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.
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European Banking Authority reports on implementation of first phase of banking book heatmap
6 February 2025
The European Banking Authority (EBA) has published a report on the implementation of the first phase of the short/medium term objectives in their interest rate risk in the banking book (IRRBB) heatmap. In the report, the EBA sets out a number of observations and recommendations, including in relation to:- the materiality of non-maturity (NMD) behavioural assumptions and the complexity of their modelling. This includes a non-restrictive list of risk factors impacting NMD repricing behaviour and a toolkit to support supervisors in their analysis of NMD modelling.
- the complementary dimensions to the supervisory outlier test (SOT) on the Net Interest Income (NII) metric. The report discusses the additional dimensions that supervisors could consider for institutions defined as outliers.
- the expected approach to model and project commercial margins of NMD, which are subject to behavioural optionality, in the SOT on NII.
- hedging strategies.
Topic : Prudential Regulation -
House of Lords Committee report on proposal to publicise enforcement investigations
6 February 2025
The House of Lords Financial Services Regulation Committee (FSR Committee) published a report on the Financial Conduct Authority's (FCA's) proposal to publicise enforcement investigations, in the spirit of "naming and shaming". This report follows the FCA's consultation on 27 February 2024 (CP 24/2), which set out its proposed new approach, and its revised proposals published in November 2024 (CP 24/2, Part 2), following engagement with industry.
The FSR Committee report finds that the FCA did not make a convincing case for why a change to its existing powers is required, nor did it convincingly show the proposed new public interest framework struck a balance between benefits to consumer protection and managing potential risks to firms, individuals and market stability. The FSR Committee stresses that, after the current consultation closes (on 17 February 2025), the FCA should be transparent about the feedback received and be able to demonstrate that industry concerns have been addressed, or otherwise should not proceed with the changes. The report also makes a series of recommendations, including that the FCA:- ensures, going forward, consultations are properly registered on the Regulatory Initiatives Grid and carries out earlier engagement with the sector where appropriate.
- publishes a 'lessons learnt' document setting out where it went wrong and how to prevent similar mistakes.
- engages with HM Treasury over any future developments relating to its enforcement investigations.
- provides a detailed analysis of the direct costs to the sector as part of its proposals.
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European Central Bank decision on non-bank payment service providers' access
6 February 2025
The European Central Bank (ECB) has published Decision (EU) 2025/222 relating to access by non-bank payment service providers (NB-PSPs) to Eurosystem central bank operated payment systems and central bank accounts. The EU Instant Payments Regulation (Regulation (EU) 2024/886) introduced certain changes to the EU Settlement Finality Directive (SFD) and Payment Services Directive (PSD 2), including adding NB-PSPs to the list of institutions eligible to become participants in payment systems designated under the SFD and permitting NB-PSPs to deposit their clients' funds for safeguarding in a separate account in a bank or central bank, at the central bank's discretion.
The ECB's decision: (i) sets out the circumstances in which a Eurosystem central bank should provide access to central bank operated payment systems, (ii) prohibits Eurosystem central banks from offering or providing safeguarding accounts to NB-PSPs or crypto-asset services providers, (iii) determines the maximum amounts that may be held by an NB-PSP across its accounts at any given central bank operated payment system, and (iv) provides for penalties in the event that an NB-PSP fails to comply with the maximum holding amount limit or requirements for access to central bank operated payment systems.
The Decision will enter into force on 26 February 2025 and will apply from 9 April 2025.
For more information on the issues and developments relating to fintech, see our blog A&O Shearman on fintech and digital assets. -
UK Financial Conduct Authority policy statement on reforming commodity derivatives regulatory framework
5 February 2025
The Financial Conduct Authority (FCA) has published a policy statement (PS25/1) on reforming the commodity derivatives regulatory framework. The policy statement sets out the FCA's response to feedback on its consultation paper on the subject (CP23/27) and includes its final rules and guidance to be included in the FCA Handbook. Key changes made in response to the consultation feedback include: Scope of the position limits regime: the regime will be limited to the 14 critical contacts consulted on, including LME Aluminium and LME Tin. However, the approach to contracts that are closely related to these critical contracts but outside the scope of position limits will be less prescriptive than consulted on, allowing trading venues more discretion to calibrate scope. Exemptions: the FCA's proposed requirement for trading venues to only grant the hedging exemption where they are satisfied that the exempt positions can reasonably be managed—the so-called risk management condition—is being amended to be less prescriptive. Non-financial entities will no longer be required to submit a detailed stress test.
Read more. -
EU Platform on Sustainable Finance publishes report on enhancing usability of EU Taxonomy framework
5 February 2025
The EU Platform on Sustainable Finance has published a report on enhancing the usability of the EU's Taxonomy regime. The report takes account of the European Commission's stated ambition to streamline ESG reporting requirements through the proposed Omnibus simplification regulation. The Platform makes four core proposals for simplifying Taxonomy-related reporting.
Read more.Topic : Sustainable Finance -
Basel Committee on Banking Supervision consults on amendments to principles for the management of credit risk
5 February 2025
The Basel Committee on Banking Supervision (Basel Committee) published a consultative document on updating the principles for the management of credit risk. The principles, first issued in October 2000, provide guidelines for banking supervisory authorities to evaluate banks' credit risk management processes in four key areas: (i) establishing a suitable credit risk environment; (ii) operating under a sound credit-granting process; (iii) maintaining an appropriate credit administration, measurement and monitoring process; and (iv) ensuring adequate controls over credit risk.
The Basel Committee mandated a review of the principles in 2023, to determine if they remain fit for purpose given the developments in global financial markets related credit risks and trends and changes to the supervisory and regulatory landscape over the past 25 years. The review confirmed the ongoing relevance of the credit risk principles but identified certain parts that either have become obsolete, superseded and redundant or are not fully aligned with the current Basel Framework and the Basel Committee's guidance. Therefore, the Basel Committee proposes to make a limited set of technical amendments to align the principles with the current Basel Framework and the latest guidelines. A comparison against the 2000 version has been published alongside the consultation. The consultation is open to comments until 21 March 2025.Topic : Prudential Regulation -
UK Payment Systems Regulator publishes compliance monitoring framework
4 February 2025
The Payment Systems Regulator (PSR) has published a policy statement (PS25/2) on its new compliance monitoring framework, setting out the scope of its monitoring work, its approach to compliance monitoring and how, in practice, it will monitor the parties that it regulates. Its approach is informed by three monitoring principles, namely that it should: (i) act in a way which is proportionate and risk-based, (ii) act quickly, and (iii) provide clear, reciprocal engagement. In practice, it monitors firms in three stages, firstly identifying and assessing whether firms are complying with regulatory requirements, then taking action where it identifies non-compliance and finally escalating cases to the Enforcement team where there are concerns that a firm is still non-compliant or investigation in relation to past conduct is warranted. The PSR also engages with and educates firms as part of its supervisory engagement and coordinates with other regulatory bodies.
Alongside the PS25/2, the PSR has published a thought piece which explains why the framework is necessary and how the PSR will work with firms in ensuring compliance. The PSR provides that its next steps include planning changes to its Process and Procedures Guide. -
UK Financial Conduct Authority Dear CEO letter on priorities for payments portfolio firms
3 February 2025
The Financial Conduct Authority has published a Dear CEO letter to firms in the payments portfolio sector (including payment institutions, e-money institutions and registered account information service providers). Although the FCA has observed improvements following its letter of 16 March 2023 which set out priorities for payments firms, it remains concerned that there are risks of harm to consumers and financial system integrity. The letter sets out key outcomes for firms.
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UK Treasury Committee publishes call for evidence on AI in financial services
3 February 2025
The UK Treasury Committee has published a call for evidence on AI in financial services, in light of growing use of the technology across the sector including in retail banking, investment banking, insurance and pensions. The Committee welcomes evidence on issues such as: (i) how AI is currently used in different sectors of financial services and how that is likely to change over the next ten years; (ii) the extent to which AI can improve productivity in financial services; (iii) any risks to financial stability arising from AI and possible mitigating actions; (iv) any benefits and risks to consumers arising from AI; and (v) how the government and regulators can strike the right balance between capitalizing on AI opportunities while protecting against threats to consumers and financial stability.
The deadline for responses is 17 March 2025. The Committee will decide on particular areas of focus once it has received the written evidence.Topic : Artificial Intelligence -
UK Financial Conduct Authority consults on public offers and admissions to trading regime and UK Listing Rules
31 January 2025
The Financial Conduct Authority (FCA) has published a consultation paper (CP25/2) on further changes to the public offers and admissions to trading (POAT) regime and the UK Listing Rules (UKLR). This was published alongside the FCA's consultation paper on proposed consequential changes and transitional arrangements in relation to the rules for firms seeking to operate a public offer platform. The proposals are designed to promote more efficient and effective capital raising for issuers and increase opportunities for investors. They also aim to complement the FCA's reforms to the UKLRs last year as part of ongoing work to ensure U.K. global competitiveness. The Public Offers and Admissions to Trading Regulations 2024 were made in January 2024, creating a new framework to replace the UK Prospectus Regulation and give the FCA greater discretion to set new rules.
Read more.Topic : Securities -
UK Financial Conduct Authority consults on further proposals for firms operating public offer platforms
31 January 2025
The Financial Conduct Authority (FCA) has published a consultation paper (CP25/3) on further proposals to support the implementation and operation of the new public offer platforms (POP) regime. This regime is designed to facilitate companies making public offers of securities to a broad range of investors outside public markets when raising more than GBP5 million. The proposed regime for POPs is part of the new Public Offers and Admissions to Trading Regulations 2024 (POATRs), which were made in January 2024. The POATRs will replace the current UK Prospectus Regulation. CP25/3 aims to ensure a comprehensive set of regulatory requirements are in place for firms operating POPs when the regime comes into force, and to ensure that firms understand the FCA's proposed approach to authorising and supervising firms carrying on this new regulated activity. This consultation was published alongside the FCA's consultation paper on further changes to the public offers and admissions to trading (POAT) regime and the UK Listing Rules (UKLR).
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European Commission rejects draft technical standards on sub-contracting ICT services under Digital Operational Resilience Act
31 January 2025
The European Commission has published a letter (dated 21 January 2025) addressed to the Joint Committee of the European Supervisory Authorities (ESAs) rejecting certain draft regulatory technical standards (RTS) the ESAs submitted under the Digital Operational Resilience Act in July 2024. The draft RTS specified the elements which a financial entity should determine when subcontracting ICT services supporting critical or important functions. These include the overall risk profile of the financial entity and its services and operations, the need for due diligence processes and a risk assessment of service providers, and the need for a description of the services and the conditions under which they would be provided. The Commission rejected the draft RTS on the grounds that proposed Article 5, on subcontracting in relation to the chain of ICT subcontractors for critical or important functions, went beyond the scope of the mandate granted to the ESAs under DORA, because it introduced requirements not specifically linked to the conditions for subcontracting. The Commission has also proposed certain non-substantive drafting amendments to the draft RTS. The Commission intends to adopt the RTS once these modifications have been made by the ESAs.Topic : Operational Resilience -
Commission Implementing Decision extends temporary equivalence of UK CCPs
31 January 2025
Commission Implementing Decision (EU) 2025/215 has been published in the Official Journal of the European Union, extending EU equivalence for U.K. CCPs under the European Market Infrastructure Regulation (EMIR). The Decision will apply from 1 July 2025 (the day after the EU's current equivalence decision expires, on 30 June 2025) and will expire on 30 June 2028. The European Commission published a press release on the same date, noting that the extension is designed to provide time for the implementation of EMIR 3. -
European Central Bank publishes FAQs on initial margin models under EMIR 3
31 January 2025
The European Central Bank(ECB) has published FAQs on initial margin (IM) model approvals under EMIR 3. EMIR 3 requires, for the first time in the EU, counterparties to apply for authorisation before using, or adopting a change to, their IM calculation model. Applying validation and authorisation requirements for IM models was expected to cause difficulties for national competent authorities (NCAs) and counterparties immediately upon entry into force of EMIR 3. In 2024, the European Banking Authority (EBA) therefore published a no action letter confirming NCAs should not prioritise supervisory or enforcement action in relation to processing IM model authorisation applications.
The ECB's FAQs provide further information on the application of the new EMIR IM model authorisation regime, including: (i) which banks are affected by the EBA's no action letter on the application of EMIR; (ii) the ECB's interim approach to processing IM model applications, until the EBA's technical standards/guidelines become applicable; (iii) the approach significant institutions should take to obtaining authorisations for IM models in light of EMIR 3; (iv) the approach to be taken when more than one legal entity within a banking group is using an IM model; and (v) the length of time an approval process is expected to take.Topic : Derivatives -
EU joint report on use of countercyclical capital buffer
31 January 2025
The European Central Bank and the European Systemic Risk Board have published a joint report on the use of the positive neutral countercyclical capital buffer (PN CCyB) in the EEA. This approach has gained traction among EEA countries in recent years as a way of increasing resilience over the financial cycle and enhancing financial stability.
The report addresses areas of commonality in the approaches adopted by EEA countries, including:- broad agreement on what a positive neutral approach means and what it is useful for.
- in most jurisdictions, there is no expectation that the PN CCyB will yield higher CCyB requirements at the peak of the cycle when cyclical systemic risks become elevated.
- there is broad consistency in the conditions that would guide authorities' decisions to release the CCyB.
- in most jurisdictions, the introduction of a PN CCyB does not need to be offset by a reduction in other capital requirements.
- clear and transparent communication is a key element in the introduction and use of a PN CCyB.
Topic : Prudential Regulation -
UK central counterparty equivalence extension published in the Official Journal of the European Union
January 30, 2025
The European Commission has extended its equivalence determination for U.K. central counterparties under the European Market Infrastructure Regulation until June 30, 2028. The relevant Commission Implementing Decision has been published in the Official Journal of the European Union. In terms of next steps, the formal process of extending any temporary recognition and tiering decisions for U.K. CCPs will need to be completed. The decision is welcome as it provides clarity and preserves financial stability and access to liquidity for EU market participants.Topic : Financial Market Infrastructure -
UK Financial Conduct Authority portfolio letter on strategy for mortgage intermediaries
January 30, 2025
The U.K. Financial Conduct Authority has published a portfolio letter on its strategy for mortgage intermediaries setting out the areas of regulatory focus for the next two years. The FCA's overarching focus is on embedding the Consumer Duty. Several key areas where this is most relevant for mortgage intermediaries are identified, including: (i) quality of advice and unsuitable products – particularly in the context of customers facing financial circumstances or vulnerability, meaning firms must do more to consider customers' personal and financial circumstances and financial objectives; (ii) high pressure selling and ancillary products – the FCA intends to assess how firms are identifying and managing conflicts of interest that may arise; (iii) excessive fees and fair value – in particular, the FCA highlights the relevance of its Consumer Duty guidance and recent update on good and poor practice in fair value assessments; and (iv) financial promotions – the letter emphasizes the importance of featuring the risks of secured lending prominently alongside the promoted benefits. The letter also notes the FCA's other expectations in relation to dormant appointed representatives, trading names and conditional selling.Topic : Consumer / Retail -
Financial Services and Markets Act 2023 (Digital Securities Sandbox) (Amendment) Regulations 2025 laid
January 30, 2025
The Financial Services and Markets Act 2023 (Digital Securities Sandbox) (Amendment) Regulations 2025 were laid before parliament, together with an explanatory memorandum. The Regulations relate to the Digital Securities Sandbox, which is a temporary supervisory regime allowing firms to test certain innovative financial market infrastructure activities that launched on September 30, 2024. The Regulations amend the Sandbox by modifying the application of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to Sandbox participants. This is to ensure that firms which may already be registered or authorized with the FCA for other activities need not register separately with the FCA as a cryptoasset business for the purpose of undertaking Sandbox activities. The explanatory memorandum accompanying the Regulations also confirms that a number of firms have successfully completed the approvals process for the Sandbox and passed through Gate 1 (the testing stage). The Regulations make certain other minor amendments, and come into force on March 3, 2025. -
European Commission communication on EU competitiveness compass
January 29, 2025
The European Commission has published a communication on a Competitiveness Compass for the EU, which sets out an action plan in response to the Draghi report published in September 2024. The communication sets out the framework for the Commission's work on competitiveness for the next five years and lists its initial priorities. One of the Commission's key aims is to reduce the regulatory burden, which for the financial services sector will include publishing, in February, the first of a series of Simplification Omnibus packages relating to sustainable finance reporting, sustainability due diligence and the sustainable finance taxonomy. Additionally in Q1 2025 the Commission will set a strategy on a Savings and Investments Union, followed by a set of specific proposals, which will aim to promote low-cost saving and investment products at EU level for retail investors. Longer term work includes removing barriers to consolidation of financial markets infrastructure and taxation barriers to cross-border investment, promoting the EU's securitization market, and pursuing the reform and harmonization of insolvency frameworks in the EU. A tentative agenda for forthcoming College of Commissioners' meetings indicates that the Commission will publish a communication on the Savings and Investments Union on March 19, 2025. -
European Commission adopts Delegated Regulation amending Regulatory Technical Standards on the supervisory delta of call and put options mapped to the commodity risk category
January 28, 2025
The European Commission adopted a Delegated Regulation amending Regulatory Technical Standards as regards the specification of the formula for calculating the supervisory delta of call and put options mapped to the commodity risk category. The RTS specify the formula for the purposes of Article 279a(3) of the EU Capital Requirements Regulation in the standardized approach for counterparty credit risk. CRR III expanded the scope of Article 279a(3) to cover commodity risk, which requires amendment to the RTS. The Council of the European Union and the European Parliament will now scrutinize the Delegated Regulation. If neither objects, the Regulation will be published in the Official Journal of the European Union and enter into force 20 days after publication.Topic : Prudential Regulation -
European Securities and Markets Authority publishes final report and draft Regulatory Technical Standards on colleges for central counterparties under European Market Infrastructure Regulation 3
January 28, 2025
The European Securities and Markets Authority has published its final report containing draft regulatory technical standards relating to colleges for central counterparties under the European Market Infrastructure Regulation 3. The report presents draft amendments to the RTS on colleges for CCPs, to reflect the changes introduced by EMIR 3 on the functioning of CCP colleges. The proposed draft amendments concern the practical arrangements for the functioning of the college with regard to the respective roles of the co-chairs and the interaction between them, the information to be shared with the college and the modalities of communication between college members. ESMA is not conducting an open public consultation on the proposed amendments, as the proposed amendments are limited in scope and only concern competent authorities. ESMA has consulted the European System of Central Banks and other relevant competent authorities, and has also consulted the Securities and Markets Stakeholder Group. ESMA will submit the draft amendments to the European Commission, which will have three months to decide whether to endorse them.Topic : Financial Market Infrastructure -
Silicon Valley Bank UK Limited Compensation Scheme Order 2025 published
January 27, 2025
The Silicon Valley Bank UK Limited Compensation Scheme Order 2025 (SI 2025/83) has been published, together with an explanatory memorandum. The order confirms in law that no compensation is due to the persons who held shares in Silicon Valley Bank UK Ltd before those shares were transferred to HSBC UK Bank plc in March 2023, as part of the resolution of SVB UK. HMT is required to make a Compensation Scheme Order where the private sector purchaser option has been exercised, in order to facilitate any compensation due to shareholders. HMT has made this determination following consultation with the BoE, which carried out a provisional valuation of SVB UK prior to its resolution and subsequently commissioned an independent valuation of SVB UK which confirmed the provisional valuation. The valuations concluded that no compensation is due to shareholders of SVB UK. The order came into force on January 28, 2025.Topic : Recovery and Resolution -
UK Financial Policy Committee response to HM Treasury November 2024 letter on remit and recommendations
January 27, 2025
HM Treasury has published a letter (dated 18 December 2024) from Andrew Bailey, Bank of England Governor, in his role as Chair of the Financial Policy Committee. In the letter, Mr Bailey sets out the response of the FPC to HMT's November 2024 letter on remit and recommendations for the FPC. The letter outlines the work of the FPC to help identify, monitor and address systemic risks to the resilience of the U.K. financial system and examples of work to support the government's economic policy. Included in this work, the FPC: (i) will continue to work in an open and collaborative way with other relevant bodies for the purpose of pursuing its financial stability objective. This includes working closely with the newly formed Financial Market Infrastructure Committee, to jointly discuss innovation in wholesale markets, including systemic stablecoins and tokenized assets; (ii) will continue to monitor the implementation and outcomes of the new critical third parties regime; (iii) plans to publish an assessment of channels of financial stability risks stemming from the adoption of AI and machine learning, as well as its approach to monitoring such risks in a report in H1 2025; (iv) will continue to consider the materiality of nature-related risks for its primary financial stability objective; and (v) will further update the O-SII buffer framework to ensure it is operating as intended.Topic : Prudential Regulation -
UK Prudential Regulation Authority response to HM Treasury November 2024 letter on remit and recommendations
January 27, 2025HM Treasury has published a letter (dated December 18, 2024) from Andrew Bailey, BoE Governor, in his role as Chair of the Prudential Regulation Committee. In the letter, Mr Bailey sets out the response of the PRC to HMT's November 2024 letter on recommendations for the PRC. The letter discusses actions taken by the PRA to advance the secondary competitiveness and growth objective and sets out the work the PRA is taking or planning to take in support of the specific recommendation to the PRC on government economic policy. This work includes planned consultations on: (i) the banking data review. The PRA plans to consult in the summer on reforms resulting from the first phase of the review, which will cover changes to reporting on Counterparty Credit Risk and explore the scope for returns that the PRA can delete outright; and (ii) the Senior Managers & Certification Regime. The PRA plans to consult in the coming months on proposals to increase the efficiency of the regime by providing greater flexibility and clarity to firms and individuals.Topic : Prudential Regulation
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European Supervisory Authorities approve terms of reference for new EU systemic cyber incidence co-ordination framework forum under the EU Digital Operational Resilience Act
January 27, 2025
The European Supervisory Authorities have published the terms of reference for the EU systemic cyber incident co-ordination framework Forum established under the EU Digital Operational Resilience Act. The Forum will be composed of representatives of EU and national bodies, including the ESAs and the European Commission. The Forum is tasked with: (i) developing and maintaining documents, protocols, procedures, arrangements, taxonomy and plans to support co-ordination in case of crisis mode, taking into account the existing coordination frameworks and the cyber threat landscape; (ii) preparing the set-up of a dedicated ad-hoc group responsible for managing crisis mode; and (iii) exercise and test the protocols and procedures to ensure continued preparedness in the event of activation of crisis mode. The terms of reference will be subject to review and endorsement by the Joint Committee and subsequent approval by the ESAs' Boards of Supervisors, and adapted to reflect any new developments, as relevant and appropriate, every two years. The terms of reference came into effect on January 17, 2025.Topic : Operational Resilience -
Global Financial Innovation Network report on use of consumer-facing AI in global financial services
January 27, 2025
The Global Financial Innovation Network has published a report summarizing discussions led by the U.K. Financial Conduct Authority and the Dubai Financial Services Authority on the use of consumer-facing AI in global financial services and the implications for global financial innovation. These discussions took place at roundtables in July and October 2024, and covered use cases of consumer-facing AI in financial services and the opportunities and challenges presented. The FCA roundtable in July 2024 in particular explored robo-advice, personalized finance and the provision of consumer education and information. Overall, the report supported the development of further innovative solutions for consumers and the exploration of striking a balance with consumer and market protection, and international collaboration and knowledge sharing. In particular, participants proposed the creation of a formalized GFIN AI Working Group, which could include non-GFIN stakeholders to explore various AI topics. The GFIN will consider this suggestion as it plans its next steps to ensure collaboration continues and grows.Topic : Artificial Intelligence -
Permission to appeal granted against Financial Ombudsman Service decision concerning motor finance discretionary commission arrangements
January 27, 2025
Barclays Partner Finance has been granted permission to appeal against the Administrative Court's judgment in R (Clydesdale Financial Services Ltd) v Financial Ombudsman Service Ltd [2024] EWHC 3237 (Admin). Permission was granted by the Administrative Court on the order of Kerr J dated December 24, 2024, and the Court of Appeal will hear the appeal by December 8, 2025. In the judgment under appeal, the Administrative Court found in favor of the FOS and dismissed a claim brought by Clydesdale Financial Services Ltd (which trades as Barclays Partner Finance) for judicial review of an ombudsman's decision to uphold a complaint in relation to a discretionary commission arrangement in a motor finance agreement.Topic : Consumer / Retail -
Financial Markets Standards Board publishes standard for sharing standard settlement instructions
January 27, 2025
The Financial Markets Standards Board has published the final version of its standard for sharing standard settlement instructions. The standard establishes core principles which set out expected practices for the sharing of SSIs between market participants and also includes templates for manually shared SSIs for cash and securities. These core principles relate to: use of industry platforms; off-platform settlement; timing; data fields; data format; data validation; validity; governance and responsibility; and periodic review. The standard is intended to supplement existing laws, regulation and guidance and applies to FMSB member firms in respect of their own or their clients' SSIs.Topic : Operational Resilience -
Global Foreign Exchange Committee publishes amended FX Global Code of Conduct
January 24, 2025
The Global Foreign Exchange Committee (GFXC) has published the updated version of the FX Global Code of Conduct (dated December 2024), which supersedes the previous version (from July 2021). Updates have been made to strengthen the Code's content and guidance on settlement risk, transparency and use of data on electronic trading platforms. The updated Code also includes links to GFXC reports which are published from time to time and while not forming part of the Code, are intended to facilitate wider awareness and understanding of specific aspects of the FX market. The GFXC has also published enhanced disclosure cover sheets for liquidity providers and platforms available via its DCS webpage. The GFXC encourages all market participants to review the amendments to the Code and consider renewing their Statement of Commitment, taking into account the nature and relevance of the updates to their FX market activities. It considers that a 12-month period should be sufficient for those affected by the changes to align their practices with the Code's principles.Topic : Financial Market Infrastructure -
New Designated Publishing Entities regime operational from 3 February
January 24, 2025
The European Securities and Markets Authority has published a press release reminding market participants that from February 3, 2025 the new Designated Publishing Entities regime shall be operational. The DPE regime was introduced following the EU Markets in Financial Instruments Directive/Markets in Financial Instruments Regulation Review and means the responsibility for reporting transactions carried out over-the-counter will turn on whether or not firms hold DPE status. The press release also confirms that ESMA will no longer publish the quarterly systematic internaliser data. From September 2025, ESMA will no longer be required to calculate quarterly SI data and given the imminence of the end of the regime, ESMA has decided stop publishing this data. Accordingly, the mandatory SI regime will no longer apply from February 1, 2025 although firms may continue to opt in to the regime.Topic : Financial Market Infrastructure -
European Commission adopts Delegated Regulation on over-the-counter derivatives identifying reference data under EU Markets in Financial Instruments Regulation
January 24, 2025
The European Commission has adopted a Delegated Regulation supplementing the EU Markets in Financial Instruments Regulation on OTC derivatives identifying reference data to be used for the purposes of the transparency requirements laid down in Article 8a(2) and Articles 10 and 21, following its consultation on the draft text in June 2024. The identifying reference data are to be used from September 1, 2026 for OTC interest rate and OTC credit default swaps. The Delegated Regulation includes an annex which lists identifying reference data for OTC interest rate swaps and separately lists standard business terms for the reference rates referenced in OTC interest rate swaps subject to the MiFIR transparency requirements. The Delegated Regulation will enter into force 20 days after its publication in the Official Journal of the European Union.Topic : Financial Market Infrastructure -
UK Financial Conduct Authority portfolio letter on supervisory strategy for wholesale brokers
January 24, 2025
The U.K. Financial Conduct Authority has published a Dear CEO Letter on its new strategy for supervising wholesale brokers. The FCA has observed a change in the sector in recent years with larger firms acquiring smaller ones and some weaker firms exiting the market altogether, although it observes the sector is overall healthy and competitive.
The FCA notes that improvements have been made on prudential risk management following its focus on the issue over the previous two years and plans to publish an observation paper on good and poor practices shortly. On financial crime, the FCA has seen improvements in areas such as risk assessment processes and oversight frameworks but is concerned that firms are underestimating their money laundering risks. It expects firms to read its publication, Money laundering through the markets, incorporate good practices and stop poor practices where relevant. It continues to observe an inconsistent application of the Remuneration Code across firms and will use regulatory tools (including imposition of capital requirements) for firms it has identified as being at fault.
Read more.Topic : Financial Market Infrastructure -
UK Conduct Authority publishes report on assessing and reducing the risk of Money Laundering Through the Markets
January 23, 2025
The Financial Conduct Authority has published a report on assessing and reducing the risk of Money Laundering Through the Markets. Money Laundering Through the Markets is the use of capital markets to launder criminally generated cash so that it appears legitimately generated. The report renews the risk assessment of Money Laundering Through the Markets and risks documented in the FCA's June 2019 thematic review. It also sets out the findings of the FCA follow-up review, which it believes will assist brokers and other firms operating in the capital markets to continue to improve their controls and ensure they meet the required standards. The FCA's report provides further insights through practical case studies and examples of good and poor practice.
Overall, the FCA saw good practice and progress in several financial crime systems and controls across larger and smaller firms. However, relevant firms needed to more rigorously tackle the issues raised in the previous thematic review. Key challenges observed include: (i) transaction monitoring; (ii) knowledge of the U.K. Financial Intelligence Unit Money Laundering Through the Markets suspicious activity reporting glossary code; (iii) information sharing; and (iv) documenting customer risk-assessment methods in enough detail. The FCA would like firms to continue reviewing their systems, controls, Money Laundering Through the Markets awareness and training. Moving forward, the FCA will use its supervisory work, to make sure firms are considering Money Laundering Through the Markets risks, and the points raised in this report to drive improvements and reduce risk across the markets. It will also encourage firms and third-party providers to innovate more, to tailor transaction monitoring systems and alerts to capital markets.Topic : Financial Crime and Sanctions -
EU Platform on Sustainable Finance makes recommendations on the development and assessment of corporate transition plans
January 23, 2025
The EU Platform on Sustainable Finance has published a report on the development and assessment of corporate transition plans. The PSF identifies core elements for evaluating transition plans and makes recommendations to the European Commission on how best to improve the effectiveness of its policy framework and support the market's provision and access to transition finance. In its report, the PSF states that companies should clearly communicate to financial market participants any gaps and how they will be addressed. Financial market participants should then use credible and robust transition plans to help inform their investment and lending decisions, supporting companies in enhancing their plans over time.
The key recommendations addressed in the report include:- developing sectoral transition pathways for high-emitting sectors at the EU level, including technology roadmaps;
- providing guidance for selecting scenarios that can be used for credible science-based corporate target setting and transition planning;
- creating criteria for qualifying targets as credible and science-based;
Read more.Topic : Sustainable Finance -
Financial Stability Board publishes work program for 2025
January 23, 2025
The Financial Stability Board has published its work program for 2025. Priority areas of work for 2025 include:- supporting global cooperation on financial stability: the FSB will continue monitoring global financial stability developments and the implications of emerging financial innovation, and conduct in-depth analysis on vulnerabilities in non-bank financial intermediation and climate change;
- enhancing the resilience of NBFI: while preserving its benefits, the FSB workstream includes finalizing policy recommendations on NBFI leverage, developing and beginning implementation of a medium-term workplan to address issues relating to non-bank data availability, use and quality and analyzing the resilience and functioning of the repo market;
- harnessing the benefits of digital innovation while containing its risks: the FSB will produce a thematic peer review on implementation of its crypto-asset recommendations, a report on how financial authorities can monitor AI adoption and assess related vulnerabilities, and finalize the format for incident reporting exchange;
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UK payments regulators discuss next steps for open banking
January 23, 2025
The Financial Conduct Authority and Payment Systems Regulator have set out the next steps for open banking, focusing on variable recurring payments. In the statement the regulators explain the benefits of variable recurring payments, which includes helping consumers take more control of their regular payments, reducing the risk of unexpected expenditure. It will also offer businesses greater competition to current payment methods and could help reduce processing fees. As part of the next steps to deliver variable recurring payments, Open Banking Limited will establish an independent central operator to coordinate how variable recurring payments are made. The FCA and PSR will support this endeavor by working with industry and trade associations and are looking forward to significant progress being made in 2025. The regulators are also working with industry and trade associations to progress development of the commercial arrangements underpinning both variable recurring payments and use of open banking for e-commerce. -
Eurozone Single Resolution Board publishes revised guidance on operational continuity in resolution
January 23, 2025
The Single Resolution Board has published a revised version of the operational guidance on operational continuity in resolution. The guidance provides further clarifications to banks on how to implement SRB expectations for resolvability related to: (i) service identification and mapping; (ii) assessment of operational continuity risk; and (iii) mitigating measures, such as having adequately documented, resolution-resilient contracts, appropriate management information systems, and governance arrangements.
The guidance was originally published in 2021, the new revisions follow the development of new frameworks, such as the Digital Operational Resilience Act, and new provisions, such as the European Banking Authority's Guidelines on improving resolvability. The SRB notes that some of the additions will, in practice, depend for their application on measures currently pending.Topic : Recovery and Resolution -
Retained EU Law (Revocation and Reform) Act 2023 (Consequential Amendments) Regulations 2025 (SI 2025/82) are made
January 22, 2025
The Retained EU Law (Revocation and Reform) Act 2023 (Consequential Amendments) Regulations 2025 have been published, together with an explanatory memorandum. They will make amendments to secondary legislation (including assimilated direct legislation) in consequence of the various provisions of the Retained EU Law (Revocation and Reform) Act 2023 (REUL Act). The Regulations do not make any policy changes, but serve to clarify the statute book. Most amendments relate to changes of terminology resulting from renaming EU-derived law, making express textual amendments to relevant references – in particular replacing "retained" with "assimilated". The Regulations come into force on February 27, 2025.Topic : Regulatory Reform Post Brexit -
UK Prudential Regulation Authority writes to domestic and international banks on its 2025 supervisory priorities
January 21, 2025
The Prudential Regulation Authority has published a Dear CEO letter outlining its supervisory priorities for 2025 for domestic banks and international banks and large investment firms. The PRA's key areas of focus for 2025 include:- Risk management, governance and controls: firms' senior management, and boards need to ensure that their organizations have robust governance, risk management and controls frameworks in place that are adaptive and resilient, leveraging stress and scenario analyses to inform risk management, strategy and business planning. Firms are expected to have these frameworks in place across businesses, risk and internal audit functions, commensurate with the firm's business model. The PRA also notes that counterparty credit risk will remain an area of focus.
- Data risk: firms must continue to improve their ability to aggregate data to ensure that they have the information necessary to support holistic risk management, robust board decision-making, and accurate regulatory calculations. Throughout 2025 the PRA will continue to assess data accuracy.
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UK Prudential Regulation Authority responds to Government on enhancing sustainable economic growth
January 20, 2025
The Prudential Regulation Authority has published a letter (dated January 15, 2025) from Sam Woods, PRA Deputy Governor and CEO, to the Government setting out the actions the PRA has taken, and will take, with a view to enhancing economic growth. Actions already addressed by the PRA include:- simplifying the prudential regime for small banks;
- proposing further amendments to remuneration requirements to enhance competitiveness; and
- simplifying regulatory data-reporting from banks.
The PRA also considers that broader changes could simplify and rationalize the U.K. regulatory regime in other ways, such as identifying potential overlaps between PRA's governance and disclosure requirements and those of legislation or other regulators. In the PRA's view, rationalizing the U.K. financial services regulators' "have regards" principles could lead to a simplification of the length and complexity of the analysis underpinning new regulations with consequential benefits for the cost of regulatory engagement by firms and efficient use of resources by the PRA. The principles relate to the number of principles regulators are required to "have regard" to and to which they are held to account for when exercising their powers. -
UK Chancellor announces engagement with financial services leaders to bolster growth plans
January 20, 2025
HM Treasury has announced that the Chancellor will increase engagement with financial services leaders to strengthen plans to grow the economy. Over the coming months, the Chancellor plans to host a series of Industry Forums with key sub-sector leaders in banking, insurance, and asset management to elicit views on delivering long-term growth. HMT explains that the Industry Forums, alongside extensive further engagement at official and ministerial levels, will ensure that industry and senior stakeholders are closely involved in the development of the upcoming Financial Services Growth and Competitiveness Strategy so that it tackles the key issues that matter most to the industry. The first meetings of the Industry Forums will run throughout January and February, reconvening ahead of the Government's publication of the Financial Services Growth and Competitiveness Strategy as part of the Industrial Strategy later this year. The Government will continue to work closely with industry following the publication of the Strategy, to ensure that it is implemented effectively. The Strategy, set to be published in the spring, aims to develop policies that foster growth in the financial services sector. -
UK Financial Conduct Authority responds to Government call for regulators to support growth
January 17, 2025
The Financial Conduct Authority has published a letter (dated January 16, 2025) from Nikhil Rathi, FCA Chief Executive, sent to the Government, setting out its work to ensure that it is supporting the Government's U.K. growth mission. The letter responds to Government's December call for regulators to support growth. In the letter, the FCA explains that to achieve the vast reforms, the FCA will need to take greater risks and prioritize resources. The Government's support and acceptance of this approach is required, including an acceptance that there will be failures because it will not be possible to prevent all harm under an approach based on risk-based choices. The FCA emphasizes that this acceptance needs to be shared across all accountability mechanisms, including in Parliament, and states that metrics for "tolerable failures" within the overall system would assist.
The areas addressed in the letter include:- unlocking capital investment and liquidity: in addition to the planned reforms for the wholesale markets, the FCA will fast-track a review of capital requirements for specialized trading firms to improve liquidity;
- accelerating digital innovation to enhance productivity: the FCA makes a number of suggestions on how to do this including introducing a new open banking payment method and developing open finance, the removal of the £100 contactless payment limit to enhance consumer flexibility and level the playing field with digital wallets. The FCA also suggests that government action could help by introducing digital identity authentication, enhancing the quality of the Companies House database to reduce costs for business, and digitalizing court systems to reduce delays;
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UK Financial Conduct Authority responds on motor finance judgment
January 17, 2025
The Financial Conduct Authority has published a letter addressed to the House of Lords Financial Services Regulation Committee on motor finance commission specifically addressing the court of appeal judgement in Johnson v FirstRand Bank Ltd (London Branch) (t/a MotoNovo Finance) [2024] EWCA Civ 1282. The letter responds to a letter the FCA received from the Committee in December.
In the letter, the FCA sets out the relevant FCA rules and principles concerning both discretionary and fixed commissions, both prior to and following the amendments introduced in 2021. The FCA also confirms that it did not seek legal advice on the specific issue of the relevance of disinterested or fiduciary duties with regard to formulating (and amending) the rules providing for commission disclosure and the ban on discretionary commission arrangements. The FCA concludes by explaining that once the Supreme Court has settled the law in this area, it will consider if any intervention is needed, which will include reviewing its rules to take account of the court's judgment.Topic : Consumer / Retail -
UK delays the implementation of Basel 3.1
January 17, 2025
The Prudential Regulation Authority has announced that, in consultation with HM Treasury, it has decided to delay the implementation of Basel 3.1 in the U.K. by one year until January 1, 2027. The PRA explains that it has decided to delay the implementation to allow more time for greater clarity to emerge about implementation plans in the U.S. and to take into account competitiveness and growth considerations. While the PRA now expects to implement on January 1, 2027, it will continue to monitor developments. The transitional periods in the rules will be reduced to ensure the date of full implementation remains on January 1, 2030. The PRA is also immediately pausing until further notice the data collection exercise intended to inform an off-cycle review of firm-specific Pillar 2 capital requirements. Also in light of the delay to implementation, the end-date of the time window to join the Interim Capital Regime, previously set as February 28, 2025, will be moved back. The PRA will provide further information in due course.Topic : Prudential Regulation -
EBA repeals guidelines on major incident reporting under the revised Payment Services Directive
January 17, 2025
The European Banking Authority has announced that it has repealed its guidelines on major incident reporting under the revised Payment Services Directive due to the application of harmonized incident reporting under the Digital Operational Resilience Act. DORA introduced harmonized incident reporting requirements that apply to financial entities across the banking, securities/markets, insurance, and pensions sectors, including most payment service providers. DORA also disapplies the incident reporting requirements under PSD2 for those PSPs. As such, the EBA has repealed the guidelines to simplify the reporting of major incidents by PSPs and provide legal certainty to the market. The EBA reminds firms that incident reporting requirements under PSD2 still apply for other types of PSPs, such as post office giro institutions and credit unions, that are not covered by DORA. The EBA notes that those PSPs that are still subject to PSD2 incident reporting requirements may be subject to national incident reporting requirements, regardless of the existence of the EBA guidelines. Competent national authorities willing to retain the incident reporting approach included in the EBA guidelines for those PSPs can continue to do so under their national legal framework or supervisory measures. -
EU joint report on the feasibility for further centralization of reporting of major ICT-related incidents
January 17, 2025
The European Supervisory Authorities have published a joint report on the feasibility of further centralization of the reporting of major ICT-related incidents by financial entities to competent authorities. The ESAs' joint report explores the potential for further centralization through the establishment of a single EU hub assessing the feasibility of three different models: (i) the baseline model; (ii) a model with enhanced data sharing arrangements; and (iii) a fully centralized model (i.e., an EU hub). The report considers the potential burden and cost reductions, as well as the efficiency and effectiveness gains that each model would bring for cross-sector supervisory practices.
Read more.Topic : Operational Resilience -
European Banking Authority publishes draft guidelines on ESG scenario analysis
January 16, 2025
The European Banking Authority has published a consultation paper on its draft guidelines on ESG scenario analysis. For institutions using the internal ratings-based approach for calculating the own funds requirements for credit risk, these guidelines are intended to specify the way in which ESG risks, and in particular, physical and transition risks stemming from climate change, are taken into account in the scenarios used for credit risk internal stress testing. They: (i) specify the different uses institutions should make of scenario analysis and propose a progressive and proportionate approach to incorporating scenario analysis into the institution management system; (ii) provide guidance on what is required before undertaking a scenario analysis and more specifically on the criteria for setting scenarios and identifying the transmission channels for translating climate risks into financial risks; and (iii) specify the distinctive features to be taken into account when conducting a climate stress test in addition to the requirements set out in the guidelines on institutions' stress testing and the use of scenarios to help define and adjust the institution's strategy and test the robustness of its business model to a range of plausible futures. These guidelines complement the EBA guidelines on the management of ESG risks, published earlier this month. The EBA will hold a virtual public hearing on the consultation on March 17, 2025, and the deadline for comments is April 16, 2025. The EBA plans for the guidelines to be finalized by the second half of 2025, and apply from January 11, 2026 to institutions other than small and non-complex institutions and, at the latest, from January 11, 2027 for SNCI. -
Financial Stability Board analytical framework and toolkit to assess climate-related vulnerabilities
January 16, 2025
The Financial Stability Board published a report containing a framework and analytical toolkit to assess climate-related vulnerabilities. The report introduces an analytical framework that the FSB will use to trace how physical and transition climate risks can be transmitted and amplified by the global financial system. The framework builds on the existing FSB Financial Stability Surveillance Framework and focuses on assessing climate-related vulnerabilities holistically, particularly from a cross-border and cross-sectoral point of view. The accompanying toolkit to the framework comprises three categories of metrics to monitor climate-related vulnerabilities from a forward-looking perspective. These are: (i) proxies to provide early signals on potential drivers of transition and physical risks; (ii) exposure metrics to gauge the extent of direct and indirect exposures in the real economy and the financial system; and (iii) risk metrics to quantify the impacts for financial institutions and the system as a whole. The FSB notes that while these metrics are already used by some FSB members domestically, various methodological and data challenges need to be overcome for them to be used for global monitoring. The FSB notes that the framework and toolkit are live documents, to be refined as understanding evolves on how climate-related vulnerabilities affect financial stability and as methodological and data issues are resolved. As such, the FSB will continue to develop the framework by operationalizing the toolkit and conducting in-depth analyses of specific climate vulnerabilities that may have global financial stability implications. -
International bodies report on effective practices for streamlining variation margin in centrally cleared markets
January 15, 2025
The Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions published a final report on examples of effective practices for streamlining variation margin in centrally cleared markets. The report sets out eight effective practices which aim to provide examples of how standards set out in the CPMI-IOSCO Principles for Financial Market Infrastructures, as supplemented by the relevant guidance, can be met.
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International bodies report on streamlining variation margin processes and initial margin responsiveness of margin models in non-centrally cleared markets
January 15, 2025
The Basel Committee on Banking Standards and International Organization of Securities Commissions published a final report on streamlining variation margin processes and initial margin responsiveness of margin models in non-centrally cleared markets. The report follows on from the BCBS-CPMI-IOSCO September 2022 review of margining practices.
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