The European Banking Authority (EBA) has published a consultation paper on its draft guidelines for managing third-party risk with regards to non-ICT related services. The guidelines will revise and update its prior 2019 outsourcing guidelines in line with the Digital Operational Resilience Act (DORA). The guidelines reaffirm that financial entities' management bodies remain fully accountable for all activities, including those outsourced to third-party service providers (TPSPs), particularly when critical or important functions are involved. The guidelines specify steps to be taken for the lifecycle of third-party arrangements, covering risk assessment, due diligence and termination processes, and stress the need for adequate resources to manage associated risks. To promote consistency with DORA, the draft guidelines allow financial institutions to maintain a single unified register for both ICT and non-ICT services, reducing administrative burden by limiting the level of information to be documented. A transitional period of two years is provided for financial entities under the scope of the updated guidelines, to review and amend existing third-party arrangements and update their non-ICT registers accordingly. The deadline for comments on the consultation is 8 October and a virtual public hearing is scheduled for 5 September.

The European Banking Authority (EBA) has published a consultation paper on its draft guidelines on ancillary services undertakings (ASUs) specifying the criteria for the identification of activities referred to in Article 4(1)(18) of the Capital Requirements Regulation (CRR), as amended by CRR III (Regulation 2024/1623). The draft guidelines set the criteria for the identification of: (a) activities that should be considered a "direct extension of banking"; and (b) activities that should be considered "ancillary to banking". They also outline the process to identify activities that the EBA may consider similar to those referred to in the CRR, to ensure that the guidelines remain responsive to emerging sources of risks.

The proper identification of ASUs plays a key role in determining the scope of prudential consolidation for banking groups, thereby enabling institutions to comply with the obligations laid down in the CRR on a consolidated basis. The EBA expects the guidelines to be read in conjunction with Regulation (EU) 2022/676 (regulatory technical standards on methods of prudential consolidation). The deadline for comments on the consultation is 7 October and a virtual public hearing is scheduled for 2 September. The date of application remains to be specified.

The UK Prudential Regulation Authority (PRA) has published its final policy statement in relation to amendments being made to the UK framework on capital buffers. Together with the Capital Buffers and Macro-prudential Measures Regulations 2025 (Capital Buffer Regulations), published in June, the amendments result in some regulatory material on the UK capital buffers framework being removed from the statute book and replaced by PRA policy material. In addition, the PRA has sought to streamline some of its policy materials on capital buffers, to enhance usability and clarity.

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The European Central Bank (ECB) has published a Memorandum of Understanding (MoU) (dated 27 June) that the ECB has entered into with the European Union's Anti-Money Laundering Authority (AMLA) to enhance cooperation between prudential and anti-money laundering supervision. The MoU establishes practical arrangements for cooperation and information exchange, aiming to enhance supervisory effectiveness, maximise efficiency and avoid duplication of efforts. Under the MoU, the AMLA will directly supervise certain high-risk financial institutions (referred to as "selected obliged entities") that are particularly exposed to cross-border money laundering. These include payment institutions, crypto-asset service providers and, in some cases, banks that also fall under the ECB's prudential supervision. Article 92(3) of the AMLA Regulation requires the AMLA and the ECB to conclude a MoU setting out the practical modalities for cooperation and for exchanging information in the performance of their respective tasks by 27 June.

The European Supervisory Authorities (the European Banking Authority, European Insurance and Occupational Pensions Authority and European Securities Markets Authority—the ESAs) have announced the signing of a multilateral Memorandum of Understanding (MoU) (dated 27 June) with the European Union's Anti-Money Laundering Authority (AMLA). The agreement establishes a framework for effective cooperation and information exchange among the four institutions. The MoU outlines practical arrangements for collaboration, aiming to enhance supervisory convergence across the EU's financial sector. It also seeks to facilitate the sharing of relevant information, promote cross-sectoral learning and support capacity building in areas of mutual interest. The agreement is a key component of the AMLA's broader cooperation framework with the financial sector, as required under Article 91 of the AMLA Regulation, which mandates the conclusion of a multilateral MoU with the ESAs by 27 June.

The European Banking Authority (EBA) has published two consultation papers under the Capital Requirements Regulation (CRR), as amended by the revised Capital Requirements Regulation (CRR III).

The first consultation paper proposes amendments to the guidelines on the application of the definition of default under Article 178 of the CRR.

Key proposals include:

• Maintaining the 1% threshold for the net present value loss in debt restructuring, emphasising the framework's flexibility and alignment with accounting principles.
• Considering a shortened probation period for certain forborne exposures from one year to three months—however this is not incorporated in the draft amended guidelines.

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The European Banking Authority (EBA) has issued its final guidelines, accompanied by a press release, on the treatment of acquisition, development and construction (ADC) exposures to residential property under Article 126a of the Capital Requirements Regulation (CRR). These guidelines mark the first phase of the EBA's roadmap for implementing credit risk provisions under the EU Banking Package. They clarify the conditions under which institutions may apply a reduced risk weight of 100%, instead of the default 150%, to ADC exposures that meet specific credit risk-mitigating criteria. These conditions include: (i) at least 50% of total contracts must be either pre-sale contracts with a cash deposit of at least 10% of the sale price, pre-lease contracts with a cash deposit equal to or exceeding three times the monthly lease rate, or a combination of sale and lease contracts; and (ii) obligor-contributed equity of at least 25% of the property's value upon completion. This threshold was revised down from 35% following the May 2024 consultation. The guidelines also introduce flexibility for public housing projects by reducing the equity requirement to 20% and broadening the scope of eligible equity to include committed subsidies.

The European Commission (EC) has adopted a Delegated Regulation supplementing the Capital Requirements Regulation (CRR) with regard to regulatory technical standards (RTS) specifying methods for identifying the main risk driver of a position and determining whether a transaction represents a long or short position. The proposed general method to identify the main risk driver hinges on sensitivities defined under the market risk standardised approach (FRTB-SA) or on add-ons defined under the standardised approach for counterparty credit risk (SA-CCR). For the determination of the direction of the positions, the methodology is aligned with the one set out in the technical standards developed in accordance with Article 279a(3), point (b), of the CRR. For relatively simple instruments, such as fixed-rate bonds, floating-rate notes, stocks, forwards, futures, simple swaps and plain vanilla options, a simplified method has also been specified. The Delegated Regulation will enter into force on the twentieth day following its publication in the Official Journal of the European Union.

The European Banking Authority (EBA) has published its spring 2025 risk assessment report alongside a press release, outlining key developments and emerging risks within the European Union/European Economic Area (EU/EEA). The report highlights, among other things:

• Strong capital and liquidity positions across EU/EEA banks, with profitability remaining at historically high levels, although increased uncertainty and financial market volatility could challenge the sustainability of this.
• Rising credit risks, particularly in sectors vulnerable to geopolitical tensions, tariffs and supply chain disruptions.
• Elevated operational risks, driven by increasing cyber threats and a surge in fraudulent activities.
• Shifts in funding strategies, with banks relying more on deposits and secured debt to support asset growth.
• Exposure to climate-related risks, both transitional and physical, with significant variation across institutions and jurisdictions.

The report is also accompanied by a spring risk assessment questionnaire.

The European Supervisory Authorities (the European Banking Authority, European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority) have launched a joint consultation on their joint draft 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. They establish a common framework for designing ESG-related stress testing methodologies and standards, ensuring consistency across the financial sector. They allow authorities to either integrate ESG risks into existing stress testing frameworks or conduct complementary assessments under adverse ESG scenarios, depending on the applicable sectoral legislation. Key elements of the draft guidelines include: (i) detailed guidance on the design and features of ESG stress tests; and (ii) organisational and governance requirements, including sufficient human resources with ESG expertise, data collection and management systems and appropriate timelines for scenario analysis. The guidelines are also designed to be forward-looking, allowing for future methodological advancements and improvements in ESG data availability. The deadline for responses is 19 September, with a public hearing scheduled for 26 August. The guidelines are expected to be finalised by the end of the year and published by 10 January 2026.

Regulation (EU) 2025/1215 of the European Parliament and of the Council of EU of 17 June amending the Capital Requirements Regulation (CRR) in relation to the stable funding factors for securities financing transactions (SFTs) and unsecured transactions with a residual maturity of less than six months, was published in the Official Journal of the European Union. The factors are used to apply the net stable funding requirements under the CRR and, by virtue of article 510(8) of CRR, were due to be increased unless otherwise specified in a legislative act adopted on the basis of a European Commission proposal. However, the current position is instead being maintained to ensure the ongoing efficient functioning of SFTs and collateral markets and to avoid an undue increase in funding costs for credit institutions. The Regulation enters into force on 26 June and applies from 29 June. Under the revised framework, the European Banking Authority will assess and report on the impact of these changes every five years.

The Prudential Regulation Authority (PRA) has published consultation paper CP13/25 proposing amendments to the credit union investment rules to permit investments in credit union service organisations (CUSOs). The proposals would result in changes to the credit unions part of the PRA Rulebook and to supervisory statement (SS) 2/23.

The key proposals are:

• To amend the PRA Rulebook to clarify that credit unions are permitted to invest in CUSOs.
• To introduce a new chapter in SS2/23 to outline the PRA's expectations for credit unions investing in or using CUSOs to manage associated prudential risks.
• To make consequential amendments to chapter 17 of SS2/23 following the PRA's proposed deletion of SS20/15 (on supervising building societies treasury and lending activities).

The deadline for responses is 24 October.

The European Banking Authority (EBA) has published a consultation paper and accompanying press release, on draft regulatory technical standards (RTS) under the Capital Requirements Directive (CRD as amended by CRD IV). The draft RTS specify the minimum information that must be provided to competent authorities when notifying about proposed acquisitions of qualifying holdings in credit institutions. The aim is to standardise the notification process across the EU, ensuring a consistent application against the five assessment criteria set out under CRD.

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The European Banking Authority (EBA) has published final reports on draft regulatory technical standards (RTS) and draft implementing technical standards (ITS) relating to the revised operational risk framework under the Capital Requirements Regulation (CRR) as amended by the CRR3. The draft RTS and ITS will be submitted to the European Commission (EC) for adoption.

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The Basel Committee on Banking Supervision (BCBS) has released a framework for the voluntary disclosure of climate-related financial risks, alongside an updated webpage and press release. This framework, which builds on the November 2023 consultative document and forms part of the BCBS's broader efforts to strengthen the resilience of the banking system to climate-related risk, is designed to operate within the Pillar 3 disclosure framework. It aims to enhance financial stability by providing banks with structured guidance for disclosing both qualitative and quantitative climate-related financial risks. While the BCBS agreed for the framework to be voluntary in nature, jurisdictions may choose to implement it domestically. The framework is structured around a series of qualitative tables and quantitative templates.

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The House of Lords Financial Services Regulation Committee (the Committee) has published a report, alongside a press release, evaluating the progress made by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) in supporting growth in the financial services sector and the wider UK economy. The Financial Services and Markets Act 2023 introduced a secondary objective for the regulators focused on international competitiveness and growth. While the Committee acknowledges that this objective has encouraged regulators to consider the broader impact of their actions, it also finds a prevailing culture of risk aversion by the regulators which undermines the objective. It states this contributes to persistent barriers that limit firms' ability to grow, innovate and compete.

The European Commission (EC) has adopted a Delegated Regulation amending Regulation 575/2013 (CRR) regarding the date of the application of market risk prudential requirements. The new market risk requirements were introduced by CRR amendments made by Regulation (EU) 2024/1623, which marked the completion of the second phase of the implementation of the Fundamental Review of the Trading Book (FRTB), part of the Basel 3 international standards. The application date has already been postponed a year to 1 January 2026. However, a further postponement—which would delay application until 1 January 2027—is being proposed to reflect concerns around delays in Basel 3 implementation by other jurisdictions and the potential impact on EU banks. The Delegated Regulation will be scrutinised by the European Parliament and Council for three months (and this period may be extended by a further three months).

The Council of the European Union has announced it has adopted a proposal to amend the Capital Requirements Regulation (CRR) in relation to the stable funding factors for securities financing transactions (SFTs) and unsecured transactions with a residual maturity of less than six months. The factors are used to apply the net stable funding requirements under the CRR, and, by virtue of article 510(8) of CRR, were due to be increased unless otherwise specified in a legislative act adopted on the basis of a European Commission proposal. The original intention of article 510(8) was to increase the factors in line with the international standards agreed by the Basel Committee on Banking Supervision, but allowing for credit institutions to adapt in time, and calibrate appropriately, for the increase, which would have occurred by 28 June. However, the current position is instead being maintained to ensure the ongoing efficient functioning of SFTs and collateral markets and avoid an undue increase in funding costs for credit institutions. The decision to maintain the current position also intends to bolster the EU's competitive position given the decisions made by other jurisdictions (including the UK and the U.S.) to deviate from the Basel III international standards. The adopted amendments mark the final step in the legislative process and will be published in the Official Journal of the European Union, taking effect from 29 June. Under the revised framework, the European Banking Authority will assess and report on the impact of these changes every five years.

The Bank of England (BoE) has published a feedback statement in response to its December 2024 discussion paper on transitioning to a repo-led operating framework. The discussion paper proposed changes to the Sterling Monetary Framework (SMF), aiming to shift towards a repo-led, demand-driven system for supplying central bank reserves, including proposals to adjust the design of the indexed long-term repo (ILTR) facility.

While there was broad support for the overall design of the framework, concerns were raised in the following areas:

• Predictability of ILTR pricing and allocation. The BoE has maintained that the ILTR's current high-level design, as a variable price, variable size auction, strikes an effective balance between flexibility and responsiveness to changing market conditions and predictability for SMF participants.

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The draft UK Financial Services and Markets Act 2023 (Capital Buffers and Macro-prudential Measures) (Consequential Amendments) Regulations 2025 were laid before the UK parliament and have been published, alongside an explanatory memorandum. This draft instrument has made consequential amendments to legislation following the revocation of the Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014 (S.I. 2014/894), which have been replaced by the new Capital Buffers and Macro-prudential Measures Regulations 2025 (S.I. 2025/653), coming into force on 31 July. The amendments are intended to ensure consistency across the legislative framework and to support the continued effective operation of the capital buffer regime. Specifically, the amendments made by this instrument includes replacing citations to the 2014 Capital Buffers Regulations with references to the new Capital Buffers and Macro-prudential Measures Regulations. It also removes references to provisions in the 2014 Regulations that are not being carried forward, such as those relating to the Global Systemically Important Institutions buffer, which are no longer applicable under the revised framework.

The Capital Buffers and Macro-prudential Measures Regulations 2025 (SI 2025/653) have been laid before the UK parliament and published, together with an explanatory memorandum. The regulations restate relevant provisions of the Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014, which are set to be revoked by the Financial Services and Markets Act 2023 with effect from 31st July. This forms part of the UK's process of replacing a large body of detailed and technical financial services regulation which remains in legislation as assimilated law, following the UK's withdrawal from the European Union.

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The UK Financial Conduct Authority (FCA) has published consultation paper CP25/15 on its proposed prudential regime for cryptoasset firms, also accompanied by an updated webpage. This is intended to be read together with CP25/14 on stablecoin issuance and cryptoasset custody, which we discuss here. In this consultation paper, the FCA has proposed prudential rules and guidance for cryptoasset firms, including those issuing qualifying stablecoins and safeguarding qualifying cryptoassets, including stablecoins. The proposals introduce a new prudential regime to be integrated through two new sourcebooks: (i) COREPRU which will initially apply to firms carrying on regulated cryptoasset activities; and (ii) CRYPTOPRU, which will contain other sector-specific requirements for firms doing regulated cryptoasset activities, with these firms referred to as CRYPTOPRU firms.

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The Economic Governance and EMU Scrutiny Unit has published a study on enhancing EU competitiveness in the banking sector, provided at the request of the European Parliament's Committee on Economic and Monetary Affairs. The study emphasises the importance of a resilient and efficient banking sector for EU competitiveness. Building on its analysis, the study has recommended that, to achieve this, the EU should first prioritise the defragmentation of the banking market, and second, simplify and streamline the prudential framework for banks without compromising resilience.

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The European Banking Authority (EBA) has issued an opinion (dated 12 May) in response to a notification from the Norwegian Ministry of Finance, regarding its intention to recalibrate the risk weight floor for Norwegian retail residential real estate exposures under Article 458 of Regulation (EU) No 575/2013 of the Capital Requirements Regulation. The opinion was published alongside a press release. The measure, initially introduced on 31 December 2020 and extended until 30 June, will result in the risk weight floor increase from 20% to 25% starting from 1 July and remaining in force until 31 December 2026. It applies to all institutions established in Norway that use the Internal Ratings Based approach to calculate capital requirements for relevant exposures, seeking to address systemic risks arising from high household debt and rising real estate prices. The EBA does support the measure but invites the Ministry of Finance to closely monitor and review it to ensure proportionality and avoid overlaps with other regulatory requirements and measures already in place.

The European Banking Authority (EBA) has published an onboarding plan, together with a press release, for large and other institutions to access and submit information to the new Pillar 3 Data Hub (P3DH)—a centralised platform for public disclosures under the revised Capital Requirements Regulation (CRR3). The onboarding plan includes procedural steps for institutions to follow when submitting Pillar 3 information and outlines a phased-in timeline for the process. The initiative will enable users to explore and visualise disclosures across institutions and over time, making it easier for institutions to benchmark themselves against peers and enhancing market discipline. The P3DH information will be available to the public from December. The EBA has also published a list of FAQs.

The UK Prudential Regulation Authority (PRA) has published a consultation paper (CP12/25) setting out Phase 1 of its Pillar 2A review. This first phase review seeks to address the consequential impact of the near-final PRA rules that would implement the Basel 3.1 standards, as well as proposals to improve information, guidance and transparency for firms and options to reduce the reporting burden in the interests of proportionality.

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The European Banking Authority (EBA) has published a consultation paper (CP) proposing amendments to Commission Implementing Regulation (EU) 2024/3172 on the EBA Pillar 3 disclosure framework, aligning it with the requirements of revised Capital Requirements Regulation (CRR3) on ESG-related risks, equity exposures and aggregate exposure to shadow banking entities. The CP also seeks to finalise the implementation of prudential disclosure requirements included in the EU banking package published in 2024. Through the amendments, the EBA aims to improve the transparency and consistency of disclosures while also simplifying the reporting process for institutions. The EBA also intends to provide an updated mapping tool to help institutions align Pillar 3 disclosures with supervisory reporting requirements. The deadline for comments to the consultation paper is 22 August. The final ITS are expected to be submitted to the European Commission by Q4 2025.

The Basel Committee on Banking Supervision (BCBS) had met to discuss a range of initiatives, following the GHOS meeting which took place earlier this month. The discussions focused on:

• Recent market developments and the financial stability outlook for the global banking system.
• Progress on efforts to strengthen supervisory effectiveness following the 2023 banking turmoil. An update on the outcome of this work will be published by the end of the year.
• Comments received to the BCBS consultation on third-part risk management in the banking sector. The BCBS has aimed to finalise principles for third-party risk management by the end of 2025.
• The use of technological innovation to make Pillar 3 disclosures more accessible in machine-readable formats. The BCBS plans to consult on this proposal by the end of the year.
• Prioritising the analysis of financial risks from extreme weather events. The BCBS is also mandated to publish the voluntary climate-related financial risk disclosure framework, which will be released in June.

The European Commission (EC) has published a call for advice to the European Banking Authority (EBA) together with a letter from John Berrigan, Directorate-General of Financial Stability, Financial Services and Capital Markets Union (DG FISMA). The EC has asked the EBA to conduct a second benchmarking exercise on national loan enforcement frameworks from a bank creditor perspective, following the initial exercise conducted in 2019–2020. The benchmarking will assess the efficiency of enforcement procedures in terms of recovery rates, time to recovery and judicial costs. The EBA is expected to deliver a preliminary analysis by July, with the final report due by 31 October.

The UK Prudential Regulation Authority (PRA) has published a final policy statement (PS6/25) alongside a press release, finalising the updates to Supervisory Statement 5/21 (SS 5/21) and branch reporting requirements for international firms operating in the UK. In response to feedback on its July 2024 consultation, the PRA has made several adjustments to the draft policy.

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The European Banking Authority (EBA) has published part 1 of its 2024 annual report, with a press release, reflecting on key regulatory and supervisory achievements under its work programme over the past year. These include: (i) progress in the implementation of the Basel III reforms; (ii) the further integration of ESG considerations into regulatory frameworks, via the issuance of guidelines and reports on ESG risks, greenwashing and scenario analysis; (iii) the assessment of financial stability amid high interest rates and geopolitical uncertainties, supported by two risk assessment reports; (iv) the enhancement of regulatory data infrastructure through the EUCLID platform; (v) the development of oversight and supervisory capacity for firms subject to the EU Digital Operational Resilience Act (DORA) and the EU Markets in Crypto-Assets Regulation (MiCAR); and (vi) an enhanced focus on innovation and consumers (including access to financial services) while preparing for the transition to the new anti-money laundering and counter-terrorist financing (AML/CFT) framework.

The European Banking Authority (EBA) has repealed its guidelines on the specification of types of exposures to be associated with high risk. The decision follows the application of the revised Capital Requirements Regulation (CRR 3) which no longer includes the high-risk exposure class and now only refers to subordinated debt exposures. As a result, the guidelines are no longer applicable.

The European Parliament's Committee on Economic and Monetary Affairs (ECON) has published a draft report (dated 13 May) and motion for a European Parliament resolution on improving access to finance for SMEs and scale-ups. The motion for a resolution has regard to various recent European Commission (EC) communications, including on the Savings and Investment Union (SIU) and competitiveness compass, and other key publications and reports such as the Draghi report and Letta report.

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The European Banking Authority (EBA) has published an updated report, together with a press release, on the monitoring of the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) in the European Union. This report provides updated guidance following the March 2023 banking turmoil, which highlighted the need for enhanced supervision of liquidity aspects resulting from changes in interest rates and related trends in deposit behaviour and concentrations.

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The Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision (BIS), met to discuss the implementation of Basel III and its work on climate-related financial risks. The GHOS members unanimously reaffirmed their expectation to implement Basel III in full and consistently and as soon as possible, noting that approximately 70% of member jurisdictions have now implemented, or will shortly implement, the standards. The GHOS tasked the Committee with continuing to monitor and assess the full and consistent implementation of Basel III. GHOS members also discussed the Committee's proposed Pillar 3 disclosure framework for climate-related financial risks. The Basel Committee will publish a voluntary disclosure framework for jurisdictions to consider. In addition, the GHOS discussed the Committee's broader work on climate-related financial risks and tasked the Committee with prioritising its work to analyse the impact of extreme weather events on financial risks.

The European Commission has adopted Delegated Regulation (EU) 2025/878 amending regulatory technical standards (RTS) on technical details of back-testing and profit and loss attribution requirements, the criteria for assessing the modellability of risk factors, and the treatment of foreign-exchange risk and commodity risk in the non-trading book. The amendments are being made to reflect amendments made to Regulation (EU) No 575/2013 (CRR) which introduced a number of remaining BCBS requirements which are yet to be implemented and some clarifications, including changes to ensure alignment with BCBS international standards. Key amendments include: (i) updated criteria for classifying trading desks and the removal of the aggregation formula for back-testing and profit and loss attribution requirements; (ii) adjusting documentation requirements to support competent authorities on whether institutions can use market data provided by third-party vendors in the assessment of modellability of risk factors; and (iii) clarifying the calculation of own funds requirements for market risk related to non-trading book positions. The regulation shall enter into force on the twentieth day following its publication in the Official Journal of the European Union.

The UK Financial Conduct Authority (FCA) has published findings of its review of smaller asset managers and alternatives business models, together with a press release. The review formed part of the FCA's alternatives supervisory strategy as outlined previously in 2022 in a portfolio letter. The FCA publication includes examples of good practice, to help new market entrants, smaller firms and growing organisations benchmark sound risk management practices and better understand regulatory expectations to manage risks and enhance consumer protection.

The FCA's findings focused on three topics where areas for improvement were identified:

• High-risk investments (HRIs). Most firms offering HRIs were able to clearly categorise their products, while some firms did not have sufficient processes in place to ensure HRIs were only sold to clients if they are appropriate. The findings included specific commentary in relation to financial promotions, product, investor and client categorisation and investor assessments and controls.

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The Prudential Regulatory Authority (PRA) has published a consultation paper (CP/11/25) proposing the deletion of supervisory statement (SS) 20/15, which outlines the supervision of building societies' treasury and lending activities. SS20/15 sets out the PRA's expectations for building societies to comply with the Building Societies Act 1986, the Financial Services and Markets Act 2000, the PRA Rulebook and SS24/15. The PRA conducted a review and concluded that SS20/15 is inconsistent with its broader policy approach and creates a level playing field issue by imposing prescriptive expectations on building societies that banks do not face. In addition, risk management in the building societies sector has advanced since SS20/15 with the PRA now having various tools to supervise firms. As a result, the PRA is proposing to withdraw SS20/15.

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Commission Delegated Regulation (EU) 2025/855 amending regulatory technical standards (RTS) laid down in Delegated Regulation (EU) 2021/931 as regards the specification of the formula for calculating the supervisory delta of call and put options mapped to the commodity risk category, was published in the Official Journal of the European Union (OJ). The RTS specify the formula for calculating the supervisory delta of call and put options mapped to the commodity risk category. This is based on the approach taken in the Basel Framework (CRE52) and for the purposes of Article 279a(3) of the EU Capital Requirements Regulation (CRR) in the standardised approach for counterparty credit risk. CRR III expanded the scope of Article 279a(3) to cover commodity risk, which required amendment to the RTS. The regulation will enter into force on the twentieth day following its publication in the OJ.

The European Banking Authority (EBA) has issued a consultation paper on draft regulatory technical standards (RTS) amending Delegated Regulation (EU) 2023/206, supplementing Regulation (EU) No 575/2013 (CRR). The EBA is mandated by Article 124(11) of the CRR to draft RTS which specify: (i) the types of factors to be considered by national authorities in assessing the appropriateness of the risk weights for exposures secured by immovable property; and (ii) the conditions to be considered for the assessment of the appropriateness of minimum loss given default values for exposures secured by immovable property. The proposed amendments aim to align the RTS with the revised CRR (CRR3) framework. The deadline for comments on the consultation is 30 May. The final report on the RTS is due by 10 January 2026.

The Basel Committee on Banking Supervision (BCBS) has published a revised version of its principles for the management of credit risk, which serve as guidelines for banking supervisory authorities to assess banks' credit risk management processes. The updated principles, published alongside a press release, reaffirm the guidelines first established in 2000 while making limited technical amendments to align with the current Basel Framework and recent Committee guidance. The principles focus on 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 update to the guidelines follows a review mandated by BCBS in July 2023, confirming the ongoing relevance of the credit risk principles, and incorporates feedback from a consultation held earlier this year (for background, please see our update). The update is not intended to change the content of the principles or cover new topics.

The Prudential Regulation Authority (PRA) has issued a consultation paper (CP10/25) and draft updates to the supervisory statement 3/19. The consultation aims to enhance supervisory expectations on the management of climate-related risks by banks and insurers due to the growing impact of climate change. This consultation was also announced in a speech given by David Bailey, Executive Director of Prudential Policy at the BoE, at the Climate Financial Risk Forum. The proposals cover: Governance. Enhancing existing governance expectations in SS3/9, clarifying the applications of these policies for climate-related risk and emphasising the board's responsibility to set and own the overall business risk appetite for climate. The proposals include new expectations to ensure alignment between a firm's strategy and meeting its own climate targets that have been adopted, and on setting the internal controls environment.

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The European Parliament's Committee on Economic and Monetary Affairs (ECON) has published a draft report on safeguarding and promoting financial stability amid economic uncertainties. The draft report emphasises the importance of financial stability as a cornerstone of the EU's economic resilience, particularly in the face of geopolitical uncertainty, heightened market volatility and structural changes. It calls for a well-integrated Capital Markets Union (CMU) to enhance investment flows and economic resilience while balancing these benefits with adequate safeguards to mitigate potential risks. There are several macro-financial risks identified, including rising sovereign debt levels, exposure to external shocks and vulnerabilities in the non-bank financial intermediation (NBFI) sector. To address these concerns, it stresses the need for robust crisis preparedness mechanisms, enhanced financial supervision, effective coordination between macro-prudential supervisors, access to granular data and an ability to respond quickly to emerging risks. It also advocates stronger cooperation with international financial bodies to manage cross-border risks and ensure a coordinated response to financial instability.

The European Banking Authority (EBA) has released an ESG dashboard, accompanied by a press release, establishing a comprehensive framework to improve the monitoring of climate-related risks within the EU/EEA banking sector. This tool provides centralised access to climate risk indicators and benchmarks, enhancing the assessment and oversight of both transition and physical climate-related risks based on data disclosed by banks through their Pillar 3 ESG disclosures in line with Commission Implementing Regulation (EU) 2021/637. The dashboard includes indicators related to: (i) climate-related transition risk, (ii) physical risk, (iii) exposures secured by immovable property collateral, and (iv) the alignment of EU and EEA banks with the EU Taxonomy. The EBA plans to regularly update and evolve the indicators over time and reflect ongoing revisions to the Pillar 3 disclosure templates in future updated versions.

The UK Financial Conduct Authority (FCA) has published a consultation paper (CP25/10), along with a press release and an updated webpage, proposing to remove all references to the UK Capital Requirements Regulation (UK CRR) from the definition of regulatory capital, also known as 'own funds', that applies to FCA investment firms within MIFIDPRU 3. The aim is to reduce regulatory burden and enhance clarity, making the framework more accessible for investment firms and easier for them to apply the requirements. The proposals do not change the rules about how much capital firms must hold but focus on simplifying and consolidating the existing rules about what qualifies as regulatory capital. The changes would reduce the volume of legal text by 70% with clear application for investment firms. The FCA also outlines its plan to establish a more integrated approach to prudential regulation by simplifying the own funds rules and incorporating them into the FCA Handbook. This involves: (i) consolidating requirements into MIFIDPRU 3, (ii) removing provisions that are only relevant for banks, and (iii) making requirements clearer and more accessible. A draft of the instrument that would make the proposed changes to MIFIDPRU and the Glossary, the Definition of Capital for Investment Firms Instrument 2025, is set out in Appendix 1 to CP25/10. The deadline for comments is 12 June, with final rules expected to be published in H2 2025 and the new framework expected to come into force on 1 January 2026.

The European Commission (EC) has adopted a Delegated Regulation supplementing the Capital Requirements Directive IV (CRD IV), containing regulatory technical standards (RTS) specifying the general conditions for the functioning of supervisory colleges, and repealing Commission Delegated Regulation (EU) 2016/98. Article 116 of CRD IV sets out provisions requiring consolidating supervisors to establish colleges of supervisors to facilitate certain supervisory tasks and to ensure appropriate coordination and cooperation with relevant third-country supervisory authorities. In addition, the competent authorities supervising an institution with significant branches in other Member States are, pursuant to Article 51(3) of CRD IV required to establish and chair colleges of supervisors where Article 116 is not applicable. Article 51(4) of the CRD IV empowers the Commission to adopt delegated acts specifying the general conditions for the functioning of colleges of supervisors. This Delegated Regulation repeals and replaces Delegated Regulation 2016/98 to account for amendments to CRD IV (e.g., in relation to the authorisation of certain financial holding companies and mixed financial holding companies, the establishment of intermediate EU parent undertakings, and removal of investment firms from the scope of CRD IV). It also includes new articles on the exchange of information with the observers of the supervisory college, specifically with resolution colleges and anti-money laundering (AML) and counter-terrorism financing (CFT) colleges, to enhance cooperation and information exchange with these authorities. The Council of the EU and the European Parliament will now scrutinise the Delegated Regulation. The Delegated Regulation enters into force on the twentieth day following its publication in the Official Journal of the European Union.

The European Commission (EC) has adopted a Delegated Regulation supplementing the Capital Requirements Regulation (No 575/2013) (CRR), containing regulatory technical standards (RTS) of the conditions and indicators that the European Banking Authority (EBA) is to use when determining extraordinary circumstances under Articles 325az(5) and 325bf(6) of the CRR have occurred. In accordance with Articles 325bf(6) and 325az(5) of the CRR, as amended by CRR 3 (Regulation EU) 2024/1623), competent authorities may permit institutions to derogate from certain requirements of the regulatory framework for the use of internal models, or apply a softer version of those requirements, where, in the opinion of the EBA, a situation of extraordinary circumstances has occurred. In accordance with Article 325az(9) of the CRR, the occurrence of extraordinary circumstances shall be determined by the EBA, which must issue an opinion to that effect. The Delegated Regulation contains RTS which set out a framework for the EBA to follow when identifying a situation of extraordinary circumstances. The RTS specify that such circumstances could be recognised where there is a situation of significant cross-border financial market stress, or a major regime shift associated with a similar level of stress (e.g., a liquidity crisis), that can render the outcome of the back-testing and profit and loss attribution requirements inappropriate. The RTS also contain a non-exhaustive list of indicators that the EBA is to use to assess whether a situation of extraordinary circumstances has occurred. The Council of the EU and the European Parliament will now scrutinise the Delegated Regulation. The Delegated Regulation will enter into force on the twentieth day following its publication in the Official Journal of the European Union.

The UK Prudential Regulation Authority (PRA) has published a policy statement on the identification and management of step-in risk (PS5/25). The policy statement provides feedback on responses to consultation paper (CP) 23/23 which, among other things, proposed to: (i) introduce new rules where firms are required to develop their own step-in risk policies and procedures based on the relevant Basel Committee on Banking Supervision's (BCBS) guidelines; and (ii) introduce an accompanying supervisory statement also based on the BCBS guidelines, detailing factors that firms are expected to consider when identifying potential step-in risk and in deciding, where necessary, on potential mitigating action. 

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The Bank of England (BoE) has updated its stress testing webpage, announcing it has published two stress test scenarios for use by banks and building societies that are not participants in its concurrent stress testing exercise. These scenarios have been drawn from the 2025 Bank Capital Stress Test scenario published on 24 March to support concurrent stress testing of the largest UK banks and building societies. The scenarios serve as a template and severity benchmark for firms to support their own internal capital adequacy assessment process (ICAAP) stress testing scenario design processes. The intention behind publishing two different scenarios is to encourage firms to evaluate the type, characteristics and severity of stress their business model may be vulnerable to when designing their own stress testing scenarios. The BoE refers firms to the Supervisory Statement on the ICAAP and the supervisory review and evaluation process (SREP) for guidance on the role of stress testing within the framework for setting banks' and building societies' capital requirements. The BoE explains that firms should use the scenarios as a starting point to build and accurately calibrate their own scenarios under Pillar 2, noting that any single scenario designed for firms with diverse business models and risks has its limitations. Therefore, it expects firms to select scenarios that robustly challenge their business and, ultimately, be responsible for creating their own scenarios to test resilience.

The UK Prudential Regulation Authority (PRA) has announced it is withdrawing the modification by consent (MbC) for third country covered bonds in the Liquidity Coverage Ratio (LCR) part of the PRA Rulebook, which it had previously offered on 8 April. The decision to pause the process and withdraw the MbC is due to the PRA receiving several technical comments and requests for clarification, which the PRA seeks to consider and address appropriately. Once the process is complete, the PRA will clarify its approach. The MbC was intended to modify Article 11 (1)(d)(ii) of the LCR part of the PRA Rulebook, to allow firms the inclusion of certain third country covered bonds in their Level 2A high-quality liquid assets (HQLA) up to a maximum value, determined at 31 January 2025 (the reporting date). During the pause in the process, firms do not need to amend their approach to recognising third country covered bonds under the Liquidity Coverage Ratio (CRR) and Liquidity (CRR) Parts of the PRA Rulebook.