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 Commission adopts Delegated Regulation on RTS on threat-led penetration testing under DORA
13 February 2025
The European Commission (EC) has adopted a Commission Delegated Regulation supplementing the Digital Operational Resilience Act (DORA) with regard to RTS specifying the criteria used for identifying financial entities required to perform threat-led penetration testing (TLPT). Article 26(11) of DORA mandates the European Supervisory Authorities (ESAs), in agreement with the European Central Bank (ECB), to develop joint draft RTS in accordance with the ECB's European framework for threat intelligence-based ethical red teaming (TIBER-EU framework) to specify further the following: (i) the criteria to identify financial entities required to perform TLPT; (ii) the requirements regarding test scope, testing methodology and results of TLPT; (iii) the requirements and standards governing the use of internal testers; and (iv) the rules on supervisory and other cooperation needed for the implementation of TLPT and for mutual recognition of testing. The Delegated Regulation will enter into force on the 20th day following its publication in the Official Journal of the EU. The ECB has also published an updated version of the TIBOR-EU framework that aligns with the DORA RTS on TLPT.Topic : Operational Resilience -
European Securities and Markets Authority consults on changes to settlement discipline under CSDR
13 February 2025
The European Securities and Markets Authority (ESMA) has published a consultation paper on a Delegated Regulation amending Commission Delegated Regulation (EU) 2018/1229, which supplements the Central Securities Depositories Regulation (CSDR) with regard to RTS on settlement discipline.
The Regulation amending the CSDR (CSDR Refit) introduced in Article 6(5) and Article 7(10) of the CSDR two mandates for ESMA to develop draft RTS in relation to settlement discipline measures and tools to improve settlement efficiency. ESMA plans to fulfil these mandates by amending Commission Delegated Regulation (EU) 2018/1229, including on timing and means for sending allocations and confirmations, on requiring all central securities depositories (CSDs) to offer hold and release and partial settlement functionalities and to enable automated use of intraday cash credit secured with collateral, as well as on the requirements for CSDs to report top failing participants, and the information on settlement fails to be published by CSDs. ESMA also explores additional tools to improve settlement efficiency, for which ESMA's preliminary view is that no regulatory action is required, but on which it would nevertheless like to receive stakeholders' views. These include topics such as the CSD business day schedule, the Standard Settlement Instructions format, the Unique Transaction Identifier (UTI), Place of Settlement (PSET) and Place of Safekeeping (PSAF). The deadline for comments is 14 April. ESMA expects to publish a final report and submit the draft RTS to the European Commission by October.Topic : Financial Market Infrastructure -
Eight Delegated Regulations under MiCAR published in Official Journal of the European Union
13 February 2025
Eight Delegated Regulations supplementing the Markets in Crypto-assets Regulation (MiCAR) have been published in the Official Journal of the European Union (OJ).
Read more.Topic : FinTech -
UK Prudential Regulation Authority policy statement on simplifying firm-specific capital communications
12 February 2025
The Prudential Regulation Authority (PRA) published a policy statement (PS2/25) on streamlining firm-specific capital communications which simplifies the content and process of the firm-specific capital communications used to set Pillar 2A, the systemic buffers and the additional leverage ratio buffer (ALRB). These changes have no impact on firms' capital requirements. The PRA also provides feedback to responses received to Chapter 3: Streamlining firm-specific capital communications of its September 2024 consultation on streamlining the Pillar 2A framework (CP9/24). In response to the feedback, the PRA has made one small change to paragraph 5.18 of supervisory statement SS31/15 on the internal capital adequacy assessment process (ICAAP) and the supervisory review and evaluation process (SREP). This change has no meaningful effect on the policy. The new policy and rules will take effect on 31 March. This is consistent with the consultation, and firms are not required to take any specific actions to implement the changes.Topic : Prudential Regulation -
European Banking Authority draft ITS to support Pillar 3 Data Hub
12 February 2025
The European Banking Authority (EBA) has published its final report on draft ITS on IT solutions for public disclosures by institutions, other than small and non-complex ones, relating to Pillar 3 disclosures under the Capital Requirements Regulation (CRR).
Read more.
Topic : Prudential Regulation -
UK Financial Conduct Authority to consult on new short selling rules in Q3 2025
12 February 2025
The Financial Conduct Authority (FCA) has updated its webpage on the notification and disclosure of net short positions, providing an update on short selling. Following the publication of the Short Selling Regulations 2025 in January, which set out high level requirements for the new U.K. short selling regime, the FCA has confirmed that it will consult on its new short selling rules in Q3 this year. The Short Selling Regulations 2025 give the FCA powers to set out more detailed rules to complete and implement the new regime; these powers have already entered into force. The FCA's rules and the remaining parts of the Regulations that are not already in force will be implemented once the FCA has finalised the new rules and has allowed time for the FCA to make any technical and operational changes, including the new requirement to publish aggregated net short positions by issuer. In the meantime, the existing UK short selling regime will continue to apply, including the current public disclosure of individual firms net short positions in issuers at the 0.5% threshold and above.Topic : Financial Market Infrastructure -
European Commission legislative proposal for shortened settlement cycle in EU
12 February 2025
The European Commission (EC) has published a legislative proposal it has adopted for a Regulation amending the Central Securities Depositories Regulation (CSDR) to shorten the settlement cycle for EU transactions in transferable securities.
The proposed Regulation shortens the settlement period under Article 5(2) of the CSDR from two business days after trading takes place (T+2) to one business day (T+1). The proposal is intended to: (i) promote settlement efficiency and increase the resilience of EU capital markets; (ii) improve the liquidity of EU capital markets; and (iii) eliminate the costs linked to the misalignment of settlement cycles between EU and other jurisdictions. Due to the urgency to act given international developments, the EC has also prepared a Commission Staff Working Document alongside this proposal, analysing the impacts of an EU move to a shorter settlement cycle. The document assesses the costs and benefits of a shorter settlement cycle in the EU, highlighting that the mostly one-off costs should, over time, be outweighed by the long-term benefits of lower counterparty and market risks, more efficient and timely settlement and increased attractiveness of EU capital markets for investors. The EC has also published a set of FAQs alongside its proposal. The proposed Regulation will enter into force on the 20th day following its publication in the Official Journal of the EU and will apply from 11 October 2027.Topic : Financial Market Infrastructure -
Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2025
12 February 2025
The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2025 (SI 2025/124) has been published, alongside an explanatory memorandum. It was made on 5 February and comes into force on 31 March.
The instrument makes amendments to the legislation which gives effect to the UK Emissions Trading Scheme (UK ETS). The UK ETS incentivises decarbonisation by requiring operators to purchase allowances based on carbon emissions. Some operators are given free allocation of allowances to mitigate the risk of carbon leakage. The scheme has two allocation periods, 2021‒2025 and 2026‒2030, in which free allocation is calculated and provided to eligible operators. The SI moves the start of the second allocation period for stationary installations from 2026 to 2027, making 2026 a standalone year, and provides for the calculation of free allocation in the 2026 standalone scheme year. The instrument also makes three changes to other aspects of the scheme. Specifically, these will:- require the publication of full details of transactions between accounts in the scheme's Registry after a three-year delay;
- add limited exceptions to the prohibition on disclosure of Scheme data in order to support the development and implementation of related policies, and support the statutory functions of the Climate Change Committee (CCC); and
Read more.
Topic : Financial Market Infrastructure -
European Commission 2025 work programme
11 February 2025
The European Commission (EC) has published a communication outlining its 2025 work programme. The EC also published the annexes to the 2025 work programme which include:- Annex I – new initiatives. The table in this annex lists the new initiatives the EC intends to adopt in 2025 to deliver on its priorities;
- Annex II – annual plan on evaluations and fitness checks. The EC's annual plan of evaluations and fitness checks is designed to ensure continuity of the simplification and burden reduction exercise;
Read more.Topic : Other Developments -
European Banking Authority publishes amending guidelines on ICT and security risk management in the context of DORA
11 February 2025
The European Banking Authority (EBA) has published a final report with amending guidelines in respect of Guidelines EBA/GL/2019/04 on ICT and security risk management. The EBA reviewed the Guidelines in light of the Digital Operational Resilience Act (DORA), which introduced harmonised requirements for ICT, risk management framework (RMF), incident reporting and third-party risk management and testing for certain financial entities. The entities subject to DORA and the related RTS on RMF overlap with those subject to the Guidelines. Therefore, to ensure transparency and legal certainty, the EBA reviewed the Guidelines and concluded that the entities subject to the Guidelines should be narrowed down, and the scope of the Guidelines should be reduced to cover certain institutions providing payment services which are not in scope of DORA, and guidelines on relationship management of payment services where this is not covered by the DORA requirements. The amending guidelines will be translated into the official EU languages and apply by two months after issuance (at the latest).Topic : Operational Resilience -
ECB updates TIBER-EU framework to align with DORA RTS on TLPT
11 February 2025
The European Central Bank (ECB) has published an updated version of the threat intelligence-based ethical red teaming framework (TIBER-EU framework) (dated January) to align with the Digital Operational Resilience Act (DORA) RTS on threat-led penetration testing (TLPT) (see item above). The ECB also published a news item on the updated framework.
The TIBER-EU framework enables EU and national authorities to work with financial and other entities to put in place a programme to test and improve their resilience against sophisticated cyber-attacks. It also sets out detailed guidance on how to complete DORA TLPT in a qualitative, controlled and safe manner, applying a uniform approach across the EU. The updates introduced in the framework include: (i) aligning the process steps with the deliverables derived from the DORA RTS on TLPT; (ii) specifying purple-teaming as mandatory under TIBER-EU, as prescribed in the DORA RTS; (iii) introducing terminological changes to ensure consistency with DORA terminology, e.g., "White Team" to "Control Team" (iv) providing advice on how to assess the quality of a provider in the updated Guidance for Service Provider Procurement; (v) moving away from the requirement for authorities that want to implement TIBER-EU to publish a full national implementation guide; authorities can instead refer to the adoption of the TIBER-EU documentation and publish a short implementation document described in the framework; and (vi) establishing TIBER-EU guidance documents to facilitate the implementation of different parts of the framework and to ensure a secure and controlled TLPT execution.
Read more.Topic : Operational Resilience -
European Commission call for evidence on amending net stable funding ratio treatment of securities financing transactions under CRR
10 February 2025
The European Commission (EC) has published a call for evidence on targeted amendments to the Capital Requirements Regulation (CRR) to adjust the prudential treatment of securities financing transactions (SFTs) under the net stable funding ratio (NSFR).
Under Article 510(8) of the CRR, until 28 June 2025, EU credit institutions can apply lower required stable funding (RSF) factors for SFTs and unsecured transactions with a residual maturity of less than six months than those set out under the Basel standards. Under Article 510(7) of the CRR, the EC has the power to adopt a legislative proposal to amend provisions in the CRR on the treatment of these instruments under the NSFR. The targeted amendments therefore aim to make permanent the current transitory prudential treatment for SFTs and unsecured transactions with a residual maturity of less than six months, with financial customers, for the purpose of the NSFR (i.e. to extend the current treatment also beyond 28 June 2025, and permanently). The EC is proposing to make this treatment permanent on the basis that the higher RSF factors that would otherwise apply would make these instruments more costly in the EU and would consequently harm the demand for collateral and the liquidity in the collateral markets. The EC is also responding to concerns that the decisions of the U.S. and the U.K. to maintain lower RSF factors than under the Basel standards for these instruments on a permanent basis may lead to a loss of competitiveness for EU banks. The deadline for responses to the call for evidence is 10 March 2025.Topic : Prudential Regulation -
European Central Bank clarifications on ICAAP and ILAAP requirements
10 February 2025
The European Central Bank (ECB) has published a report clarifying the internal capital adequacy assessment process (ICAAP) and the internal liquidity adequacy assessment process (ILAAP), as well as the respective package submissions. The ECB reminds banks of its main supervisory expectations on sound and effective capital and liquidity management in line with the ECB Guides on ICAAP and ILAAP published in November 2018. The ECB also outlines some clarifications on the governance around the submissions and key content areas which should be reflected in ICAAP and ILAAP packages. The report notes that it remains banks' responsibility to determine and apply the most appropriate approach to ensure sound capital and liquidity adequacy assessment processes tailored to their own specificities. Therefore, the ECB's clarifications focus on sound practices instead of setting additional expectations or requirements. They should be considered by banks to refine or improve their capital and liquidity management practices. Regarding the technical details around ICAAP and ILAAP package submissions, the note "Technical implementation of the EBA Guidelines on ICAAP information collected for SREP purposes" that was sent to banks in February 2017 remains applicable and is included in the annex to the report.Topic : Prudential Regulation -
European Commission consultation on draft Delegated Regulation amending Delegated Regulation on fees relating to supervision of consolidated tape providers under MiFIR
10 February 2025
The European Commission (EC) has published a draft Delegated Regulation amending Commission Delegated Regulation (EU) 2022/930 regarding fees relating to the supervision by ESMA of consolidated tape providers (CTPs). Commission Delegated Regulation (EU) 2022/930 supplements MiFIR by specifying fees relating to the supervision by ESMA of data reporting service providers (DRSPs), as required under Article 38(n) of MiFIR.
The draft Delegated Regulation:- clarifies that Commission Delegated Regulation (EU) 2022/930 covers all DRSPs subject to ESMA supervision, including CTPs;
- introduces a fixed one-off authorisation fee per CTP of EUR100,000. The amount of the one-off authorisation fee for CTPs is higher compared to the amount of the one-off authorisation fee for approved publication arrangement (APAs) and approved reporting mechanism (ARMs), given the complexity of the authorisation process for CTPs. That fee is lowered to EUR50,000 where an already authorised CTP applies for authorisation to provide the services of an APA, ARM or CTP for a different asset class; and
Read more.Topic : Financial Market Infrastructure -
European Securities and Markets Authority consultations on draft RTS relating to CCP authorisations, extensions and validations under EMIR 3
7 February 2025
The European Securities and Markets Authority (ESMA) has published two consultation papers on central counterparty (CCP) authorisations, extensions and validations under the European Market Infrastructure Regulation 3 (EMIR 3).
The first consultation paper is on the conditions for extensions of authorisation and the list of required documents and information for applications by CCPs for initial authorisations and extensions. For extensions of services and activities, Articles 15, 15a, 17 and 17a of EMIR now distinguish between a "normal extension" of authorisation procedure, an accelerated procedure and changes that can benefit from an exemption from authorisation. Under Article 14(6), 15(3), 17a(5) and 15a(2) of EMIR, ESMA is mandated to develop four draft RTS specifying: (i) the list of documents that are to accompany an application for authorisation and an application for an extension of authorisation; (ii) the conditions for the accelerated procedure referred to in Article 17a(1), points (a) to (e), of EMIR; (iii) the procedure for consulting ESMA and the college on whether or not those conditions are fulfilled and; (iv) the type of extension of services or activities that could benefit from an exemption from authorisation.
Read more.Topic : Financial Market Infrastructure -
UK Financial Conduct Authority updates webpage on bond consolidated tape
7 February 2025
The Financial Conduct Authority (FCA) has updated its webpage on bond consolidated tape (CT) confirming that the tender documents for the process to appoint a bond CT provider (CTP) will be published by 7 March, instead of the original proposed date of 31 January. Given this revised publication date, the FCA will conduct the procurement of a bond CTP under the Procurement Act 2023, and the tender will follow the two-stage process as described in CP23/33 on the CT framework for bonds. The tender documents will be published on the FCA's procurement portal and will contain details of: (i) the award process; (ii) the licences the successful bidder will need to provide; and (iii) how to participate in the tender and the information firms have to submit to the FCA as part of the application process. The FCA will publish a draft contract between the CTP and the FCA. Potential bidders will need to register on the FCA's procurement portal to access the relevant documentation.Topic : Financial Market Infrastructure -
Financial Ombudsman Service policy statement on charging fees to claims management companies and other professional representatives
7 February 2025
The Financial Ombudsman Service (FOS) has published a policy statement on its new fee rules regarding complaints that are referred to it by certain claims management companies (CMCs) and other professional representatives acting on behalf of complainants. The rules are aimed at encouraging CMCs to consider the merits of complaints more diligently before referring them to the FOS. The FOS will introduce a maximum £250 case fee for each complaint a CMC refers to it exceeding the annual free case provision of ten per financial year. This is to reflect a proportionate contribution to the costs incurred by the FOS, ensuring adequate resources continue to be available to resolve disputes quickly. However, there will be a £75 minimum case fee for all cases referred by CMCs, regardless of the outcome of the complaint, in the interest of proportionality and fairness. If the complaint is upheld in favour of the complainant, the CMC will receive £175 credit. However, if the case outcome is not in favour of the complainant, then the respondent firm's case fee will be reduced to £475, from £650 for the current financial year. Under the new rules, this will mean that the overall aggregate charge from both parties will be £725 for a single complaint, whatever the outcome of the case. In relation to late payment of case fees, which was previously a £250 fixed fee plus interest, this will be replaced with a variable charge up to 25% of the outstanding debt, based on the cost and effort required to recover it. The rules will come into force on 1 April and will apply in relation to complaints referred to the FOS on behalf of complainants on, or after, this date.Topic : Consumer / Retail -
European Commission consultation on draft Delegated Regulation extending procedural rules for penalties imposed on data reporting service providers to consolidated tape providers under MiFIR
6 February 2025
The European Commission (EC) has published a draft Delegated Regulation amending Commission Delegated Regulation (EU) 2022/803 by specifying rules of procedure for the exercise of the power to impose fines or periodic penalty payments by the European Securities and Markets Authority (ESMA) regarding data reporting service providers (DRSPs).
Commission Delegated Regulation (EU) 2022/803 specifies the rules applying to ESMA for the exercise of power to impose fines or periodic penalty payments regarding two specific types of DRSPs, approved publication arrangements and approved reporting mechanisms. Consolidated tape providers (CTPs), which are also DRSPs, were intentionally left out of scope. This was due to the absence of entities providing consolidated tape services in the EU and because the review of the rules governing CTPs under the EU Markets in Financial Instruments Regulation (MiFIR) was still ongoing at that time. Therefore, in light of the upcoming CTP authorisation process introduced by MiFIR II, it is necessary to amend the scope of Commission Delegated Regulation (EU) 2022/803 to ensure it covers all DRSPs, including CTPs. The deadline for comments on the draft Delegated Regulation is 10 March.Topic : Financial Market Infrastructure -
European Commission draft guidelines on AI system definition under EU AI Act
6 February 2025
The European Commission (EC) has published draft guidelines on the definition of an AI system to explain the practical application of the legal concept, as anchored in the EU AI Act. The EC aims to assist providers and other relevant persons in determining whether a software system constitutes an AI system to facilitate the effective application of the rules. The AI Act does not apply to all systems, but only to those systems that fulfil the definition of an "AI system" within the meaning of Article 3(1) of the EU AI Act. The definition of an AI system is therefore key to understanding the scope of application of the EU AI Act. These guidelines take into account the outcome of a stakeholder consultation and the consultation of the European Artificial Intelligence Board.
Read more.Topic : Artificial Intelligence -
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. -
European Commission guidelines on prohibited AI practices under EU AI Act
4 February 2025
The European Commission (EC) has published guidelines on prohibited AI practices, as defined by the EU AI Act. The guidelines provide an overview of the prohibited AI practices under Article 5 of the EU AI Act, which are deemed unacceptable due to their potential risks to European values and fundamental rights. Article 5, which prohibits the placing on the EU market, putting into service or use of certain AI systems for manipulative, exploitative, social control or surveillance practices, started to apply from 2 February. The guidelines specifically address practices such as harmful manipulation, social scoring and real-time remote biometric identification, among others. The guidelines are designed to ensure the consistent, effective and uniform application of the EU AI Act across the EU. While they offer valuable insights into the EC's interpretation of the prohibitions, they are non-binding, with authoritative interpretations reserved for the Court of Justice of the European Union. The guidelines provide legal explanations and practical examples to help stakeholders understand and comply with the EU AI Act's requirements.Topic : Artificial Intelligence -
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.
Read more. -
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).
Read more. -
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