease regulated DPC activity but may continue servicing DPC agreements entered into before that date. Merchants offering DPC directly will remain outside the regulatory perimeter and will not require authorisation.

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Topics : Consumer / Retail, Payment Services and Payment Systems

BoE publishes fundamental rules for FMIs

18 July 2025

Following its November 2024 consultation, the Bank of England (BoE) has published final fundamental rules for financial market infrastructure firms (FMIs), a supervisory statement setting out how the BoE expects FMI to comply with the rules and a final policy statement providing its responses to the feedback to the November proposals. FMIs include central counterparties (CCPs), central securities depositories (CSDs) and recognised payment system operators. The final rules take effect on 18 July 2026. In response to consultation feedback, the BoE makes refinements to the policy which include.

Clarification that FMIs are not expected to take actions to mitigate systemic risk if doing so would compromise their own resilience.
Increased emphasis on the importance of transparency between FMIs with their participants to enhance effective risk management.
Clarification on the application of the fundamental rules to activities conducted at the group level.

The following posts provide a snapshot of selected UK, EU and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.