The Financial Conduct Authority has published a report on assessing and reducing the risk of Money Laundering Through the Markets. Money Laundering Through the Markets is the use of capital markets to launder criminally generated cash so that it appears legitimately generated. The report renews the risk assessment of Money Laundering Through the Markets and risks documented in the FCA's June 2019 thematic review. It also sets out the findings of the FCA follow-up review, which it believes will assist brokers and other firms operating in the capital markets to continue to improve their controls and ensure they meet the required standards. The FCA's report provides further insights through practical case studies and examples of good and poor practice.

Overall, the FCA saw good practice and progress in several financial crime systems and controls across larger and smaller firms. However, relevant firms needed to more rigorously tackle the issues raised in the previous thematic review. Key challenges observed include: (i) transaction monitoring; (ii) knowledge of the U.K. Financial Intelligence Unit Money Laundering Through the Markets suspicious activity reporting glossary code; (iii) information sharing; and (iv) documenting customer risk-assessment methods in enough detail. The FCA would like firms to continue reviewing their systems, controls, Money Laundering Through the Markets awareness and training. Moving forward, the FCA will use its supervisory work, to make sure firms are considering Money Laundering Through the Markets risks, and the points raised in this report to drive improvements and reduce risk across the markets. It will also encourage firms and third-party providers to innovate more, to tailor transaction monitoring systems and alerts to capital markets.

The EU Platform on Sustainable Finance has published a report on the development and assessment of corporate transition plans. The PSF identifies core elements for evaluating transition plans and makes recommendations to the European Commission on how best to improve the effectiveness of its policy framework and support the market's provision and access to transition finance. In its report, the PSF states that companies should clearly communicate to financial market participants any gaps and how they will be addressed. Financial market participants should then use credible and robust transition plans to help inform their investment and lending decisions, supporting companies in enhancing their plans over time.

The key recommendations addressed in the report include:

• developing sectoral transition pathways for high-emitting sectors at the EU level, including technology roadmaps;
• providing guidance for selecting scenarios that can be used for credible science-based corporate target setting and transition planning;
• creating criteria for qualifying targets as credible and science-based;

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The Financial Stability Board has published its work program for 2025. Priority areas of work for 2025 include:

• supporting global cooperation on financial stability: the FSB will continue monitoring global financial stability developments and the implications of emerging financial innovation, and conduct in-depth analysis on vulnerabilities in non-bank financial intermediation and climate change;
• enhancing the resilience of NBFI: while preserving its benefits, the FSB workstream includes finalizing policy recommendations on NBFI leverage, developing and beginning implementation of a medium-term workplan to address issues relating to non-bank data availability, use and quality and analyzing the resilience and functioning of the repo market;
• harnessing the benefits of digital innovation while containing its risks: the FSB will produce a thematic peer review on implementation of its crypto-asset recommendations, a report on how financial authorities can monitor AI adoption and assess related vulnerabilities, and finalize the format for incident reporting exchange;

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The Financial Conduct Authority and Payment Systems Regulator have set out the next steps for open banking, focusing on variable recurring payments. In the statement the regulators explain the benefits of variable recurring payments, which includes helping consumers take more control of their regular payments, reducing the risk of unexpected expenditure. It will also offer businesses greater competition to current payment methods and could help reduce processing fees. As part of the next steps to deliver variable recurring payments, Open Banking Limited will establish an independent central operator to coordinate how variable recurring payments are made. The FCA and PSR will support this endeavor by working with industry and trade associations and are looking forward to significant progress being made in 2025. The regulators are also working with industry and trade associations to progress development of the commercial arrangements underpinning both variable recurring payments and use of open banking for e-commerce.

The Single Resolution Board has published a revised version of the operational guidance on operational continuity in resolution. The guidance provides further clarifications to banks on how to implement SRB expectations for resolvability related to: (i) service identification and mapping; (ii) assessment of operational continuity risk; and (iii) mitigating measures, such as having adequately documented, resolution-resilient contracts, appropriate management information systems, and governance arrangements.

The guidance was originally published in 2021, the new revisions follow the development of new frameworks, such as the Digital Operational Resilience Act, and new provisions, such as the European Banking Authority's Guidelines on improving resolvability. The SRB notes that some of the additions will, in practice, depend for their application on measures currently pending.

The Retained EU Law (Revocation and Reform) Act 2023 (Consequential Amendments) Regulations 2025 have been published, together with an explanatory memorandum. They will make amendments to secondary legislation (including assimilated direct legislation) in consequence of the various provisions of the Retained EU Law (Revocation and Reform) Act 2023 (REUL Act). The Regulations do not make any policy changes, but serve to clarify the statute book. Most amendments relate to changes of terminology resulting from renaming EU-derived law, making express textual amendments to relevant references – in particular replacing "retained" with "assimilated". The Regulations come into force on February 27, 2025.

The Prudential Regulation Authority has published a Dear CEO letter outlining its supervisory priorities for 2025 for domestic banks and international banks and large investment firms. The PRA's key areas of focus for 2025 include:

• Risk management, governance and controls: firms' senior management, and boards need to ensure that their organizations have robust governance, risk management and controls frameworks in place that are adaptive and resilient, leveraging stress and scenario analyses to inform risk management, strategy and business planning. Firms are expected to have these frameworks in place across businesses, risk and internal audit functions, commensurate with the firm's business model. The PRA also notes that counterparty credit risk will remain an area of focus.
• Data risk: firms must continue to improve their ability to aggregate data to ensure that they have the information necessary to support holistic risk management, robust board decision-making, and accurate regulatory calculations. Throughout 2025 the PRA will continue to assess data accuracy.

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The Prudential Regulation Authority has published a letter (dated January 15, 2025) from Sam Woods, PRA Deputy Governor and CEO, to the Government setting out the actions the PRA has taken, and will take, with a view to enhancing economic growth. Actions already addressed by the PRA include:

• simplifying the prudential regime for small banks;
• proposing further amendments to remuneration requirements to enhance competitiveness; and
• simplifying regulatory data-reporting from banks.

The PRA also considers that broader changes could simplify and rationalize the U.K. regulatory regime in other ways, such as identifying potential overlaps between PRA's governance and disclosure requirements and those of legislation or other regulators. In the PRA's view, rationalizing the U.K. financial services regulators' "have regards" principles could lead to a simplification of the length and complexity of the analysis underpinning new regulations with consequential benefits for the cost of regulatory engagement by firms and efficient use of resources by the PRA. The principles relate to the number of principles regulators are required to "have regard" to and to which they are held to account for when exercising their powers.

HM Treasury has announced that the Chancellor will increase engagement with financial services leaders to strengthen plans to grow the economy. Over the coming months, the Chancellor plans to host a series of Industry Forums with key sub-sector leaders in banking, insurance, and asset management to elicit views on delivering long-term growth. HMT explains that the Industry Forums, alongside extensive further engagement at official and ministerial levels, will ensure that industry and senior stakeholders are closely involved in the development of the upcoming Financial Services Growth and Competitiveness Strategy so that it tackles the key issues that matter most to the industry. The first meetings of the Industry Forums will run throughout January and February, reconvening ahead of the Government's publication of the Financial Services Growth and Competitiveness Strategy as part of the Industrial Strategy later this year. The Government will continue to work closely with industry following the publication of the Strategy, to ensure that it is implemented effectively. The Strategy, set to be published in the spring, aims to develop policies that foster growth in the financial services sector.

The Financial Conduct Authority has published a letter (dated January 16, 2025) from Nikhil Rathi, FCA Chief Executive, sent to the Government, setting out its work to ensure that it is supporting the Government's U.K. growth mission. The letter responds to Government's December call for regulators to support growth. In the letter, the FCA explains that to achieve the vast reforms, the FCA will need to take greater risks and prioritize resources. The Government's support and acceptance of this approach is required, including an acceptance that there will be failures because it will not be possible to prevent all harm under an approach based on risk-based choices. The FCA emphasizes that this acceptance needs to be shared across all accountability mechanisms, including in Parliament, and states that metrics for "tolerable failures" within the overall system would assist.

The areas addressed in the letter include:

• unlocking capital investment and liquidity: in addition to the planned reforms for the wholesale markets, the FCA will fast-track a review of capital requirements for specialized trading firms to improve liquidity;
• accelerating digital innovation to enhance productivity: the FCA makes a number of suggestions on how to do this including introducing a new open banking payment method and developing open finance, the removal of the £100 contactless payment limit to enhance consumer flexibility and level the playing field with digital wallets. The FCA also suggests that government action could help by introducing digital identity authentication, enhancing the quality of the Companies House database to reduce costs for business, and digitalizing court systems to reduce delays;

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The Financial Conduct Authority has published a letter addressed to the House of Lords Financial Services Regulation Committee on motor finance commission specifically addressing the court of appeal judgement in Johnson v FirstRand Bank Ltd (London Branch) (t/a MotoNovo Finance) [2024] EWCA Civ 1282. The letter responds to a letter the FCA received from the Committee in December.

In the letter, the FCA sets out the relevant FCA rules and principles concerning both discretionary and fixed commissions, both prior to and following the amendments introduced in 2021. The FCA also confirms that it did not seek legal advice on the specific issue of the relevance of disinterested or fiduciary duties with regard to formulating (and amending) the rules providing for commission disclosure and the ban on discretionary commission arrangements. The FCA concludes by explaining that once the Supreme Court has settled the law in this area, it will consider if any intervention is needed, which will include reviewing its rules to take account of the court's judgment.

The Prudential Regulation Authority has announced that, in consultation with HM Treasury, it has decided to delay the implementation of Basel 3.1 in the U.K. by one year until January 1, 2027. The PRA explains that it has decided to delay the implementation to allow more time for greater clarity to emerge about implementation plans in the U.S. and to take into account competitiveness and growth considerations. While the PRA now expects to implement on January 1, 2027, it will continue to monitor developments. The transitional periods in the rules will be reduced to ensure the date of full implementation remains on January 1, 2030. The PRA is also immediately pausing until further notice the data collection exercise intended to inform an off-cycle review of firm-specific Pillar 2 capital requirements. Also in light of the delay to implementation, the end-date of the time window to join the Interim Capital Regime, previously set as February 28, 2025, will be moved back. The PRA will provide further information in due course.

The European Banking Authority has announced that it has repealed its guidelines on major incident reporting under the revised Payment Services Directive due to the application of harmonized incident reporting under the Digital Operational Resilience Act. DORA introduced harmonized incident reporting requirements that apply to financial entities across the banking, securities/markets, insurance, and pensions sectors, including most payment service providers. DORA also disapplies the incident reporting requirements under PSD2 for those PSPs. As such, the EBA has repealed the guidelines to simplify the reporting of major incidents by PSPs and provide legal certainty to the market. The EBA reminds firms that incident reporting requirements under PSD2 still apply for other types of PSPs, such as post office giro institutions and credit unions, that are not covered by DORA. The EBA notes that those PSPs that are still subject to PSD2 incident reporting requirements may be subject to national incident reporting requirements, regardless of the existence of the EBA guidelines. Competent national authorities willing to retain the incident reporting approach included in the EBA guidelines for those PSPs can continue to do so under their national legal framework or supervisory measures.

The European Supervisory Authorities have published a joint report on the feasibility of further centralization of the reporting of major ICT-related incidents by financial entities to competent authorities. The ESAs' joint report explores the potential for further centralization through the establishment of a single EU hub assessing the feasibility of three different models: (i) the baseline model; (ii) a model with enhanced data sharing arrangements; and (iii) a fully centralized model (i.e., an EU hub). The report considers the potential burden and cost reductions, as well as the efficiency and effectiveness gains that each model would bring for cross-sector supervisory practices.

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The European Banking Authority has published a consultation paper on its draft guidelines on ESG scenario analysis. For institutions using the internal ratings-based approach for calculating the own funds requirements for credit risk, these guidelines are intended to specify the way in which ESG risks, and in particular, physical and transition risks stemming from climate change, are taken into account in the scenarios used for credit risk internal stress testing. They: (i) specify the different uses institutions should make of scenario analysis and propose a progressive and proportionate approach to incorporating scenario analysis into the institution management system; (ii) provide guidance on what is required before undertaking a scenario analysis and more specifically on the criteria for setting scenarios and identifying the transmission channels for translating climate risks into financial risks; and (iii) specify the distinctive features to be taken into account when conducting a climate stress test in addition to the requirements set out in the guidelines on institutions' stress testing and the use of scenarios to help define and adjust the institution's strategy and test the robustness of its business model to a range of plausible futures. These guidelines complement the EBA guidelines on the management of ESG risks, published earlier this month. The EBA will hold a virtual public hearing on the consultation on March 17, 2025, and the deadline for comments is April 16, 2025. The EBA plans for the guidelines to be finalized by the second half of 2025, and apply from January 11, 2026 to institutions other than small and non-complex institutions and, at the latest, from January 11, 2027 for SNCI.

The Financial Stability Board published a report containing a framework and analytical toolkit to assess climate-related vulnerabilities. The report introduces an analytical framework that the FSB will use to trace how physical and transition climate risks can be transmitted and amplified by the global financial system. The framework builds on the existing FSB Financial Stability Surveillance Framework and focuses on assessing climate-related vulnerabilities holistically, particularly from a cross-border and cross-sectoral point of view. The accompanying toolkit to the framework comprises three categories of metrics to monitor climate-related vulnerabilities from a forward-looking perspective. These are: (i) proxies to provide early signals on potential drivers of transition and physical risks; (ii) exposure metrics to gauge the extent of direct and indirect exposures in the real economy and the financial system; and (iii) risk metrics to quantify the impacts for financial institutions and the system as a whole. The FSB notes that while these metrics are already used by some FSB members domestically, various methodological and data challenges need to be overcome for them to be used for global monitoring. The FSB notes that the framework and toolkit are live documents, to be refined as understanding evolves on how climate-related vulnerabilities affect financial stability and as methodological and data issues are resolved. As such, the FSB will continue to develop the framework by operationalizing the toolkit and conducting in-depth analyses of specific climate vulnerabilities that may have global financial stability implications.

The Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions published a final report on examples of effective practices for streamlining variation margin in centrally cleared markets. The report sets out eight effective practices which aim to provide examples of how standards set out in the CPMI-IOSCO Principles for Financial Market Infrastructures, as supplemented by the relevant guidance, can be met.

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The Basel Committee on Banking Standards and International Organization of Securities Commissions published a final report on streamlining variation margin processes and initial margin responsiveness of margin models in non-centrally cleared markets. The report follows on from the BCBS-CPMI-IOSCO September 2022 review of margining practices.

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The Basel Committee on Banking Standards, Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions has published a final report on transparency and responsiveness of initial margin in centrally cleared markets. The report sets out ten final policy proposals, with the aim of increasing the resilience of the centrally cleared market ecosystem in times of market stress. The proposals are also designed to improve market participants' understanding of centrally cleared initial margin calculations and potential future margin requirements.

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The U.K. Financial Conduct Authority has published two new webpages relating to consumer redress liabilities. The first webpage provides an update for firms on what they should and should not do to tackle polluting behavior and how to meet their redress liabilities. Polluter behavior is described as when a firm or individual takes steps that leave behind potential or actual redress liabilities generated in the course of their regulated activities. To prevent and address this behavior, the FCA expects firms to have adequate financial resources to be able to provide redress as part of complying with Principle 4 (Financial prudence) and the threshold conditions. While there will be occasions when firms are genuinely unable to meet their liabilities, they should not seek to leave their liabilities behind and should provide robust reasons for the actions and decisions they intend to take and be prepared to evidence those. The webpage provides further information on what firms should expect from the FCA if they are required to provide consumer redress, which includes having to take further action to avoid polluter behavior or seek a voluntary requirement that aims to mitigate ongoing harm to consumers or markets. The second webpage explains how to identify and report polluting behavior. The FCA provides six main examples of polluting behavior: (i) basic phoenixing; (ii) lifeboating; (iii) fronting; (iv) sales at an undervalue; (v) restructuring; and (vi) proceeds of sale not being applied to redress. Regulated firms, financial advisers, compliance firms and other financial advice organizations are encouraged to speak out and report to the FCA any firm or individual suspected of providing poor advice, products or services, or attempting to phoenix to avoid their liabilities to consumers. Firms are also expected to carry out thorough due diligence and compliance checks on all advisers they recruit to ensure no poor advice has been given previously.

The Financial Services and Markets Act 2000 (Designated Activities) (Supervision and Enforcement) Regulations 2025 have been published, alongside an explanatory memorandum. The Regulations amend the Financial Services and Markets Act 2000 to provide for the U.K. Financial Conduct Authority's supervision and enforcement of requirements imposed by the designated activity regime. The Regulations enable the FCA to supervise designated activities by gathering information and launching investigations into persons carrying out designated activities, and to enforce its designated activity rules by publicly censuring or imposing financial penalties on persons that breach them. It also sets out the procedures that will apply to the giving of directions by the FCA relating to designated activities. In the first instance, the Regulations apply this supervision and enforcement framework to the Consumer Composite Investments (Designated Activities) Regulations 2024 and the Short Selling Regulations 2025. The stated intention is that the framework would also be extended to any future designated activities. The Regulations were made on January 13, 2025, and came into effect on January 14, 2025.

The Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2025 has been published alongside an explanatory memorandum. The Order amends the Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) Order 2014 (SI 2014/1960) and the Financial Services and Markets Act 2000 (Excluded Activities and Prohibitions) Order 2014 (SI 2014/2080) to adjust the regulatory regime applying to ring-fenced bodies. Amendments include the introduction of a secondary threshold to exempt retail-focused banking groups from the regime, architectural reforms, removing the geographic restrictions on where ring-fenced banks can operate, and the introduction of a four-year transition period for complying with the ring-fencing regime where ring-fenced banking groups acquire another bank that is not subject to ring-fencing. The Order also expands the list of permitted products and services, including to facilitate investments by ring-fenced banks in SMEs and introduces a de minimis threshold for excluded activities. The order was made on January 13, 2025, and comes into force on the twenty-second day after the day on which it is made. On January 15, 2025, a correction slip to the order was published, confirming that the coming into force date cross-heading which initially read "11 February 2025" should read "4 February 2025".

The Short Selling Regulations 2025 were made and published on legislation.gov.uk, alongside an explanatory memorandum. The regulations replace assimilated law (including the U.K. Short Selling Regulation) and establish a new legislative framework for the regulation of short selling, creating designated activities for short selling, giving the U.K. Financial Conduct Authority rulemaking powers related to those activities, and powers to intervene in exceptional circumstances. The instrument restates core definitions relevant to the short selling regime and grants the FCA broad rulemaking powers, including the ability to set requirements like restrictions on uncovered short selling. It also restates the requirement for firms to notify the FCA of net short positions above 0.2% of issued share capital. HM Treasury retains the power to amend this threshold, but the FCA may require notifications at a different threshold in exceptional circumstances. Regulations 1–6, 8, 9 and 11 came into force on January 14, 2025. The remaining provisions came into force on the same date to the extent required to enable the FCA to give guidance or issue statements of policy. So far as they are not already in force, the remaining regulations will come into force on the day on which the revocation of the U.K. SSR comes into force under FSMA 2023.

HM Treasury published the Government's response to its call for evidence on the pension fund clearing exemption, which exempts pension funds from the requirement to clear certain derivative contracts via a central counterparty. In November 2023, HMT published the call for evidence requesting input from industry stakeholders to inform the Government's review of the exemption, which aimed to determine a long-term approach. The response document provides a breakdown of the key themes raised by the 26 respondents to the call for evidence. Following analysis of the responses and engagement with U.K. regulatory authorities on the issue, the Government has decided that the exemption should be maintained for the longer-term. The Government will now take forward legislation to ensure that the exemption does not expire on June 18, 2025 as currently scheduled, and to remove any further time limit on the exemption. The Government will, however, keep this policy under review in coordination with the U.K. regulatory authorities.

The U.K. Financial Conduct Authority published a portfolio letter setting out its supervisory strategy for credit reference agencies and credit information service providers. In the letter, the FCA sets out its priority areas for the next two years, which relate to:

• embedding the consumer duty—the FCA has concerns that the process of raising a data dispute or complaint can be difficult for consumers to navigate. As such the FCA intends to undertake work to understand complaint practices across the portfolio and what actions firms have taken under the duty to improve outcomes. The FCA will also continue to assess how firms are meeting the price and value outcome;
• cyber resilience—firms should have a forward-looking outlook and remain vigilant to technological advances and emerging threats to be able to anticipate potential system vulnerabilities. Firms should review the systems and controls, oversight, and monitoring arrangements that they currently have in place to ensure they are sufficient to identify weaknesses and vulnerabilities;

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The U.K. Government has published its response to the House of Commons Science, Innovation and Technology Committee report on the governance of AI. The Government welcomes the findings of the Committee and agrees with the Committee that specific AI legislation is required. As such, it intends to bring forward AI legislation, following a period of consultation, which will include how the most powerful AI models will be captured. The Government also recognizes that, beyond placing requirements on the development of the most powerful AI models, there are a broad range of issues associated with AI development and deployment which require regulatory oversight. Hence, the Government will continue to work with regulators to implement pro-innovation regulatory initiatives, including through the newly established Regulatory Innovation Office. On the AI Safety Institute, the Government explains that its intention is for legislation to put the AI Safety Institute on a statutory footing to strengthen its role leading voluntary collaboration with AI developers and leading international coordination of AI safety. The Government plans to publish a consultation shortly, setting out its legislative proposals to establish binding regulations on the companies developing the most powerful AI models. On January 13, the Government also announced that it will be taking forward the recommendations made in the independent report of Matt Clifford, the AI Opportunities Action Plan.

The European Banking Authority has published its final guidelines on the management of ESG risks. The guidelines set out requirements for institutions for the identification, measurement, management, and monitoring of ESG risks, including through plans aimed at ensuring their resilience in the short, medium, and long term. The guidelines will apply from January 11, 2026, except for small and non-complex institutions for which the guidelines will apply at the latest from January 11, 2027.

The guidelines specify requirements regarding the internal processes and ESG risk management arrangements that institutions should have in place in accordance with the CRD VI. They also specify the content of plans to be prepared by institutions with a view to monitoring and addressing the financial risks stemming from ESG factors, including those arising from the adjustment process towards the objective of achieving climate neutrality in the EU by 2050. The EBA explains that these plans will support the preparedness of institutions for the transition and should be consistent with transition plans prepared or disclosed by institutions under other pieces of EU legislation.

The Financial Conduct Authority has published a research note on a pilot study into bias in natural language processing (NLP). The research note presents the results of a technical investigation into biases in word embeddings. There are three main findings from the investigation, namely that:

• No individual measurement technique can fully capture bias in embeddings, but bias can be seen more clearly when a mix of techniques is used.
• Even when multiple methods are used, tackling bias is still complicated. The research note highlights that existing tools have limits, and bias is often shaped by context, language, and social factors.
• Techniques that try to reduce bias, like Hard Debiasing, do not always work as well as anticipated. While they can lower bias in some areas, they often reduce the overall quality of the model. The research note explains that future research could involve testing applications that utilize embeddings—for instance, studying the impact of biased embeddings on downstream outcomes for consumers. The authors of the research note also believe that mitigation of bias in contextual and sentence embeddings would also be a worthy avenue of enquiry.

The Financial Services and Markets Act 2000 (Collective Investment Schemes) (Amendment) Order 2025 has been published, alongside an explanatory memorandum. The Order includes a new paragraph 22 to the Schedule to the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001 (the "CIS Order"). The Schedule to the CIS Order specifies the kinds of arrangements which do not amount to a collective investment scheme. The new paragraph clarifies that arrangements for qualifying crypto-asset staking do not amount to a collective investment scheme. The aim of the instrument is to provide clarity to firms so that they are able to offer staking services to their U.K. customers without being subject to the collective investment scheme rules for this activity. The U.K. government has considered the need for an appropriate degree of consumer protection from the risks associated with the marketing of staking products and considers that this protection is delivered by communications on staking arrangements provided in compliance with the requirements of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 and relevant FCA rules and guidance. The Order comes into force on January 31, 2025.

For more information on the issues and developments relating to fintech, see our blog A&O Shearman on fintech and digital assets.

The EU Platform on Sustainable Finance has published a draft report on activities and technical screening criteria to be updated or included in the EU taxonomy, with a related call for feedback. The draft report, prepared by the Platform on Sustainable Finance's technical working group, is a deliverable required under the EU Taxonomy Regulation. Responses to the call for feedback may be submitted until February 5, 2025.

The draft report contains preliminary recommendations relating to: (i) the review of the criteria and analysis for the EU Taxonomy Climate Delegated Act; (ii) new activities mandated by the European Commission; (iii) new activities mandated by the European Commission but not completed; and (iv) further recommendations for climate change adaptation.

The Platform on Sustainable Finance explains that the aim is to gather feedback and evidence from a wider set of stakeholders to improve the draft criteria and make them more robust and usable. However, the Platform on Sustainable Finance emphasizes that the call for feedback is not an official Commission consultation.

The Financial Markets Standards Board has published its updated final statement of good practice for front office supervision of wholesale traded markets. The statement of good practice sets out 15 good practice statements, grouped under five themes, to support firms with their approach to supervision of market and client-facing activities. The statement of good practice represents an update to FMSB's original 2017 publication on front office supervision and includes new guidance to help firms meet challenges to supervision that have emerged since then amid evolving regulation, new working practices, and technological change.

Significant updates include good practice guidance around:

• Establishing clearer support for the role of a supervision framework.
• Clarifying the concepts of supervision, responsibility and controls.
• Specifying the roles and responsibilities of a supervisor and the standards expected.
• Providing clarity around reasonable spans of supervision.

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The European Banking Authority has published a consultation paper on its draft Regulatory Technical Standards on the calculation and aggregation of crypto-exposure values under the Capital Requirements Regulation 3. The RTS specify the technical elements necessary for institutions to calculate and aggregate crypto-asset exposures in relation to the prudential treatment of such exposures. The RTS aim to address implementation aspects and ensure harmonization of the capital requirements on crypto-assets exposures by institutions across the EU.

The draft RTS also further develop the relevant capital treatment for credit risk, counterparty credit risk, market risk and credit valuation adjustment risk for 'asset reference tokens' and 'other' crypto-assets exposures and align, to the extent possible, the capital treatment with the elements specified in the Basel standard on prudential treatment of crypto-asset exposures.

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The Prudential Regulation Authority has published a policy statement on amendments to resolution assessment reporting and disclosure dates. The statement provides feedback to responses the PRA received to its consultation paper (CP12/24) on the same topic. It also contains the PRA's final policy which provides greater flexibility over the timing of Resolution Assessment report submissions and disclosures by moving from fixed two-year cycles to a periodic basis. The final policy takes effect on January 10, 2025.

The PRA's final policy is reflected in: (i) amendments to the Resolution Assessment Part of the PRA Rulebook, which can be found in Appendix 1 of the statement; and (ii) an updated supervisory statement (SS4/19) on resolution assessment and public disclosure by firms, found in Appendix 2.

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The European Securities and Markets Authority has published its final report on guidelines on stress test scenarios under the Money Market Funds Regulation. The MMF Regulation requires ESMA to annually update the guidelines, taking into account the latest market developments. The final report includes:

• An additional explanation on the way to report the results of the macro systemic shocks.
• Updated guidelines and risk parameters, so that managers of MMFs have the information needed to fill in the relevant reporting template.

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The European Securities and Markets Authority has launched the first selection procedure for the Consolidated Tape Provider for bonds. The CTP aims to enhance market transparency and efficiency by consolidating trade data from various trading venues into a single and continuous electronic stream. ESMA believes that this consolidated view of market activity should help market participants to access accurate and timely information and make better-informed decisions, leading to more efficient price discovery and trading.

Entities interested in applying are encouraged to register and submit their requests to participate in the selection procedure by February 7, 2025. ESMA will assess the received requests against the exclusion and selection criteria and will invite the successful candidates to submit their application. ESMA intends to adopt a reasoned decision on the selected applicant by early July. The successful applicant will be selected to operate the CTP for a period of five years, and invited to apply for authorization with ESMA without undue delay. Once authorized, the CTP will be supervised by ESMA. Further information about the process is available on the dedicated webpage.

The European Central Bank has published a statement on its framework for assessing capital buffers of other systemically important institutions. In the statement, the ECB announced that it will enhance the floor methodology used to assess capital buffers for O-SIIs so that it also takes into account the systemic importance of O-SIIs for the banking union as a whole. This will lead to a more consistent treatment of O-SIIs across Member States participating in the banking union. The effect of these changes will be that for each O-SII at the highest level of consolidation within the banking union, the O-SII buffer should be no less than the higher of the minimum buffer rates implied by the banking union perspective and the national perspective. Moreover, the enhanced methodology will contribute to deepening financial integration by reducing the current disparity between capital requirements for domestic and cross-border activities within the banking union.

The ECB began using the enhanced floor methodology to assess O-SII buffers notified by national authorities from January 1, 2024, with the enhanced methodology being fully phased in as of January 1, 2028.

The European Securities and Markets Authority has published a consultation on draft guidelines on internal controls for benchmark administrators, credit rating agencies, and market transparency infrastructures (which include trade repositories, data reporting services providers, and securitization repositories). The guidelines outline ESMA's expectations for the components and characteristics of an effective internal control system. The proposed guidelines build on the internal control guidelines currently in place for CRAs and extend them to BMAs and MTIs. They also revise ESMA's expectations considering the growing impact of technology on supervised entities' operations, including in terms of managing technology risk from external and internal sources, and the integration of new technologies into supervised entities' internal controls. The draft guidelines also explain in greater detail how ESMA applies proportionality in its expectations regarding the internal controls for a supervised entity. The deadline for comments is March 19, 2025. ESMA expects to publish a final report by Q4 2025.

The Bank of England has published a statement of policy setting out its approach to exercising its power to direct a CCP to address impediments to resolvability under the Financial Services and Markets Act 2023. This power applies to U.K.-based CCPs. The BoE also has a new power to direct a parent company of a CCP to establish a separate holding company for specific purposes, if the CCP is a subsidiary of a company incorporated in the U.K.

The policy statement summarizes the feedback received to the BoE's July 2024 consultation on the subject and provides the BoE's responses to the points raised in relation to: (i) the approach to the BoE's use of its power; (ii) the publication of directions; (iii) the approach to the resolvability assessment of CCPs; (iv) engagement with industry and other regulators; (v) the BoE's objectives; and (vi) the approach to CCP resolution publication.

In the policy statement, the BoE confirms that it still intends to publish in due course a document on its general approach to CCP resolution.

The Bank of England has published an updated memorandum of understanding between the BoE and the U.K. Financial Conduct Authority on the supervision of markets and financial market infrastructures. The memorandum sets out a high-level framework the BoE and FCA use to co-operate on the supervision of markets and market infrastructure. The framework also caters for the BoE's obligations under the Banking Act 2009 to consult the FCA on the exercise of its payment system oversight responsibilities. The memorandum has been updated to reflect changes made by the Financial Services and Markets Act 2023, including to reflect the extended rule making powers, the designated activities regime and cooperation in relation to FMI sandboxes. It has been agreed pursuant to section 17A of the FSMA 2000.

The Bank of England has published a statement of policy setting out its approach to determining commercially reasonable payments to clearing members whose contracts are subject to a statutory tear up in CCP resolution, together with a policy statement responding to feedback received to the BoE consultation paper on the subject.

Respondents were generally supportive of the proposals in the consultation paper, while recognizing the challenging circumstances in which a statutory tear up may occur. The policy statement summarizes the feedback received and provides the BoE's responses to the points raised in relation to: (i) CCPs' role in proposing prices for torn up contracts; (ii) responsibility for determining a commercially reasonable price; (iii) definition of a commercially reasonable price; (iv) CCPs' incentives when proposing prices; (v) access to pricing information in stressed market conditions; (vi) benefits to the high bar for deviating from CCPs' proposed prices; (vii) determining an alternative price; (viii) scope of a statutory tear up; and (ix) the BoE's approach to CCP resolution.

The BoE statement of policy entered into effect from December 19, 2024. In the policy statement, the BoE confirms that it still intends to publish in due course a document on its approach to CCP resolution.

The U.K. Financial Conduct Authority has published a policy statement on further temporary changes to handling rules for motor finance complaints. The FCA has extended the time motor finance firms have to respond to motor finance complaints not involving a discretionary commission arrangement. Firms now have until after December 4, 2025, to provide a final response to such complaints received on or after October 26, 2024. Consumers who receive a final response to these complaints have until the later of either 15 months from when the final response is sent, or July 29, 2026, to decide whether to refer their complaint to the Financial Ombudsman Service. The rules broadly mirror those for motor finance DCA commission complaints, which were made in January and subsequently extended in September.

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The U.K. Financial Conduct Authority has published a consultation on a new product information framework for Consumer Composite Investments. The regime will apply in respect of a CCI which is or may be distributed to a retail investor in the U.K. and seeks to help consumers understand the products they are buying while giving firms flexibility to innovate. The proposals aim to simplify existing requirements, enable better digital communications, and ensure consistency and comparability across the market. The new regime aligns with the Consumer Duty, prioritizing good consumer outcomes. Through the new regime, the FCA wants consumers to: (i) be presented with information that is accurate, understandable, and broadly comparable; (ii) engage with product information and use it in their decision-making process; and (iii) be able to compare investments more effectively and find the best product for their needs more easily. The deadline for comments is March 20, 2025. The FCA plans to publish a further consultation with draft rules for consequential amendments and transitional provisions in early 2025. The FCA also plans to issue a policy statement and final rules in 2025.

The European Securities and Markets Authority has published a consultation on draft regulatory technical standards to establish an EU code of conduct for issuer-sponsored research. When final, the RTS will supplement the revised Markets in Financial Instruments Directive, as amended by the Listing Act Directive, which provides that investment firms distributing to clients or potential clients research that is paid for, fully or partially, by an issuer, is labelled as issuer-sponsored research. Only research that is prepared in accordance with an EU code of practice may be labelled issuer-sponsored research. The code of conduct sets out standards of independence and objectivity for research providers and specifies procedures and measures for the effective identification, prevention, and disclosure of conflicts of interest, with a view to enhancing the trust in and use of issuer-sponsored research.

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The Bank of England has published its annual report on its supervision of financial market infrastructures, covering the period December 16, 2023 —December 17, 2024. The report sets out the work undertaken by the BoE over the past year in relation to FMIs to deliver its financial stability objective and secondary innovation objective. The report also outlines the BoE's objectives for the coming year.

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The European Securities and Markets Authority has published technical advice on revisions to Delegated Regulation (EU) 447/2012 and Annex I of the CRA Regulation. The proposed amendments are intended to ensure the better traceability on the incorporation of ESG factors in credit rating methodologies and better disclosure of the relevance of ESG factors to individual credit rating actions. The proposals address the need to update several provisions of Delegated Regulation (EU) No 447/2012 to reflect ESMA's supervisory observations. The technical advice includes ESMA's final proposals following the conclusion of the consultation conducted by ESMA and explains how this feedback has been considered in developing the final technical advice. In addition, Annex III provides ESMA's proposed amendments to Delegated Regulation (EU) No 447/2012 and Annex I of the CRA Regulation.

The Financial Stability Board has published a consultation report on policy measures to address leverage in non-bank financial intermediation where it can create financial stability risks. The measures aim to help authorities and market participants to monitor vulnerabilities from NBFI leverage, contain NBFI leverage where it may create risks to financial stability, and mitigate the impact of these risks.

The nine policy recommendations cover: (i) risk identification and monitoring; (ii) addressing data challenges; (iii) public disclosures; (iv) addressing NBFI leverage in core financial markets; (v) using a wide range of measures to address such financial stability risk; (vi) counterparty credit risk management; (vii) the adequacy of private disclosure practices between leveraged non-bank financial entities and leverage providers; (viii) addressing incongruences in the regulatory treatment of NBFI leverage by adopting the principle of "same risk, same regulatory treatment"; and (ix) enhancing cross-border cooperation and coordination.

The FSB notes that market structures, legal frameworks, and financial stability risks related to leverage vary across jurisdictions and so a combination of policy measures may be most effective. The deadline for comments is February 28, 2025. The final report will be published in mid-2025.

The European Supervisory Authorities have published a summary report with the key findings from the 2024 Dry Run exercise on reporting the registers of information under DORA. The quality of data observed in the registers submitted by almost 1,000 financial entities across the EU was in line with the ESAs' expectations, considering the 'best effort' nature of the exercise. The ESAs are confident that the objective of having registers of sufficient quality in 2025 that would allow for the designation of critical third-party service providers is not out of reach, subject to some additional efforts from the industry. The ESAs advise that all industry stakeholders carefully consider the report and all supporting materials to aid in preparing to report the registers in 2025.

The European Banking Authority has published a no action letter stating that competent authorities should not prioritize any supervisory or enforcement action in relation to the processing of applications for initial margin (IM) model authorization received as a result of the entry into force of EMIR 3.

EMIR 3 requires that counterparties apply for authorization to their competent authorities before using, or adopting a change to, a model for initial margin calculation. Compliance with this requirement immediately after EMIR 3 enters into force may cause difficulties for competent authorities and counterparties until the EBA has established its central validation function and the draft regulatory technical standards and guidelines setting out key requirements have been published.

The no action letter sets a registration process for counterparties in scope of IM model authorization for any first application submitted after EMIR 3 enters into force and for subsequent changes to such IM models. As per the no action letter, however, competent authorities should not prioritize the processing of such applications, until the draft RTS on Initial Margin Model Validation and the guidelines on application and authorization process mandated under EMIR 3 come into application.

The U.K. Financial Conduct Authority has published a consultation on the regulatory framework for the Private Intermittent Securities and Capital Exchange System (PISCES), the proposed new platform for trading shares in private companies. The draft legislation implementing the PISCES sandbox ( the Financial Service and Markets Act 2023 (Private Intermittent Securities and Capital Exchange System Sandbox) Regulations 2025 were published in November 2024. The consultation contains the FCA's proposed rules and guidance for the PISCES sandbox, as well as alternative options the FCA considered in its policy development process.

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The EU Platform on Sustainable Finance has published a report on the categorization of products under the Sustainable Finance Disclosure Regulation. The Platform recommends categorizing products with the following sustainability strategies:

• sustainable — contributions through Taxonomy-aligned Investments or Sustainable Investments with no significant harmful activities, or assets based on a more concise definition consistent with the EU Taxonomy;
• transition — investments or portfolios supporting the transition to net zero and a sustainable economy, avoiding carbon lock-ins, in line with the European Commission's recommendations on facilitating finance for the transition to a sustainable economy; and
• ESG collection — excluding significantly harmful investments/activities, investing in assets with better environmental and/or social criteria or applying various sustainability features. All other products should be identified as unclassified products.

The Platform recommends evaluating whether the scope of the categorization should go beyond the current SFDR, potentially categorizing all products and services under sustainability preferences in the Insurance Distribution Directive and the Markets in Financial Instruments Directive. The Platform also recommends that the European Commission develops a common understanding on impact investing in the EU sustainable finance framework and how it relates to the EU Taxonomy and thereafter determines how to integrate it in the categorization scheme.