Alongside its Financial Services Growth and Competitiveness Strategy, the UK government has laid before Parliament, a draft of the Financial Services (Overseas Recognition Regime Designations) Regulations 2025 (the ORR Regulations) alongside an explanatory memorandum, and published Overseas Recognition Regimes Guidance (the ORR Guidance). The ORR is the UK's regime for providing "recognition" of a regulatory regime in an overseas jurisdiction, allowing cross-border financial services into the UK. It is similar to the EU's equivalence and the U.S.'s comparability regimes.

The ORR Regulations, which are intended to take effect on 28 November, bring together in a comprehensive regime the existing ORRs under the Short Selling Regulations 2025 and the Insurance and Reinsurance Undertakings (Prudential Requirements) Regulations 2023 and the equivalence decisions that were inherited when the UK left the EU.

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The UK Financial Ombudsman Service (FOS) has published a final policy statement and accompanying press release, confirming that the FOS is changing the interest rate applied to compensation awards to a time-weighted average of the Bank of England base rate plus one percentage point, applied on a simple basis. This change is being made as a result of feedback to the joint FOS and UK Financial Conduct Authority call for input published in June, which conveyed the view that the 8% interest rate does not reflect prevailing market conditions. This change will not impact complainants able to demonstrate actual loss (where the loss is considered in the primary compensation award) nor late payments (i.e. payment made after the deadline date set by the FOS for paying compensation, where the 8% interest rate is being retained in respect of the post-determination period). The FOS is aiming to implement the changes as of 1 January 2026 but will confirm the date in due course. The FOS also confirms that it has taken on board industry feedback on the potential complexity of having dual rates and will be developing and implementing calculators for both the existing and new rates, plus guidance, which will be developed in advance of the implementation date.

HM Treasury has published an updated version of the Banking Act 2009 Special Resolution Regime Code of Practice. The code sets out resolution tools and powers available under the Banking Act 2009 for authorities to use in certain circumstances. This latest version has been updated to reflect three developments: (i) the removal of FCA solo-regulated firms from the UK resolution regime; (ii) the introduction of the UK's expanded resolution regime for central counterparties (CCPs), meaning the Code no longer applied to CCPs; and (iii) the Bank Resolution (Recapitalisation) Act 2025, where the code has a new chapter on the recapitalisation payment mechanism.

The HM Treasury (HMT), the UK Financial Conduct Authority (FCA) and the UK Prudential Regulation Authority (PRA) have published consultations on various proposals to reform the UK Senior Managers and Certification Regime (SMCR). The proposals fall into two phases. Phase 1 comprises amendments to the FCA and PRA rules which the regulators can implement without legislative changes, meaning firms can benefit from these changes more quickly. Phase 2 will cover reforms requiring primary legislation to be amended, with a view to giving the regulators more flexibility to develop a proportionate regime.

For phase 1, the regulators have collaborated to produce consistent proposals in relation to areas for improvement arising from the feedback received in response to the regulators' 2023 joint discussion paper. Key proposed rule changes include amendments to the 12-week rule so that it is more practicable, streamlining and reducing duplication in the course of the application process, and increasing the thresholds for categorisation as an enhanced SMCR firm.

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The Bank Resolution (Recapitalisation) Act 2025 (Commencement) Regulations 2025 have been made, which brings into force certain provisions of the Bank Resolution (Recapitalisation) Act 2025 from 16 July, in parallel with the Prudential Regulation Authority (PRA) confirming concomitant changes to its rules also taking effect on 16 July, in its policy statement. The Act makes provision for recapitalisation costs in relation to the special resolution regime under the Banking Act 2009, and in particular, on how the regime is applied to smaller banks which do not hold a minimum requirement for own funds and eligible liabilities (MREL). It expands the statutory functions of the Financial Services Compensation Scheme (FSCS) so that it is required to provide funds to the Bank of England on request, which can be used to meet certain costs from the use of the resolution regime to manage the failure of a bank, building society or other PRA-authorised investment firm.

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HM Treasury (HMT) and the UK Prudential Regulation Authority (PRA) have published updates with proposed changes to the expected implementation of Basel 3.1. The changes relate to delaying the implementation of the new internal model approach under the Fundamental Review of the Trading Book (FRTB-IMA) by a year, and to the advanced standardised approach (ASA) – specifically, the treatment of collective investment undertakings (CIUs) and the application of the residual risk add-on (RRAO) component.

The PRA consultation on adjustments to the Basel 3.1 market risk framework makes four proposals, accompanied by draft updates to rules and guidance set out in various appendices.

• Proposal 1, which proposes to delay FRTB-IMA implementation to 1 January 2028. All other aspects of Basel 3.1 would proceed on 1 January 2027, as would the implementation of the Strong and Simple capital regime. This proposal recognises the challenges and operational complexity faced by firms with varying business models across multiple jurisdictions. In the interim period, firms with existing IMA permissions would retain those permissions, and positions not in scope of those permissions would move to the ASA. Otherwise, positions not in scope of existing IMA permissions would move to the new standardised approaches (whether ASA or simplified standardised approach, in accordance with the near-final market risk rules and related supervisory statement previously published).

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HM Treasury (HMT) has published a consultation paper setting out proposed reforms to the UK Financial Ombudsman Service (FOS), in tandem with the joint UK Financial Conduct Authority and FOS consultation paper (CP25/22) on modernising the financial redress system (with accompanying press release). The consultations were also announced by the Chancellor of the Exchequer in her speech delivered at Mansion House on 15 July, where she referred to the delivery of the most significant reform to the FOS since its inception.

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HM Treasury has announced the launch of a permanent mortgage guarantee scheme, aimed at supporting first-time buyers and home movers across the UK. The scheme enables access to 91–95% loan-to-value mortgages, allowing buyers to purchase a home with deposits as low as 5%. Effective from July, the scheme provides participating lenders with a government-backed guarantee, insuring them against a portion of potential losses on those qualifying mortgages. The scheme rules, published on the same day, set out the eligibility criteria, lender obligations and terms under which the government guarantee applies. The announcement accords with other significant mortgage market developments as referred to in the Chancellor's Mansion House speech, including the Financial Policy Committee's announcement regarding the loan-to-income limit on mortgage lending which the UK regulators are implementing.

HM Treasury has published a letter, dated 1 July, from the Chancellor of the Exchequer to the governor of the Bank of England (BoE) setting out the government's recommendations to the BoE's Financial Market Infrastructure Committee (FMIC). Noting the BoE's primary objective of protecting and enhancing UK financial stability, and as regulator of central counterparties (CCPs) and central securities depositories (CSDs), its secondary objective of facilitating innovation, the Chancellor states that the BoE should engage constructively with incumbent and new entrant financial market infrastructures (FMIs) to encourage responsible innovation, provided it aligns with regulatory objectives, and actively facilitate innovation across the BoE's policymaking. The BoE should also ensure that the regulatory burden on firms is rationalised to enable FMIs to offer new products and services without lowering regulatory standards, including as the regulatory framework for FMIs is updated (for example, the latest proposed updates to the CCP regulatory regime ). In addition, the UK must continue to engage effectively in international forums. The FMIC must respond to the recommendations within a year, setting out the actions taken or reasons for not taking certain steps.

The UK government has published its Financial Services Growth and Competitiveness Strategy, a ten-year plan to drive growth and competitiveness in the UK financial services sector. The strategy follows a call for evidence issued in November 2024 and has been published in tandem with the Leeds Reforms and the UK Chancellor of the Exchequer's speech, delivered at Mansion House on 15 July. The strategy covers five areas of focus: (i) delivering a competitive regulatory environment; (ii) harnessing the UK's global leadership of financial services; (iii) embracing innovation and leveraging the UK's fintech leadership; (iv) building a retail investment culture and delivering prosperity through UK capital markets; and (v) setting the UK′s financial services sector up with the skills and talent it needs. The strategy encompasses a wide range of proposals and initiatives announced on 15 July, with key take-aways for the financial sector covered in our webinar delivered on 16 July.

The UK Financial Conduct Authority (FCA) has published a statement on its work to date reforming the UK capital markets, and what lies ahead in terms of consultations and developments expected later this year and in 2026. The statement notes the recent work carried out by the FCA in respect of the financial markets, and refers to those market reforms highlighted in the UK Chancellor of the Exchequer's speech delivered at Mansion House on 15 July, including the landmark reforms to the advice guidance boundary on the new regulated activity of targeted support, proposals to modernise the redress system and consultations on reforming the Senior Managers and Certification Regime.

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HM Treasury has published a press release confirming a significant package of measures aimed at making the UK the prime destination for financial services by 2035, referred to as the "Leeds Reforms". The Leeds Reforms cover a broad range of financial services sub-sectors, and include proposals and initiatives to unlock retail investment, remove frictions to investment activity in the UK, free capital for investment in the UK, and promote innovation. The Reforms formed the foundation of the Chancellor of the Exchequer's speech delivered at Mansion House on 15 July, in conjunction with the UK's Financial Services Growth and Competitiveness strategy.

The UK Chancellor of the Exchequer has delivered a speech at Mansion House, London which heralded a large number of UK regulatory reforms with significant impact on the financial services sector. These were announced alongside the publication of the UK's Financial Services Growth and Competitiveness Strategy and the Leeds Reforms. In her speech, the Chancellor has confirmed the government's commitment to "meaningful reform" of the UK's ringfencing regime, further reiterated in the Financial Services Growth and Competitiveness Strategy document which stated that HM Treasury's (HMT) report of its review of the ringfencing regime is expected in early 2026. HMT's overview of the call for evidence outcome in relation to the Financial Services Growth and Competitiveness Strategy, also confirms the government's intention to reform the ringfencing regime with a view to supporting growth.

HM Treasury has published a policy paper and two related statutory instruments (SI) on its approach to updating the UK's regulatory framework for central counterparties (CCPs). The Financial Services and Markets Act 2023 gave the Bank of England (BoE) powers to make rules for CCPs, envisaging that the CCP requirements in the UK's European Market Infrastructure Regulation (UK EMIR) would be replaced and restated partly in new UK legislation or in the BoE's new CCP rules.

The draft Central Counterparties (Amendment) Regulations 2025 restate certain provisions in the UK European Market Infrastructure Regulation on the authorisation and supervision of CCPs, requirements applicable to CCPs and provisions regarding overseas CCPs, including "location regulations". These changes will be made by amending the Financial Services and Markets Act 2000 and the Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges, Clearing Houses and Central Securities Depositories) Regulations 2001 as well as the draft Financial Services (Overseas Recognition Regime Designations) Regulations 2025.

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The Bank of England (BoE) has published a suite of publications in its capacity as the UK's resolution authority, covering significant updates in relation to its approach to setting the minimum requirement for own funds and eligible liabilities (MREL) and preferred resolution strategies, and its approach to assessing resolvability under the resolvability assessment framework (RAF).

On MREL and resolution strategies, the BoE has made a substantive update to the MREL framework, publishing a policy statement confirming the changes and an updated Statement of Policy which will be effective from 1 January 2026. As a high-level summary, key areas of change are set out below.

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The Financial Stability Board (FSB) has published a letter from Andrew Bailey, Governor of the Bank of England, who was appointed chair of the FSB from 1 July. In the letter, the chair confirms his commitment to the FSB's work in the interest of financial stability and comments that global cooperation is key for ensuring resilience in the global financial system. He also confirms delivery of the FSB's report on non-bank financial intermediation (NBFI) leverage, the FSB workplan on non-bank data, and the updated FSB climate roadmap, as requested by the G20 presidency. In addition, the chair lists three priorities for his term: (i) enhancing surveillance capabilities to ensure surveillance keeps pace with developments in the markets and new technologies, including communicating with stakeholders outside the FSB membership; (ii) focusing on the key areas of NBFI policy implementation, private finance-related vulnerabilities, and the role of stablecoins for payment and settlement; and (iii) strengthening the FSB's effectiveness to prevent regulatory arbitrage and market fragmentation, including by considering areas capable of meaningful improvement as identified by the G20 implementation monitoring review process. The FSB chair is appointed for a term of three years, renewable once.

The Financial Stability Board (FSB) has published its 2025 progress report on the implementation of its 2021 Climate Roadmap. The report provides a factual overview of progress made across four key areas: disclosures, data, vulnerability analysis, and regulatory and supervisory practices. Its publication does not imply that all G20 members endorse every aspect of the initiatives described. In addition to reviewing past progress, the report outlines the FSB's medium-term strategy for addressing potential climate-related financial risks, continuing its focus on the same four areas listed below.

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The Financial Services and Markets Act 2023 (Commencement No. 10 and Saving Provisions) Regulations 2025 have been made. The Regulations serve to implement legislative changes required in relation to the Mansion House reforms announced in relation to the UK overseas recognition regime (UK ORR), the UK Capital Requirements Regulation (UK CRR), and sustainable finance. The regulations will revoke on 28 November legislative provisions relevant to the framework for determining equivalence as on-shored post-Brexit, in alignment with the date on which the Financial Services (Overseas Recognition Regime Designations) Regulations 2025 are expected to come into force – a key step in establishing the UK's regime for providing "recognition" of a regulatory regime in an overseas jurisdiction. On UK CRR, the regulations revoke parts of the UK CRR, in respect of which significant prudential and resolution-related reforms were announced this week, with the relevant provisions coming into force on 1 January 2026. As well as the specific revocations in relation to the UK ORR, the UK CRR and sustainable finance, the regulations include savings provisions to preserve certain directions, decisions, applications and permissions under the current regimes, to ensure they continue to have effect once the revocation provisions have come into force.

The UK statutory instrument (The Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025) implementing the necessary legislative changes for progressing buy-now, pay-later (BNPL) regulation was made, accompanied by an explanatory memorandum. The draft secondary legislation was originally laid in May alongside HM Treasury's (HMT) response to its 2024 consultation. The instrument brings interest-free BNPL agreements within the regulatory perimeter by amending the scope of agreements which are capable of being "exempt agreements" under article 60F of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. In addition, it provides a carve-out from the regulated activity of credit broking for merchants offering BNPL agreements except in the case of domestic premises suppliers.

The instrument came into force on 15 July for certain limited purposes, including to enable the UK Financial Conduct Authority and the UK Financial Ombudsman to make rules and give guidance in relation to the changes. For other purposes, the instrument comes into force on 15 July 2026 which is in line with the expected timetable for BNPL regulation. You may also like to read our client bulletin, Buy-Now, Pay Later – The Journey Continues (and the end is nearly in sight) for further detail on HMT's response to the 2024 consultation on BNPL products.

Regulation (EU) 2025/1355 of the European Central Bank (ECB) adopted on 2 July has been published in the Official Journal of the European Union. This Regulation recasts and replaces Regulation (EU) No 795/2014, updating the oversight framework for systemically important payment systems (SIPS) in the euro area. It strengthens the ECB's supervisory role by aligning it with international standards, particularly the CPMI-IOSCO Principles for Financial Market Infrastructures. The Regulation applies to both large-value and retail payment systems, operated by either central banks or private entities. However, Eurosystem-operated SIPS are exempt from certain requirements (such as those relating to governance, wind-down planning, capital and liquidity buffers, collateral, and investment risks) where equivalent internal ECB rules already apply.

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The UK Financial Conduct Authority (FCA) has published the 2025 outcomes report of the open finance sprint, held in March. The Sprint brought together stakeholders to develop practical data-sharing use cases across four key areas: financial wellbeing, financial growth, financial resilience, and digital identity and verification. The report captures participants outputs and does not represent the FCA's official position. Key themes for a trusted and effective open finance ecosystem included:

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The European Securities and Markets Authority (ESMA) has published its final report, updating the 2021 guidelines on outsourcing to cloud service providers in line with the Digital Operational Resilience Act (DORA). The 2021 guidelines were designed to assist firms in identifying, managing and monitoring risks associated with cloud outsourcing. However, since the implementation of DORA in January, which covers the same scope including ICT third-party risks, these guidelines are no longer needed for most financial entities. However, DORA does not apply to certain depositories under the Alternative Investment Fund Managers Directive (AIFMD) and the Undertakings for Collective Investment in Transferable Securities Directive (UCITSD). Therefore, ESMA revises the scope of the 2021 guidelines to apply only to these specific depositaries that fall outside DORA's coverage. According to ESMA, the content of the guidelines has not substantively changed. The updated guidelines will now be translated into all official EU languages and published on ESMA's website. National competent authorities must notify ESMA within two months of publication whether they comply or intend to comply with guidelines.

The European Commission has adopted a Delegated Regulation amending Delegated Regulation (EU) 2023/2772, introducing targeted amendments, referred as a "quick fix", to postpone the application of certain disclosure requirements under the European Sustainability Reporting Standards. These changes aim to reduce the reporting burden and enhance legal certainty for companies already subject to sustainability reporting for financial year 2024 ("wave one" companies). The amendments allow these companies to continue omitting certain disclosures, such as anticipated financial effects of sustainability-related risks, among others, for financial years 2025 and 2026. Additionally, larger wave one companies (with over 750 employees) will now benefit from the same phase-in provisions previously reserved for smaller entities. These changes are set out in an annex to the Delegated Regulation, which replaces Appendix C of ESRS 1 and provides a revised list of phased-in disclosure requirements. The amendments address the gap left by the "stop-the-clock" Directive, which deferred reporting obligations for wave two and three companies but excluded wave one. A broader ESRS review is underway, targeting simplification and alignment, with completion expected by financial year 2027.

The European Securities and Markets Authority (ESMA) has published its final guidelines under the Markets in Crypto-Assets Regulation (MiCAR) specifying the criteria for assessing the knowledge and competence of staff at crypto-asset service providers (CASPs). Aimed at enhancing investor protection and trust in the crypto-asset sector, the guidelines: (i) outline the minimum professional qualifications and experience required for staff providing information or advice on crypto-assets; (ii) set out the organisational requirements for assessment, maintenance and updating of knowledge and competence; and (iii) address specific risks associated with the crypto-asset market, such as high volatility and cybersecurity, by setting out the assessment criteria for staff knowledge and skills. The guidelines will be translated into all EU languages and will apply six months after publication. Competent authorities must notify ESMA within two months of publication whether they comply or intend to comply with guidelines.

The European Securities and Markets Authority (ESMA) has issued a public statement addressed to crypto-asset service providers (CASPs) that offer both regulated and unregulated services under the Markets in Crypto-Assets Regulation (MiCAR). ESMA calls on CASPs to avoid creating investor confusion about the regulatory protections that apply to unregulated products and services. To address this risk, ESMA reminds CASPs of their obligation to act fairly, professionally and in the best interests of their clients, to avoid any conduct that can mislead or confuse them. In the statement, ESMA also cautions against CASPs using their regulated status as a marketing tool to promote unregulated services, as this can further contribute to investor misunderstanding. To mitigate these risks, ESMA encourages CASPs to adopt all necessary measures and provides a practical table of "dos and don'ts". This includes measures such as maintaining clear and effective communication with clients at every stage of the sales process, ensuring marketing materials are fair, clear and not misleading and disclosing the absence of MiCAR protections for unregulated services, among others.

The European Banking Authority (EBA) has published three consultation papers under Directive 2013/36 (CRD IV), as amended by Directive 2024/169 (CRD VI), relating to the regulatory requirements for third country branches (TCBs). In particular relating to cooperation and colleges of supervisors for TCBs, the booking arrangements that TCBs are to apply, and instruments available for TCBs for unrestricted and immediate use to cover risks or losses.

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The Proceeds of Crime (Money Laundering) (Threshold Amount) (Amendment) Order 2025 has been made and published with an accompanying explanatory memorandum. The legislation increases the financial threshold under sections 339A(2) and 339A(6A) of the Proceeds of Crime Act 2002 (POCA) from GBP1,000 to GBP3,000. These thresholds apply to two key exemptions for regulated businesses, such as banks, electronic money institutions and payment institutions, among others set out in schedule 9 of POCA, enabling them to (i) operate a customer account; or (ii) return funds when terminating a customer relationship, without committing a money laundering offence, even where criminal property is suspected (i.e., property believed to represent the proceeds of crime), provided the amount involved is below the threshold. The change aims to reduce the volume of low-value Defence Against Money Laundering (DAML) Suspicious Activity Reports (SAR), which in 2024 accounted for 23,000 submissions but only 0.1% of assets denied. A DAML SAR can be submitted for transactions above the threshold, which means a criminal offence will not be committed by the regulated entity, although the transaction is frozen pending the outcome of the review of the transaction or the lapse of three months. A review of the exit and pay away exemption introduced via the Economic Crime and Corporate Transparency Act 2023 is scheduled for 2026.

The Basel Committee on Banking Supervision (BCBS) has released a horizon-scanning report examining the interconnections between banks and non-bank financial intermediaries (NBFIs). The report discusses trends shaping bank-NBFI linkages, identifies key activities linking banks and NBFIs, covering leverage, clearing, market-making and underwriting services, and discusses the potential systemic risks arising from these interconnections. Drawing on case studies and stylised scenarios, the report demonstrates how failure in NBFIs could affect the banking system and broader financial stability. The report also identifies data gaps and limitations, emphasising the importance for granular, timely and high-frequency data to effectively monitor these interconnections. The BCBS intends to continue its assessment of these interconnections, with particular attention to synthetic risk transfers, to better understand their associated benefits and potential risks.

The European Securities and Markets Authority (ESMA) has published a peer review report assessing the authorisation and supervision of a crypto-asset service providers (CASPs) under the Markets in Crypto-Assets Regulation (MiCAR). While the peer review was conducted in Malta and sets out specific recommendations addressed to the Malta Financial Services Authority (MFSA), ESMA also makes broader recommendations which apply to all national competent authorities (NCAs).

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The UK Financial Conduct Authority has announced plans to review its client categorisation rules to unlock more investment opportunities for wealthy investors and support capital markets. The review will focus on maintaining proportionality and supporting economic growth by modernising the client classification regime, providing greater clarity and confidence for firms and forming part of a broader strategy to enhance the competitiveness of the UK's financial services sector. The FCA will consult on the elective professional client categorisation later this year.

The UK Financial Conduct Authority (FCA) has published its 2024/25 report on the secondary competitiveness and growth objective (SCGO), outlining the progress made since July 2024 and setting out its forward-looking priorities for the remainder of the reporting period. The SCGO, introduced under the Financial Services and Markets Act 2023, requires the FCA to publish annual reports for the first two years following the objective's introduction. This is the second such report and is accompanied by two annexes. Annex 1 provides a six-month progress update on the FCA's response to the Prime Minister's letter of December 2024, which called on UK regulators to identify actions that could unlock economic growth. In its response, the FCA outlined around 50 initiatives aimed at supporting innovation, streamlining regulation to reduce regulatory burden and boosting market access. The annex tracks progress against those commitments, several of which align with pledges made in the UK Government's March policy paper. Annex 2 presents the FCA's performance against a suite of published metrics designed to assess how its rules and guidance have contributed to advancing the SCGO. The FCA also published its response to the HM Treasury's (HMT) 2024 remit letter, reaffirming its commitment to embedding the SCGO into its five-year strategy. The letter outlines the FCA's efforts in strengthening the UK's capital markets, supporting innovation and technology and ensuring that regulatory reform is aligned with sustainable growth and consumer protection.

The European Banking Authority (EBA) has published a consultation paper proposing amendments to Commission Delegated Regulation (EU) No 241/2014 on the timing for the application for prior permission to reduce own funds and eligible liabilities instruments under Articles 77, 78 and 78a of the Capital Requirements Regulation (CRR). The assessment timeline to process the applications to reduce own funds and eligible liabilities instruments had been extended the from three to four months, to accommodate more complex evaluations by competent and resolution authorities. However, following a monitoring period and in light of feedback from institutions, the EBA now considers that authorities have gained sufficient experience to process applications more efficiently. As such, the EBA proposes reverting to a three-month timeframe. References to the simplified requirement for liquidation entities, with an MREL set at the loss absorption amount, are also deleted from the RTS. This is to reflect amendments made by Directive 2024/1174 to the Bank Recovery and Resolution Directive, which exclude liquidation entities from the requirement to obtain the prior permission of the resolution authority to affect the call, redemption, repayment or repurchase of liabilities that would meet the eligibility requirements for the MREL. The deadline for comments on the consultation is 9 October following which the EBA will submit the final draft RTS to the European Commission for adoption.

The Bank of England's Financial Policy Committee (FPC) has published its July financial stability report alongside the record of its 27 June meeting. After assessing the risks to the UK financial system, the FPC reports that global financial markets remain vulnerable, with elevated risks stemming from geopolitical tensions, trade fragmentation and sovereign debt pressures.

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The Bank of England and the Prudential Regulation Authority (PRA) have released a letter to PRA-regulated firms and relevant financial market infrastructure (FMIs) outlining the thematic findings from the 2024 Cyber Stress Test (CST24). PRA-regulated firms and relevant FMIs are encouraged to consider these findings in the implementation of their operational resilience policies.

The CST24 involved providers and users of wholesale services modelling the operational, financial and confidence impacts of suspected, confirmed and longer cyber-attack scenarios affecting transaction settlement.

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The Prudential Regulation Authority (PRA) has announced it will be reviewing the Loan to Income (LTI) flow limit requirements, following the Financial Policy Committee's (FPC) recommendation, as stated in its July financial stability report. In line with this, the PRA is offering an interim modification by consent, allowing lenders to temporarily disapply the current rule that limits new residential mortgage loans with an LTI ratio of 4.5 or above to 15% of total new lending. Firms opting into the modification must: (i) within one month, submit detailed information on their business plan (including the percentage share of high LTI mortgages expected to be approved in each of the four quarters), risk appetite and risk management frameworks which include details of any planned increase in high LTI lending; and (ii) on a monthly basis, notify the PRA on the volume and share of high LTI mortgage approvals and completions within the previous month, with the first submission covering the preceding three months. Once granted, the modification will remain effective until 30 June 2026, or earlier if the rule is amended or withdrawn as a result of the PRA's review.

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The Financial Stability Board (FSB) has published its final report on leverage in non-bank financial intermediation (NBFI) which highlights the significant role of NBFI leverage in recent financial stress episodes and provides policy recommendations to mitigate associated financial stability risks. The recommendations build on existing implemented policy measures by authorities and the work of standard-setting bodies (SSBs) and relate specifically to identification and monitoring, NBFI leverage in core financial markets, counterparty and credit risk management, addressing incongruencies in regulatory treatment and cross border cooperation.

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The European Banking Authority (EBA) has published a consultation paper on proposed revisions to its product oversight and governance (POG) guidelines for retail banking products. The EBA considers the update necessary in light of its June 2024 greenwashing report, which identified growing risks across the financial sector and to align with recent legislative amendments to the Capital Requirements Directive (CRD) and Capital Requirements Regulation (CRR) concerning Environmental Social Governance (ESG) risk management.

The revised guidelines aim to strengthen safeguards against greenwashing and ensure that financial institutions maintain high standards of conduct when offering products with ESG features. The EBA proposes a proportionate and targeted approach, adjusting a limited set of existing requirements related to the product's subject matter, manufacturers internal controls, the target market, distribution channels and information flows for the manufacturer's arrangements. A small number of consequential updates are also proposed. The deadline for comments on the consultation is 9 October, with the final guidelines expected to be published in Q1 2026 and effective from 1 December 2026. A virtual public hearing is scheduled for 11 September.

The European Securities and Markets Authority (ESMA) has published official translations of its guidelines on supervisory practices to prevent and detect market abuse under the Markets in Crypto-Assets Regulation (MiCAR). The guidelines, initially released in April through a final report, outline general principles to promote high-quality and effective supervision of market abuse in crypto-assets, alongside more targeted practices to support national competent authorities (NCAs) in detecting and preventing such abuse. The guidelines will now apply from 9 October, being three months after their publication in all official EU languages. NCA's shall confirm by 9 September whether they comply or intend to comply with the guidelines. If an NCA does not comply or does not plan to comply, it must notify ESMA, providing the reasons for its position. ESMA will subsequently publish this information on its website.

The UK Prudential Regulation Authority (PRA) and the UK Financial Conduct Authority (FCA) have published joint final policy statement 11/25, finalising amendments to the PRA Rulebook and FCA Guidance (FG25/4) on the de minimis threshold for the Loan to Income (LTI) flow limit in mortgage lending. The LTI flow limit seeks to ensure that mortgage lenders limit the number of new residential mortgage loans made with an LTI ratio at, or greater than, 4.5 to no more than 15% of their total number of new mortgage loans per annum. This final policy statement follows the April consultation proposing to raise the threshold so that the LTI flow limit only applies to lenders issuing residential mortgages in aggregate exceeding GBP150 million per four rolling quarters (an increase from the current threshold of GBP100 million). The policy statement explains that the updated recommendation addresses the impact of inadvertent regulatory tightening due to growth in the UK economy since the threshold was first implemented. The aim is to reduce regulatory burdens on smaller lenders, allowing them to extend more residential mortgages before being subject to the LTI flow limit. The final amendments to the PRA Rulebook and FCA guidance remain consistent with the consultation proposals. The new rules and updated guidance are implemented through the PRA Rulebook: CRR Firms, Non-CRR Firms: Housing (Amendment) Instrument 2025 and will take effect on 11 July.

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 Commission (EC) has adopted a Delegated Regulation amending a Delegated Regulation it adopted on 10 June, to introduce a review clause requiring the EC to independently assess countries that may pose a threat to the EU financial system, even if they are not publicly identified by the Financial Action Task Force (FATF). The Delegated Regulation adopted on 10 June amended the list of high-risk third countries laid down in Commission Delegated Regulation 2016/1675. The EC states that countries that are not publicly identified as being subject to calls for action or increased monitoring by the FATF might still pose a threat to the integrity of the EU financial system. Where membership of such countries to the FATF is suspended because of gross violations of core principles upon which that standard-setter is built, the threat to the EU financial system is likely to increase. The proposed review clause would require the EC to complete an autonomous assessment of whether such countries are high-risk third countries as referred to in Article 9 of Directive 2015/849 by 31 December.

The UK Financial Conduct Authority (FCA) has published its feedback to the interim working group's final report on credit information market governance, which was developed in response to the FCA's Credit Information Market Study (CIMS). The CIMS final report proposed a new industry governance model named the Credit Reporting Governance Body (CRGB). An industry working group (IWG) was tasked with designing recommendations for the CRGB's structure and remit, to include strengthening self-governance in the credit information market, improving consistency and quality in data sharing and ensuring broader representation and transparency in decision-making. The FCA supports the IWG's recommendations and suggests areas for further consideration during implementation.

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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 Financial Conduct Authority (FCA) has published finalised guidance on the treatment of Politically Exposed Persons (PEPs) under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. The guidance is intended to help firms apply a proportionate and risk-based approach to managing money laundering risks associated with PEPs, their relatives and close associates.

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The UK Financial Conduct Authority (FCA) has announced the launch of its new and improved FCA Handbook website. The website, currently in a beta version, retains all existing features but seeks to offer improved navigation, facilitates better understanding of rule connections and make it easier to compare different versions of FCA Handbook text to determine what has been added or deleted over time. While in beta phase, the FCA will continue to test and refine the website, with both the current and new websites accessible during the testing phase. The full rollout is expected later this year, ensuring continuous updates to rules and guidance throughout the transition. The FCA has also published a how-to guide and FAQs.

The European Commission has adopted a Delegated Regulation amending Delegated Regulation (EU) 2021/2178 to simplify reporting requirements for environmentally sustainable activities under the EU Taxonomy Regulation. It also amends Delegated Regulations 2021/2139 and 2023/2486 to simplify certain technical screening criteria for determining whether economic activities cause no significant harm to environmental objectives.

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The UK Financial Conduct Authority (FCA) has published consultation paper CP25/20 on the systematic internaliser (SI) regime for bonds and derivatives. The consultation builds on the November 2024 final policy statement which introduced new bond and derivative transparency rules for trading venues and discussed the future of the SI regime. Given the removal of the pre-trade transparency from SI's obligations in bonds and derivatives, the FCA is now consulting on the SI regime and continued alignment between the transparency and SI regimes, along with additional proposals aimed at enhancing the functioning of UK markets.

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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 Securities and Markets Authority (ESMA) has announced the selection of Ediphy (fairCT), a fintech company, as the first consolidated tape provider for bonds in the EU. The decision marks a significant step towards establishing consolidated tapes in the EU, contributing to the development of the Savings and Investment Union and enhancing capital markets in Europe. Ediphy (fairCT), was selected following a thorough assessment process against the criteria listed in the EU Markets in Financial Instruments Regulation. The firm met all eligibility requirements and achieved the highest overall score on the award criteria. ESMA now invites Ediphy (fairCT) to apply for formal authorisation without delay, after which it will operate the CTP for bonds for five years under ESMA's direct supervision.

HM Treasury (HMT) has published a policy note and draft statutory instrument on the ancillary activities exemption, which is an exemption (originally introduced in the revised EU Markets in Financial Services Directive) from investment firm authorisation requirements for firms that trade commodity derivatives or emission allowances as an ancillary activity to their main business. The exemption is intended for non-financial firms such as energy and other commodity trading firms which are active in both physical trading and financial instrument trading. Currently, firms must determine their eligibility for the exemption and ancillary activities test (AAT), which is burdensome and expensive for firms.

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