The Financial Services and Markets Act 2023 (Commencement No. 12 and Saving Provisions) Regulations 2026 were published. The Regulations, which were made on 13 January, use powers under the Financial Services and Markets Act 2023 (FSMA 2023) to revoke provisions in the UK Capital Requirements Regulation (UK CRR) and related legislation. They also make saving provisions relating to some of the revoked provisions The Regulations continue the process of revoking certain pieces of retained EU law relating to financial services and restating them into UK domestic law, including through regulator-made rules. You may like to read our article "A boost for UK Financial Services" for further information.

Specifically:

• Regulation 2 revokes, on 1 July, certain provisions of Commission Implementing Regulation (EU) 2016/1646 concerning main indices and recognised exchanges for the purposes of the CRR.
• Regulation 3 revokes, on 1 January 2027, further provisions of the CRR on prudential requirements for credit institutions and investment firms, and related instruments.
• Regulations 4 and 5 include extensive saving provisions ensuring continuity for firms by preserving permissions granted under revoked CRR provisions, so that from 1 January 2027 they continue to have effect as permissions under section 138BA FSMA 2000 or the equivalent UK Prudential Regulation Authority (PRA) rules. They also include specific rules applying separately to small domestic deposit takers (SDDTs), SDDT consolidation entities and non-SDDT firms.

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The Bank of England, UK Prudential Regulation Authority and UK Financial Conduct Authority have published their 2025 annual CBEST thematic report. CBEST is a threat-led penetration testing assessment framework of cyber resilience, helping regulators, firms and financial market infrastructures (FMIs) identify vulnerabilities and take remedial action. This report summarises insights from recent CBEST assessments conducted across firms and FMIs. While it does not introduce any new or additional regulatory expectations, it articulates gaps, some of them foundational, observed in firms' and FMIs' cyber defences.

Key messages for firms and FMIs to consider include:

• To reduce the likelihood of severe cyberattacks, firms and FMIs should harden operating systems by patching vulnerabilities and securely configuring key applications.
• The impact of unauthorised access to sensitive systems and information can be reduced by strengthening credentials management, enforcing strong passwords, considering the use of multi-factor authentication, preventing or detecting insecure credential storage and through appropriate segmentation of networks.

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The UK Prudential Regulation Authority (PRA) has published final policy statement PS21/6 on the implementation of the Basel 3.1 standards in the UK, together with associated supervisory statements, statements of policy and updated disclosure and reporting templates in the relevant appendices. Alongside this policy statement, the PRA also published final policy, rules and supervisory expectations on a number of related banking capital frameworks (see updates below). Specifically, in this policy statement, the PRA confirms: (i) its one‑year deferral of Basel 3.1 to 1 January 2027 (with the Fundamental Review of the Trading Book internal model approach deferred to 1 January 2028); and (ii) finalises targeted amendments consulted on in 2025, including changes to the market risk framework, clarifications to credit risk, operational risk and output floor provisions, the replacement of certain Capital Requirement Regulation (CRR) definitions (such as probability of default, loss given default and conversion factor) with new PRA Rulebook glossary definitions and the revocation of residual CRR provisions via HM Treasury commencement regulations. The PRA also finalised its policy on structural foreign exchange (FX) positions, confirming that items held at historical FX rates are excluded from Pillar 1 FX capital requirements, while providing updated guidance on structural FX permissions and contingency FX risk. Aside from these adjustments, the PRA has made only non‑substantive corrections and clarifications relative to its near‑final rules in PS17/23, PS9/24 and PS7/25, with firms expected to comply with the full Basel 3.1 reporting and disclosure regime from 1 January 2027.

The UK Financial Conduct Authority (FCA) and the UK Payment Systems Regulator (PSR) have issued a joint prioritisation statement clarifying their enforcement position on the UK Payments Initiative's (UKPI) centralised "access fee" pricing model being developed for commercial variable recurring payments (cVRP). After consulting the Competition Markets Authority (CMA), the regulators confirm that they will not, at this stage, prioritise investigations under Chapter I of the Competition Act 1998 in relation to specific pricing arrangements concerning UKPI's cVRP scheme.

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The UK Treasury Select Committee has published a report on AI in financial services. The report expresses concerns that the Bank of England, the UK Financial Conduct Authority (FCA) and HM Treasury (HMT) are exposing consumers and the wider financial system to potentially serious harm by maintaining a "wait‑and‑see" approach to AI in financial services. With over 75% of UK financial services firms now using AI, particularly insurers and international banks, the Committee acknowledges the potential benefits to consumers but concludes that regulators are not doing enough to mitigate emerging risks.

The report recommends that: (i) the Bank of England and the FCA undertake AI‑specific stress testing to build firms' readiness for AI-driven market shocks; (ii) the FCA publishes comprehensive practical AI guidance for firms by year‑end covering: (a) how existing consumer protection rules apply to their use of AI and (b) accountability and the level of assurance expected from senior managers under the Senior Managers and Certification Regime for harm caused through the use of AI; and (iii) by year-end, HMT must designate the major AI and cloud providers as critical third parties for the purposes of the Critical Third Parties Regime. The Committee states it is unclear why HMT has been slow to use the new powers at its disposal, noting that the regime was established over a year ago. It further recommends that the Bank of England's Financial Policy Committee should monitor the regime's progress and, if needed, use its power of recommendation to HMT to ensure swift implementation.

The European Banking Authority (EBA) has announced it has completed the transfer of all anti‑money laundering and counter‑terrorist financing (AML/CTF) mandates to the new Authority for Anti‑Money Laundering and Countering the Financing of Terrorism (AMLA) on 1 January. This transition, part of the EU's broader AML/CTF reform package, ends the EBA's stand‑alone AML/CFT mandate established in 2020 and places AMLA at the centre of a unified European supervisory framework. Key EBA tools and expertise, including the EuReCa database, supervisory insights and risk assessments, have been handed over, with all existing EBA AML/CTF guidelines and standards remaining in force until replaced by AMLA. Under the new regime, AMLA will complete the EU's Single Rulebook, advance supervisory convergence, coordinate the work of financial intelligence units and directly supervise 40 of the most complex financial institutions or groups in the EU. The EBA will continue to address money laundering risk through prudential regulation. The EBA has also published a fact sheet explaining the transition. A formal ESAs–AMLA Memorandum of Understanding was signed in June 2025, which underpins ongoing cooperation and information‑sharing between the authorities.

The UK Financial Conduct Authority (FCA) has published a letter (dated 19 December 2025) to trade associations outlining next steps towards establishing the Future Entity (FE) that will serve as the UK's long‑term open banking standards‑setting body. The FCA reflects on progress made in 2025, noting industry collaboration on the multilateral agreement for variable recurring payments (VRP), the creation of the transitional multilateral agreement operator and associated governance arrangements, continued development of the VRP commercial model and broader industry preparation for the increased adoption of open banking and VRP services.

Looking ahead, the FCA expects 2026 to be a landmark year, with live transactions flowing through the VRP scheme expected in Q1. It also anticipates that HM Treasury will introduce legislation under the Data (Use and Access) Act 2025 (DUAA) granting the FCA new rulemaking powers for open banking. The FCA plans to consult on new rules for the long‑term regulatory framework enabled by these powers. In parallel, the FCA expects industry to establish a body capable of becoming the FE, which it wants to be the UK's primary standards setting body for application programming interfaces (APIs). Subject to legislation, the FCA expects to use its powers under the DUAA to support this objective.

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The European Securities and Markets Authority and the UAE Securities and Commodities Authority have published a Memorandum of Understanding (MoU) signed on 29 December 2025. The MoU establishes a framework for cooperation and information sharing in the supervision of credit rating agencies (CRAs) operating across both jurisdictions. While non binding in nature, it sets out principles for mutual assistance, including cooperation on registration and certification processes, ongoing supervision, enforcement actions, cross border on site inspections and the handling of emergency situations. It creates mechanisms for exchanging both solicited and unsolicited information, subject to confidentiality and data protection safeguards. It also outlines procedures for managing outsourced functions and maintaining professional secrecy. Both authorities commit to periodically reviewing the MoU and may amend or terminate it with appropriate notice.

The UK Financial Conduct Authority (FCA) has announced the launch of a two-day stablecoin tech-sprint. The sprint, taking place on 4-5 March, will explore the use cases for stablecoins in domestic and international payments, covering retail and wholesale applications. A separate, smaller roundtable will take place on 15 May, focusing on use cases for stablecoins in trade payments, identifying risks, opportunities and where regulation would be beneficial. Follow-up roundtables are expected throughout 2026. Outputs from the sprint are expected to provide actionable insights to directly inform future FCA policy decisions on potential stablecoin payment regulation in the UK. The FCA invites participation from fintechs, payment institutions (including EMIs and acquirers), banks, technology providers, corporates, issuers, consultants and representative groups. A participation pack has been made available with more information on the format of the event and the problem statements the FCA expects to tackle. Applications are due by midnight on 4 February. The FCA will notify applicants by 13 February if they have secured a place at the sprint and/or roundtable.

The European Commission (EC) has launched two consultations on reforming the rules for venture and growth capital funds. The consultations seeks to explore potential changes to the regulatory framework applying to such funds to support their development across the EU single market. This follows the identification of issues related to market fragmentation and unnecessary regulation.

The targeted consultation requests input from key stakeholders such as fund managers, institutional investors, public authorities and supervisors. It seeks insight into the barriers faced by managers and considers how the European Venture Capital Fund (EuVECA), European Social Entrepreneurship Funds (EuSEF) and the Alternative Investment Fund Managers (AIFMD) regimes could be changed to facilitate the development of such funds. In particular, the consultation includes specific questions on the calibration of thresholds under the EuVECA and AIFMD regimes, which trigger certain requirements, and the practical functioning of the EuVECA and EuSEF regimes.

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The UK Prudential Regulatory Authority (PRA) has published Dear CEO letters setting out its 2026 supervisory priorities for UK deposit takers and international banks and designated investment firms. Across both letters, the PRA highlights its continued focus and expectations across risk management, operational resilience, financial resilience and data governance. It states that these priorities should be considered alongside firm-specific feedback provided though a firm's recent periodic summary meeting (PSM). It also announced plans to move certain supervisory activity, including PSMs, to a two-year cycle. The letters explain that a firm's supervisory contact will provide details in due course of what this means for the timing of the firm's next PSM.

The European Central Bank (ECB) has published its staff contribution to the European Commission's (EC) targeted consultation on the application of the market risk prudential framework (FRTB). The ECB welcomes the proposal to have the FRTB enter into force in the EU on 1 January 2027. It argues that further delaying the implementation of the FRTB would come with clear costs from a risk management and operational perspective. The ECB favours the three-year period of stability in the applicable market risk framework proposed by the EC. With respect to the temporary measures proposed for the delegated act, the ECB believes there is room to make these proposed amendments more risk-based and sound without adversely affecting the EC's objective of maintaining a level playing field with other jurisdictions. Regarding internal model-related requirements, the ECB agrees with using the Profit and Loss Attribution Test (PLAT) as a monitoring tool only, on the understanding that banks work on remediation in the event of highly concerning results. It considers the measures regarding the Risk Factor Eligibility Test (RFET) could be too far-reaching in their current form and would prefer this relief measure be limited to new risk factors. Equally, with regard to collective investment undertakings (CIUs), the ECB continues to consider that the proposal allowing banks to carry out the look-through on a quarterly basis for material exposures under both FRTB-AIMA and FRTB-ASA, rather than on a weekly basis as currently foreseen in the Capital Requirements Regulation, would not be sufficient to adequately capture the underlying risks of CIU exposures.

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The Financial Markets Standards Board has published its 2026 workplan. The workplan covers a wide range of areas in relation to wholesale financial markets, and in 2026 the Board sets out the following focus topics:

• In relation to market practices, work is being progressed on pre-hedging, grey market trading, market quotation mechanisms, conduct risks around risk management transactions for new issuances, and price discovery.
• In relation to electronic trading and technology, the relevant committee will be looking at market-facing applications of AI and potentially the application of model risk management frameworks to electronic trading algorithms.

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The European Supervisory Authorities (comprising the European Securities and Markets Authority, the European Insurance and Occupational Pensions Authority and the European Banking Authority) have entered into a Memorandum of Understanding with the Bank of England (BoE), the UK Prudential Regulatory Authority and the UK Financial Conduct Authority (FCA). The MoU seeks to strengthen cross-border oversight of critical third parties (CTPs) and critical ICT third-party service providers (CTPPs) under the Digital Operational Resilience Act (DORA), including during incidents such as power outages or cyber-attacks. It sets out cooperation principles and procedures, information‑sharing arrangements and coordination of oversight activities between EU and UK regulators. To enable information sharing with a third country authority, the ESAs must first verify that the third country's confidentiality and professional secrecy regime is equivalent to that under EU law. Accordingly, prior to signing the MoU, the ESAs carried out an assessment confirming that the UK's regime meets the standards set out in DORA. Separate statements from the FCA and BoE announcing the signed MoU were published on the same day.

The European Securities and Markets Authority has published its second thematic note on clear, fair and not misleading sustainability-related claims in relation to environmental, social and governance (ESG) strategies. This note forms part of a broader thematic study to address greenwashing risks in support of sustainable investments and follows ESMA's first note on ESG credentials. The purpose of these notes are to provide market participants with information and build on observed market practices. As with the first note, this second note sets out four principles for making sustainability claims. In summary, claims should be: (i) accurate; (ii) based on accessible information; (iii) substantiated; and (iv) up to date. The note follows a similar format to the first, including practical "do's and don'ts" and examples of good and poor practice. It focuses on ESG integration, exclusions and strategies. While these notes do not create new disclosure requirements, they are intended to guide market participants on ensuring that communications, including non-regulatory oral and written communications, and those aimed at retail investors, are clear, fair and not misleading.

The UK Financial Conduct Authority (FCA) has published consultation paper CP26/3 proposing to replace its ad hoc retail banking business models (R2B2) data requests with a mandatory annual regulatory return for banks and building societies meeting specified thresholds. This forms part of a phase two use case for the transforming data collection programme which seeks to transform data collection from the UK financial sector. The proposed return would require in‑scope firms to submit sub-product level financial and volumetric data across mortgages, personal and business banking, lending and wholesale funding, as well as whole‑bank reconciliation data. The FCA also proposes to include an "off-the-shelf" request for firms to provide various readily available business documents. The return is proposed to apply to banks and building societies with more than 200,000 UK customer relationships and at least GBP5 million revenue in the relevant periods. Those that do not meet these thresholds will not have to send the FCA this data. The first mandatory submission would be due in November, with the FCA planning to publish anonymised annual statistics and review the data collection after five years. The deadline for comments is 4 March with a final policy statement expected later this year.

The Bank of England (BoE) has published a speech by Dave Ramsden, deputy governor, markets and banking, on the evolution of the BoE's approach to resolution. The speech discusses the balance to be struck in optimising ex ante resilience and ex post costs and the response to recent events and the changing environment. Mr Ramsden states that in terms of bank resolution, assuming no unexpected developments, the BoE has now implemented the key policy developments he expects it to – certainly in his remaining term as Deputy Governor, which ends in September 2027. Later this year, the BoE expects to publish an operational guide to the transfer resolution strategies and an update to its operational guide to bail-in. Subject to the findings of the third RAF assessment which begins later this year and market developments, the BoE expects to confirm the timing of the fourth assessment as not being before 2029-30. There is more to do to operationalise the central counterparty (CCP) resolution regime and later this year the BoE expects to consult on resolvability standards for CCPs.

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The European Securities Markets Authority (ESMA) has announced the adoption of its new digital strategy 2026–2028 and an updated data strategy 2023–2028, signalling a continued shift toward technology‑driven supervision and streamlined regulatory reporting. The new digital strategy sets out a roadmap focused on: enhancing EU‑wide digital synergies; strengthening the digital capabilities of both ESMA and the European System of Financial Supervision; improving operational efficiency; and ensuring a secure and future‑ready supervisory ecosystem.

The updated data strategy emphasises burden reduction and more integrated data management, with key new actions including major initiatives to streamline supervisory reporting, expansion of the ESMA data platform, further development of the MiCAR joint supervisory tool for crypto‑market monitoring and finalisation of the European Single Access Point. These goals are in line with its wider simplification and burden reduction initiative launched in 2025. ESMA's data and digital work will be guided by the roadmaps under both strategies. By 2029, ESMA expects to converge the two into one unified strategy.

The UK Financial Conduct Authority (FCA) has published an updated webpage on its consultation paper proposing a framework for introducing an equity consolidated tape in the UK, operated by a consolidated tape provider. The FCA confirms that the deadline for comments on the proposals has been extended to 13 February. It also published a separate note outlining the cost benefit analysis methodology, following a request for further information.

The European Securities and Markets Authority (ESMA) has published its final report with guidelines on stress test scenarios under the Money Market Funds Regulation (MMF Regulation). ESMA updates these guidelines at least annually. These new guidelines follow the previous version published in January 2025, along with their official translations in February 2025. This report sets out revised stress test scenarios and risk parameters to ensure that MMF managers have the necessary information to complete the reporting template required under Article 37 of the MMF Regulation and Commission Implementing Regulation (EU) 2018/708. The report's annex contains the full text of the updated guidelines and scenario calibrations for 2025 (with amendments shown in red). Once the official translations of the guidelines are published on ESMA's website, national competent authorities will have two months to confirm whether they will comply, after which the updated guidelines, including the new 2025 parameters, will apply. From that point, MMF managers must report results based on the new parameters in their quarterly submissions; until then, they should continue using the parameters set out in the 2024 guidelines. Separately, the European Systemic Risk Board published the adverse financial market scenario for the stress-testing exercise (dated 4 December 2025) that ESMA used to update the risk parameters in the guidelines.

HM Treasury has published a statement from the G7 Cyber Expert Group (CEG) setting out a high‑level, non‑binding roadmap for a coordinated financial‑sector transition to post‑quantum cryptography (PQC). Building on its previous 2024 statement, the CEG highlights while quantum computing promises significant new capabilities for financial services, these advanced computers will be capable of breaking widely-used cryptographic protocols that protect systems and data. Therefore, the CEG explains how the financial sector should start preparing for this in advance of risks. The roadmap outlines a phased approach for both financial sector entities and public authorities for planning and coordination. It highlights key migration activities including awareness and preparation, discovery and inventory, risk assessment and planning, migration execution, testing and ongoing validation and monitoring. Although not legally binding, the CEG encourages firms to begin planning now. It notes that many jurisdictions currently reference 2035 as an overall target for full migration, with the most important systems ideally upgraded earlier (around 2030–2032). While the trajectory of quantum computing development is uncertain, the statement conveys it may be helpful for organisations to establish comparable migration timelines to ensure their milestones can be achieved prior to the availability of cryptographically relevant quantum computers. The CEG further encourages ongoing monitoring, cross sector information sharing and close coordination with international standard setting bodies to support a harmonised transition to PQC.

The UK Prudential Regulation Authority (PRA) and the UK Financial Conduct Authority (FCA) have published consultation paper CP1/26, proposing a management expenses levy limit (MELL) of GBP113 million for the UK Financial Services Compensation Scheme (FSCS) for 2026/27. The MELL ensures the FSCS has enough funding to carry out its functions.

The proposed MELL comprises a GBP108m management expenses budget, a GBP4.4m increase from 2025/26, broadly in line with inflation, and an unlevied reserve of GBP5m. Excluding the cost of the FSCS's revolving credit facility (RCF), which is being expanded to GBP3bn to support the Bank of England's recapitalisation powers and ensure faster depositor payouts, the proposal represents a nominal and real‑terms reduction in the FSCS budget.

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The UK Financial Conduct Authority has (FCA) published Primary Market Bulletin 61 (PMB 61), outlining proposed changes to the FCA Knowledge Base in preparation for the incoming Public Offers and Admissions to Trading Regulations (POATRs) regime, taking effect on 19 January. The Knowledge Base contains the FCA's technical guidance (comprising technical and procedural notes) on primary markets regulatory topics relating to listing, prospectuses, disclosure and transparency.

The new POATRs regime reforms the current UK Prospectus regime (which was inherited from the EU) in three fundamental ways: it creates a prohibition-and-exceptions model for public offers; greater rule-making flexibility for the FCA on admission to trading; and targeted recalibration of liability and disclosure to facilitate efficient issuance. Due to the extensive changes being brought in by the regime, the FCA is required to update its technical guidance and make other changes to its Knowledge Base. The FCA consulted on these changes in October, in PMB 58.

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The UK Financial Conduct Authority (FCA) has published findings from its multi‑firm review on the distribution of complex exchange traded products (ETPs) to retail consumers, highlighting both good practice and areas requiring improvement under the consumer duty. These products are a small but growing segment of the wider ETP market. The FCA observed significant growth in retail trading of complex ETPs, including leveraged and inverse products, and assessed whether execution‑only distributors are meeting obligations relating to product governance, appropriateness testing, price and value, consumer understanding and outcomes monitoring.

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The European Securities and Markets Authority (ESMA) has published its non-binding principles for risk-based supervision to promote a common and effective EU-wide supervisory culture and strengthen the EU single market. These principles apply to national competent authorities (NCAs) and ESMA when exercising direct supervision, covering the identification, assessment, prioritisation and mitigation of risks across all mandates (markets, entities and products) within an authority's remit. While acknowledging that different models for risk-based supervision exist, ESMA introduces an entity-based approach that can be adapted to other models (such as transaction or product-based approaches) depending on an authority's supervisory processes. The principles are intended to guide supervisory practice rather than prescribe a single supervisory model or operate as a full manual. As non-binding guidance, they are intended to be implemented practically under the relevant authority's existing framework. ESMA and NCAs will work together to advance implementation and promote high quality supervisory outcomes for market participants.

The House of Lords Financial Services Regulation Committee has published a report titled "Private markets: Unknown unknowns". The report highlights the rapid global expansion of private markets and raises concerns about the implications of this growth for the UK's financial stability. The Committee's inquiry focused on identifying the drivers of the expansion of private markets and assessing its potential consequences. The report should also be read alongside the accompanying letter (dated 18 December) from the Economic Secretary to the Treasury, which forms HM Treasury's (HMT) evidence to the inquiry.

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The European Banking Authority (EBA) has published its final guidelines on ancillary services undertakings. It specifies criteria for identifying activities referred to in Article 4(1)(18) of the Capital Requirements Regulation (CRR), which was amended by Regulation 2024/1623 (CRR III), to clarify the definition of ancillary services undertaking. The guidelines define how to identify: (a) activities that should be considered a "direct extension of banking"; (b) activities that should be considered "ancillary to banking"; and (c) "other similar activities" that the EBA may consider similar to those referred to in the CRR.

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The UK Financial Conduct Authority (FCA) has published an update on its advice guidance boundary review – targeted support policy sprint. The six-week sprint, launched in February 2025, brought together 12 firms, including retail banks, investment platforms and wealth managers, to test the FCA's targeted support proposals. As a reminder, the new regulated activity of targeted support aims to allow authorised firms to provide recommendations for pre-defined consumer segments with common needs or objectives. The regime is outcomes-focussed, with bespoke rules in the FCA handbook and further underpinned by the consumer duty and product governance rules.

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The European Supervisory Authorities (ESAs, comprising the European Banking Authority, European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority) has published a final report with joint guidelines for integrating environmental, social and governance (ESG) risks into financial stress tests for banks and insurers. These guidelines, mandated by the Capital Requirements Directive (CRD) and the Solvency II Directive, aim to harmonise how competent authorities across the EU consistently incorporate ESG risks into their supervisory frameworks.

Following feedback to the June consultation, the ESAs refined the drafting but did not change the overall structure or approach. Notable amendments include: clarifying the materiality assessment to make it more forward looking and not limited to relative exposure measures; enhancing proportionality language; increasing the time horizon to 10 years for or a more forward looking and comprehensive materiality assessment of ESG risks for competent authorities to identify; and other minor adjustments. The guidelines will be translated into all official languages of the EU in Q1 and published on the ESAs' websites. The deadline for competent authorities to notify the respective ESA whether they comply or intend to comply with the guidelines will be two months after the publication of the translated guidelines. The joint guidelines apply from 1 January 2027.

The European Banking Authority (EBA) has published two final draft RTS under the Capital Requirements Directive 2013/36 (CRD IV), as amended by Directive 2024/1619 (CRD VI), relating to the regulatory requirements for third-country branches (TCBs). The RTS relate to: (i) cooperation and colleges of supervisors for TCBs; and (ii) the booking arrangements that TCBs are to apply. The revised drafts consider feedback from the July consultations, in particular:

• The draft RTS on supervisory cooperation contains a revised Article 14 on the information to be exchanged on the supervisory review and evaluation process (SREP). The elements of information to be exchanged are linked to the relevant provisions of CRD in order to accommodate future developments at the level of the SREP Guidelines (a revised version of which is currently under consultation). 

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The UK Financial Conduct Authority (FCA) has published a new suite of webpages outlining its approach to the upcoming regulatory regime for cryptoasset activities. The regime will be implemented under the Financial Services and Markets Act 2000 (FSMA), through the draft statutory instrument laid before Parliament in December. The regime's go-live date is 25 October 2027.

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The UK Department for Business and Trade (DBT) has published a letter (dated 5 January) sent to the UK Financial Conduct Authority (FCA) providing an update on finalising the UK versions of the International Sustainability Standards Board's (ISSB) sustainability reporting standards (UK SRS), ahead of the FCA's planned January 2026 consultation on adopting the standards for listed companies. The letter confirms that consultation feedback largely supported the draft UK SRS S1 and S2, but stakeholders strongly recommended providing entities with sufficient time to implement the more challenging requirements and sought clarity on the interaction between embedded transitional reliefs and FCA rules.

To address this, the government will remove specific time references from the standards and instead allow timing and availability of reliefs to be set through government regulations (Companies Act 2006), FCA rules or by any other relevant authority. It will also clarify how statements of compliance apply to reporters where reliefs are used. The government will review the ISSB's updates to the international financial reporting standard S2 (climate related disclosures) for incorporation into the final UK SRS S2, which is expected to be published early in 2026.

Commission Delegated Regulation 2026/73 has been published in the Official Journal of the European Union (OJ). The Delegated Regulation, adopted on 4 July, amends Delegated Regulation (EU) 2021/2178 to simplify reporting requirements for environmentally sustainable activities under the EU Taxonomy Regulation. It also amends Delegated Regulations 2021/2139 and 2023/2486 to simplify certain technical screening criteria for determining whether economic activities cause no significant harm to environmental objectives. These include materiality-based exemptions, reduced and simplified key performance indicators and streamlined reporting templates. The Regulation enters into force on the twentieth day following publication in the OJ, applying from 1 January. Undertakings may, however, apply Delegated Regulations (EU) 2021/2178, (EU) 2021/2139 and (EU) 2023/2486 as applicable on 31 December 2025 for the financial year that starts between 1 January and 31 December 2025.

The European Securities and Markets Authority (ESMA) has published its third report on marketing requirements and marketing communications under the regulation on cross border distribution of funds. Drawing on data submitted by national competent authorities, ESMA confirms that there have been no significant changes to national marketing rules since its previous 2023 report. The report now incorporates, for the first time, statistics on cross border fund marketing notifications. The new statistical insights show that Luxembourg and Ireland remain the dominant jurisdictions for notifying cross border fund marketing activity, representing 59% and 30% of notifications, respectively. Undertakings for collective investment in transferable securities account for the majority of notifications (56%), with alternative investment funds comprising the remaining 44%.

The European Securities and Markets Authority (ESMA) has announced the launch of its first selection procedure for a consolidated tape provider (CTP) for over-the-counter (OTC) derivatives. ESMA encourages interested entities to register and submit their requests to participate by 11 February. The CTP aims to enhance transparency and efficiency in the OTC derivatives market by consolidating post-trade data from trading venues and other contributors into a single, continuous electronic stream. This consolidated view of market activity is intended to support more accurate and timely information access, improve price discovery and contribute to EU initiatives such as the Savings and Investment Union.

The CTP will collect and disseminate OTC derivatives data in line with ESMA's proposals set out in its final report on transparency for derivatives. Regarding next steps, ESMA will assess the requests it receives against the applicable exclusion and selection criteria and invite successful candidates to submit full applications. Any queries during the application phase will be handled through the EU Funding & Tenders Portal, which also has the contract notice and procurement document available. A reasoned decision on the selected CTP is expected by early July, after which the chosen provider will operate the OTC derivatives tape for a five‑year term, subject to ESMA authorisation and supervision.

The Bank of England Financial Policy Committee (FPC) has issued its formal response (dated 19 December) addressing HM Treasury's November remit and recommendations for 2025/26. The FPC welcomes the recommendations made, confirming alignment with the government's aim of supporting sustainable economic growth while ensuring financial stability. It reflects on its recent work and refers to its assessment in the December Financial Stability Report (FSR) on the resilience of the UK financial system. It states that global macroeconomic and geopolitical risks continue to pose vulnerabilities, though, UK banks remain well capitalised, and results from the 2025 Bank Capital Stress Test show that the banking system could continue to support the economy even if conditions were materially worse than expected.

The FPC also reports progress on its medium term priorities including operational resilience, climate related financial risks and cryptoassets, noting that it remains alert to new and emerging risks which will remain a focus in the upcoming years. It also welcomes plans for a system wide exploratory scenario exercise on private markets, expected to be completed by the end of the year. As requested by HMT, the FPC also provides an update on areas where there is potential to increase the financial sector's ability to support sustainable economic growth, with conclusions set out in the FSR.

The UK Prudential Regulation Authority (PRA) has published a new webpage outlining its expectations of firms' when including interim or year‑end profits in Common Equity Tier 1 (CET1) capital. Under Article 26(2), Chapter 3 of the Own Funds (CRR) Part of the PRA Rulebook, firms must notify the PRA as soon as practicable when including interim or year-end profits in CET1 capital, unless a formal decision has been taken confirming the final profit or loss for the year (e.g., by the board or AGM). Losses must be deducted in full as soon as they are incurred and do not require notification.

When notifying, firms are expected to demonstrate that profits have been independently verified and that any foreseeable charge or dividend has been deducted. Notifications must specify whether they apply on an individual basis, a consolidated basis, or both. The PRA emphasises that receipt of a notification does not constitute approval of CET1 eligibility and firms themselves remain responsible for compliance with all applicable requirements regarding the quality of capital. If any information provided changes, firms must inform their PRA supervisory contact and submit a new notification as soon as possible. Firms are also reminded to notify the PRA each time they wish to count interim or year-end profits as CET1 capital in a financial year.

The UK Financial Conduct Authority (FCA) has issued a new direction with an explanatory statement (published later, on 2 January) under Article 28a(9) of the UK Markets in Financial Instruments Regulation (MiFIR) regarding its direction on the derivatives trading obligation (DTO). The direction, originally issued on 31 December 2024, permits firms which would otherwise be subject to the UK DTO trading with EU DTO clients to execute trades on EU venues provided certain conditions are met. The statement confirms that the direction is extended for a further six months, remaining effective until 30 June. The FCA states that this decision satisfies the conditions under Article 28(1)(a) of MiFIR, reflecting the ongoing need to prevent or mitigate market disruption caused by the absence of mutual equivalence between the UK and EU. It also satisfies Article 28a(1)(b) as the measure advances the FCA's operational objectives under the Financial Services and Markets Act 2023. A further review will take place at the end of the next six-month period, after which, if the direction is still in force, the FCA will issue a new statement.

The European Securities Markets Authority (ESMA) has published a final report with guidelines on internal controls applicable to benchmark administrators (BMAs), credit rating agencies (CRA) and market transparency infrastructures (MTIs), which include trade repositories, data reporting services providers and securitisation repositories. The guidelines repeal and replace previous CRA-specific internal control guidance, extend coverage to BMAs and MTI and update expectations to address technology-related risks and integration of new technologies. Following feedback on the December 2024 consultation, ESMA confirms that no substantive changes were made to the draft, apart from clarifications on scope, proportionality and governance terminology. The guidelines apply from 1 October.

The European Banking Authority (EBA) has published a final report updating its guidelines on the equivalence of confidentiality and professional secrecy regimes in third countries. The amending guidelines: (i) expand the scope of the 2022 guidelines to include confidentiality and professional secrecy provisions under the Markets in Crypto-Assets Regulation; (ii) reflect recent EBA equivalence assessments confirming that regimes in Australia, China, Montenegro, Peru, Serbia and the UK are now deemed equivalent to EU standards; and (iii) streamline definitions, update legal references and clarify how competent authorities should apply the framework when sharing information or engaging in supervisory cooperation. The EBA states that while these guidelines inform opinions on equivalence, they do not address the need for cooperation arrangements or participation in supervisory colleges. The guidelines will be translated into all official EU languages and published on the EBA website. Competent authorities are required to report on whether they comply two months after the publication of the translations.

The UK Payment Systems Regulator (PSR) has published consultation paper CP25/3, proposing specific draft directions to implement two remedies arising from its market review of card scheme and processing fees. The review identified rising fees, weak competitive constraints and insufficient transparency for acquirers and merchants. Following feedback on its April consultation, which proposed four potential remedies, the PSR is now taking forward the following two:

• Information, transparency and complexity remedy, ensuring that acquirers and merchants through their contractual relationship, receive better information to understand the fees they are charged.
• Pricing governance remedy, ensuring that there is evidence behind pricing decisions.

The draft directions have been published separately on this webpage. A draft direction for a third remedy on regulatory financial reporting, intended to give the PSR enhanced data on profitability and card-scheme financial performance, will be consulted on separately by 31 March. The PSR confirms that other previously proposed remedies will not proceed. The deadline for responses is 5:00pm on 13 February.

The UK Financial Conduct Authority (FCA) has published policy statement PS25/24 finalising its revised approach to the ancillary activities test (AAT). The AAT determines when non financial firms trading commodity derivatives may rely on the ancillary activities exemption (AAE) instead of requiring investment firm authorisation for commodity derivatives or emission allowances trading that is ancillary to their main business.

HM Treasury made legislative changes by laying the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2025, giving the FCA the power to set the rules defining the conditions under which firms can rely on the AAE. Following its July consultation, the FCA has finalised its proposals largely as consulted on. From 1 January 2027, firms will be able to qualify for the AAE by satisfying any one of three independent tests: (i) a new GBP3 billion annual threshold test based solely on OTC cash settled derivatives exposure (with exchange traded derivatives expressly excluded following industry feedback); (ii) a modified trading test; or (iii) a modified capital employed test. The trading and capital employed tests will retain their existing methodology for calculating these tests but will now be subject to a 50% threshold. Transitional relief will apply until 1 January 2028, and firms currently relying on the AAE are advised to familiarise themselves with the new conditions and prepare for annual calculations under the updated framework.

The UK Financial Conduct Authority (FCA) published Handbook Notice 136, outlining amendments to the FCA Handbook resulting from the following statutory instruments:

• Dispute Resolution: Complaints Sourcebook (Motor Finance Complaints Handing) Instrument 2025, which entered into force on 5 December 2025. This extends the deadline for firms to send final responses to certain motor finance complaints.
• Consumer Composite Investments Instrument 2025, entering into force on 6 April 2026 and 7 May 2026. This introduces a new product information regime to help consumers understand the investment products they are buying.
• Complaints Reporting Instrument 2025, entering into force on 7 April and 31 December 2026.  The changes seek to improve the quality of reported data allowing the FCA to detect consumer harm more quickly while also reducing firm burden.
• Simplification: Conduct and Product Governance of Non-Investment Insurance Business and Other Amendments Instrument 2025, which entered into force on 9 December 2025.
• Non-Financial Misconduct (No 2) Instrument 2025, entering into force on 1 September 2026. This introduces rules and guidance on non-financial misconduct to raise standards, increase accountability and build trust in financial services.

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The UK Prudential Regulatory Authority (PRA) has finalised a series of what it refers to as low impact amendments (LIAF03/25) to its Rulebook and policy materials following its October consultation. These include:

• The conditional disapplication of certain PRA general provisions to implement the deference arrangements under the UK Swiss-Berne Financial Services Agreement, effective from 1 January.
• A minor technical amendment to the Transitional Measure on Technical Provisions Part of the PRA Rulebook, TMTP Calculation and Rule 5.2, which all took effect from 23 December.
• An amendment to the Insurance Special Purpose Vehicle Part of the PRA Rulebook, solvency requirements, Rule 2.2A(3) and related updates to supervisory statement SS2/25, which all took effect and applied from 23 December.
• Miscellaneous corrections across the PRA Rulebook to ensure its accuracy, effective from 1 January.

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Guideline (EU) 2025/2595 of the European Central Bank (ECB) has been published in the Official Journal of the European Union. The guideline, adopted on 10 December, sets out a harmonised supervisory approach for national competent authorities (NCAs) to assess the management and coverage of non performing exposures (NPEs) held by less significant institutions (LSIs) within the Single Supervisory Mechanism. It aims to ensure consistent supervisory standards across member states by requiring NCAs to review LSIs’ provisioning policies and treatment of assets in terms of own funds requirements. Such data is not currently included in the information that institutions are required to report under Commission Implementing Regulation (EU) 2021/451, and therefore NCAs should require LSIs to report it for each relevant reporting reference date. NCAs must: assess NPE coverage using Article 47c factors under the Capital Requirements Regulation; apply the framework to all LSIs unless specific exemption conditions are met; and introduce reporting requirements for each reporting reference date using ECB developed templates. Transitional reduced coverage factors apply for the 2025–2027 reporting periods, with full application from the 31 December 2028 reference date. The guideline takes effect on the day of its notification to the NCAs of the participating member states.

The Single Resolution Board (SRB) has published its approach to simplification. The SRB states that it is working to simplify its own processes and approaches, which will result in fewer deliverables requested from banks, greater stability and predictability in data requirements and policies, and faster interactions. The SRB's work on simplification is guided by four core principles: supporting competitiveness, supporting Banking Union integration, focusing on actions that enhance efficiency without compromising resolvability, and acknowledging that cooperation and trust are critical to effective crisis management. The SRB outlines its ongoing actions related to simplification, focusing on (i) streamlining information and reporting requirements; (ii) adjusting the frequency and intensity of resolution planning and testing; and (iii) providing clear, predictable, and stable guidance to enhance transparency and efficiency.

Key measures include reducing the burden of data requests, decreasing the frequency of mature deliverables and simplifying the prior permissions regime for MREL instruments in line with SRB practices to make authorisation more agile. The SRB is recommending legislative changes allowing the move to a two- or three-year resolution planning cycle, to further reduce burden for authorities and banks, to focus resolution planning more on specific elements, and to facilitate work on operationalisation and testing. The SRB is also exploring the development of digital solutions to facilitate the processing of information.

The Council of the EU and the European Parliament (EP) have reached a provisional political agreement on an updated retail investment strategy package to empower and protect consumers and increase competitiveness in the EU's financial markets. The package takes the form of a directive containing targeted amendments to a number of other EU directives in the area of financial services such as the Markets In Financial Instruments Directive (MIFID), the Solvency II Directive, the Directive For Undertakings For Collective Investment In Transferable Securities (UCITS) and the Alternative Investment And Managers Directive (AIFMD), and a regulation amending the Packaged Retail And Insurance-Based Investment Products (PRIIPs Regulation).

The Council of the EU and EP confirm that agreement has been reached in the following areas:

• Value for money – firms must identify and quantify all costs borne by investors related to the investment products they advise. Products failing to offer value for money should not be released onto the market and sold to retail customers, and who should be able to compare investment products' costs, charges, performance and non-financial benefits.
• Inducements – a new test will be introduced to ensure firms act in the clients' best interests, enabling them to distinguish inducements from other fees.

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The European Banking Authority (EBA), the European Central Bank (ECB), national central banks (NCBs), and national supervisory authorities (NSAs) across the EEA have signed a Memorandum of Understanding (MoU). The MoU aims to enhance cooperation and information sharing to support non-bank payment service providers' (NB-PSPs) access to central bank operated payment systems. The MoU sets out clear principles for collaboration to achieve three clear objectives: (i) to establish cooperation between NSAs and NCBs in the EEA for the exchange of information to support NCBs in their assessment of the compliance of NB-PSPs with requirements for granting access to central bank-operated payment systems in the EU; (ii) to establish procedures in a cross-border scenario for the NCB operating the payment system in the host member state to notify the NSA of the home member state about the NB-PSP' application and the NCB's decision regarding its participation; and (iii) to harmonise the processes and procedures across the EEA for the exchange of information between NSAs and NCBs, to the extent possible, by specifying the types of information to be shared, the timing and means of such exchange.

The European Securities Markets Authority (ESMA) has published a report with amended guidelines on liquidity management tools (LMTs) of Undertakings for Collective Investment in Transferable Securities (UCITS) and open-ended Alternative Investment Funds (AIFs). The amendments aim to align with the regulatory technical standards (RTS) adopted by the European Commission on 17 November. To ensure consistency between the guidelines and the RTS, ESMA has made some targeted amendments to the guidelines in two areas: (i) the inclusion of investor-level redemption gates to mitigate first-mover advantage, and (ii) the calculation of implicit transaction costs for anti-dilution LMTs, which should only be considered where appropriate to the fund's investment strategy and estimated on a best-effort basis. The guidelines will be translated into all official EU languages and published on ESMA's website. National competent authorities will have two months to notify ESMA on whether they comply or intend to comply with the guidelines. The updated guidelines will apply from the RTS application date (which is specified as 16 April 2026), with a 12-month transitional period for existing funds.

The Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025 has been published, accompanied by an explanatory memorandum. This follows the draft version of the Order which was laid before the UK Parliament in October. The Order amends the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) to bring the provision of an environmental, social or governance (ESG) rating into the remit of the UK Financial Conduct Authority (FCA) when that rating is likely to influence a decision to make a specified investment. This means that providers of an ESG rating will need to be authorised by the FCA. The FCA published a consultation on 1 December setting out its proposed rules for the ESG ratings regime. The Order inserts a new article 63U into the RAO setting out the new regulated activity. It also specifies exclusions, including exclusions for regulated products and services, intra-group ratings, private use, and ancillary non-commercial provision. In addition, the Order tailors the overseas persons exclusion in article 72 of the RAO to reflect the new regulated activity.

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