The Bank of England (BoE) has launched its second system-wide exploratory scenario (SWES) exercise, this time focused on the private markets ecosystem. It will be run in collaboration with a group of banks and NBFIs active in these markets. Its aim is to better understand how banks and non-banks active in private markets would respond to a severe but plausible global downturn, how their actions interact at a system level, and whether these interactions can amplify stress across the financial system and pose risks to UK financial stability and the provision of finance to the UK real economy. The exercise is not a test of the resilience of the individual firms that will participate in the exercise. Its focus is system wide, exploring the resilience of the provision of private market and related public market finance to the UK corporate sector. It will focus on private equity (PE) sponsored UK corporates, credit originated to finance these corporates (including leveraged loans and high-yield bonds) and broader private credit (PC) provided to the UK corporate sector. The SWES will aim to include key participants in the private markets ecosystem. This includes alternative asset managers that manage PE and PC funds; large banks that provide credit to both private market funds and PE-sponsored corporates; and institutional investors that participate in private markets and related public markets. The BoE anticipates having largely completed firm engagement and analysis in 2026, with the final report to be published in early 2027 and interim findings over the course of 2026.

The UK Prudential Regulation Authority (PRA) has published a policy statement and supervisory statement SS4/25, updating expectations for banks and insurers on managing climate-related financial risks. The final policy replaces SS3/19 in its entirety and applies with immediate effect. Following feedback from the April consultation, the PRA makes changes to the final policy (i) clarifying proportionality, allowing firms to tailor governance and risk management based on materiality and business models; (ii) recognising litigation risk as a potential transmission channel; and (iii) confirming that the six-month review period is to conduct an internal gap analysis, not an implementation timeline. Firms may integrate climate responsibilities within existing governance frameworks and embed climate risks into current risk registers or sub-registers, with flexibility in approach. The PRA emphasises a principles-based, proportionate framework aligned with international standards, encouraging scenario analysis, reverse stress testing and engagement with the Climate Financial Risk Forum (CFRF).

The European Banking Authority (EBA) has published a consultation paper on draft amendments to the regulatory technical standards (RTS) under Delegated Regulation (EU) 2017/390, supplementing the Central Securities Depositories Regulation (CSDR) prudential framework. The changes respond to the CSDR Refit (Regulation (EU) 2023/2845), which now permits banking CSDs to provide banking-type ancillary services to participants of other CSDs, including foreign currency cash settlement. This expansion introduces potential credit, liquidity, and concentration risks, prompting the EBA to propose updates to prudential requirements, including enhanced frameworks for intraday credit and liquidity risk management, credit limits and collateral management. The draft RTS also aligns references with amendments made to the Capital Requirements Regulation. The deadline for comments is 3 March 2026.

The Bank of England's (BoE) Financial Policy Committee (FPC) has published a Financial Stability in Focus report, revisiting its assessment of bank capital requirements. The FPC now judges that the appropriate benchmark for the system-wide level of Tier 1 capital requirements is around 13% of risk-weighted assets, equivalent to a Common Equity Tier 1 (CET1) ratio of around 11%. This represents a reduction from the 2019 assessment, which set the benchmark at 14%, reflecting improvements in risk measurement, a lower systemic importance of some banks, and a decline in banks' average risk weights.

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The UK Prudential Regulation Authority (PRA) has published a letter addressed to credit union directors. It summarises key findings from its 2025 assessment of credit unions with assets up to GBP50 million and sets out supervisory priorities for 2026. The PRA identifies operational resilience as a key risk, with thematic work planned in 2026 to strengthen this area, including contingency planning and ensuring robust arrangements for replacing key staff and directors. The second key risk highlighted is disorderly failure: boards are expected to monitor prudential positions and financial forecasts proactively, act promptly on emerging issues and consider alternatives where activities become unsustainable, to avoid disorderly wind-down. In addition to these priorities, the PRA will maintain a focus on risk management throughout 2026. Governance standards also remain a priority, with emphasis on reducing dependency on key individuals and improving risk oversight. Areas for continued attention include succession planning, policy reviews, business planning and board performance appraisals (noted as a non-exhaustive list). The PRA reminds credit unions of their regulatory obligations, including maintaining open and cooperative engagement under Fundamental Rule 7. The letter should be read alongside the January Dear CEO letter to UK deposit takers, which outlines the PRA's priorities in this sector.

The UK Financial Conduct Authority (FCA) has published findings from its data quality review of prudential regulatory reporting by MIFIDPRU investment firms, covering submissions from January 2024 to March 2025. The FCA found that 60% of firms passed all data quality tests and saw good practice in reporting across time periods and accurate cross-validation returns. However, the FCA identified significant areas for improvement firms, including: (i) inconsistent reporting across multiple data sources; (ii) inaccurate implementation of reporting guidance; (iii) incorrect reporting of type of investment firm; and (iv) incorrect reporting units and data entry issues. From the 10% of firms that were not meeting their reporting requirements, the FCA found recurring reporting errors, indicating weaknesses in these firms' regulatory systems and controls.

The FCA urges firms to review their reporting processes against the relevant provisions in its Handbook, including MIFIDPRU 9 Annex 2, and ensure accuracy, noting that no new requirements or guidance are being introduced. Notifications highlighting data quality failures will be issued to firms and further detailed examples of data quality issues the FCA has seen will be shared in an upcoming IFPR Newsletter.

The European Banking Authority (EBA) has published a peer review report assessing how competent authorities have implemented and supervised gender diversity requirements. EU legislation requires that credit institutions have robust governance arrangements, including gender-neutral remuneration policies and diversity policies. The review examined six competent authorities, including the European Central Bank, on the application of the respective requirements under the fourth Capital Requirements Directive (CRD IV), the Capital Requirements Regulation and certain EBA guidelines across six major areas. It found that most requirements checked have been fully or largely incorporated into the supervisory framework by all supervisors reviewed.

However, deficiencies were noted, particularly in the use of supervisors' own benchmarking of diversity practices, where three supervisors were rated "partially applied" overall, with five out of six supervisors being rated "partially applied" on the second criteria of that benchmark, which concerns the further use of own diversity benchmarking results. The EBA recommends improvements in collecting and publishing supervisors' benchmarking results to enhance transparency and to improve the ability of credit institutions to compare with their peers. Both individual and general follow-up measures, as well as best practices have been adopted to strengthen consistency and effectiveness across the EU. The EBA will conduct a follow-up peer review of the implementation of the measures included in the report in two years.

The European Banking Authority (EBA) has published a fact sheet summarising the findings from its 2025 mapping exercise on the interaction between the EU AI Act (Regulation EU 2024/1689) and existing banking and payments legislation. This includes the Capital Requirements Regulation (575/2013), the Consumer Credit Directive (2008/48/EC), the Mortgage Credit Directive (2014/17/EU) and the Payment Services Directive ((EU) 2015/2366). The EBA's key findings include: (i) no significant contradictions have been found between the AI Act and EU banking and payment legislation; (ii) the AI Act is complementary to EU banking and payment sector legislation, which already provides a comprehensive framework to manage risks. However, some efforts may be required by banks and other financial institutions to integrate the two frameworks effectively; and (iii) the co-existence of multiple authorities supervising financial entities' compliance highlights the importance of supervisory cooperation to ensure effective implementation of the AI Act.

The EBA also concludes that no immediate changes to its guidelines or new EBA guidelines are planned. Instead, the EBA will follow up with actions to contribute to a common supervisory approach to supervisory cooperation and implementation of sectoral requirements alongside AI Act requirements. The EBA will undertake specific activities in 2026–2027 to support the implementation of the AI Act in the EU banking and payments sector by: promoting common supervisory approaches and cooperation among national competent authorities responsible for financial sector supervision and market surveillance authorities; and providing input to the AI office, as appropriate, and participating in discussions of the AI Board Subgroup on Financial Services.

Commission Implementing Regulation (EU) 2025/2338 (Amending Regulation) has been published in the Official Journal of the European Union. The amendments update the implementing technical standards (ITS) under Commission Implementing Regulation (EU) 2016/100, which govern the joint decision process for competent authorities when granting permission to use internal models for credit risk, counterparty credit risk and market risk for prudential purposes for certain entities in banking groups, as required by Article 20(8) of the Capital Requirements Regulation (CRR). The Amending Regulation introduces three key changes: (i) the removal of the Advanced Measurement Approach for operational risk, reflecting amendments to the CRR by CRR III (Regulation (EU) 2024/1623); (ii) the alignment with new RTS and ITS on the functioning of supervisory colleges that were published in August (Commission Delegated Regulation (EU) 2025/791 and Implementing Regulation (EU) 2025/790); and (iii) Commission Delegated Regulation (EU) 2025/1496, which sets out that the current requirements on the calculation of own funds requirements for market risk will apply until 1 January 2027. The Amending Regulation enters into force on 11 December.

The Basel Committee has published a summary of its latest meeting in which members discussed a range of initiatives. The Committee reaffirmed its commitment to full and consistent implementation of Basel III standards and approved final principles for managing third-party risk in banking, which will be released next month. It also agreed to expedite a targeted review of its prudential standard for banks' cryptoasset exposures in response to market developments. Other priorities include examining synthetic risk transfers (SRTs), consulting on machine-readable Pillar 3 disclosures (expected in December) and consolidating guidelines into a more user-friendly format. The Committee also approved assessment reports on the UK implementation of the net stable funding ratio and large exposures framework, which are expected next month, and committed to pursue further analytical work of financial risks from extreme weather events.

The European Central Bank (ECB) has published the results of its 2025 supervisory review and evaluation process (SREP) and supervisory priorities for 2026–2028. The review covers 105 banks under ECB supervision and looks at their capital, liquidity, profitability, governance and risk management. Overall, banks maintained robust capital and liquidity positions and strong profitability in the second quarter of 2025.

Looking ahead, the ECB's supervisory priorities for 2026–2028 reflect a comprehensive assessment of emerging risks and vulnerabilities for supervised entities. Each supervisory priority targets a specific set of vulnerabilities in the banking sector for which dedicated strategic objectives have been set and tailored work programmes developed.

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The European Commission (EC) has published a call for evidence on a proposed Delegated Act to amend market risk rules under the Fundamental Review of the Trading Book (FRTB) in Basel III. This follows the November consultation where responses are due by 6 January 2026. Although most Basel III requirements have applied since January, the EC postponed FRTB implementation on several occasions and most recently to 1 January 2027 due to delays and uncertainty regarding FRTB implementation in other major jurisdictions. As a result, the EC is evaluating whether to use the empowerment granted under Article 461a of the Capital Requirements Regulation, to adopt a Delegated Act to mitigate potential negative impacts arising from an unlevel playing field in the international implementation of the FRTB. It would also aim to incorporate those targeted changes already proposed by other jurisdictions that the EC believes can improve the EU framework (e.g. removing excessive rigidity and preventing excessive operational burden on banks). The deadline for responses is 18 December.

The UK Prudential Regulation Authority (PRA) has published policy statement PS24/25 on depositor protection and feedback to responses it received on its March consultation on the topic. The policy statement sets out final rules relating to the limits for deposit protection available from the Financial Services Compensation Scheme (FSCS).

In particular:

• From 1 December, the deposit protection limit increases from GBP85,000 to GBP120,000.
• From 1 December, the limit applicable to certain temporary high balance claims increases from GBP1 million to GBP1.4m.

In response to feedback, the PRA has made additional amendments to the depositor protection part of the PRA Rulebook (DPP rules). These include amending the requirement for firms to display the FSCS compensation sticker and poster to exclude branches where a firm does not deal with depositors in person, clarifying the scope of "third-party premises" to tighten the requirement and more closely reflect models such as banking hubs, and updates to the information sheet to address points raised about accessibility. Firms are required to update their single customer view systems to reflect the new limit from December 1. Deposit takers will then have up to six months to make changes to disclosure materials, which will need to be completed no later than 11.59pm on 31 May 2026.

The Financial Stability Board (FSB) has published a letter from the FSB's Chair, Andrew Bailey, addressed to G20 leaders. The letter urges G20 leaders to accelerate efforts to modernise financial regulation while safeguarding stability, citing significant gaps in reform implementation and a challenging economic outlook. The next phase of the FSB's work will look deeper into where full, timely and consistent implementation of global standards, such as Basel III, was not achieved.

The letter highlights the growing influence of non-bank financial intermediaries in global financial markets, now estimated at USD2 trillion globally, and stresses the need for robust monitoring to prevent systemic risks. It also calls for continued attention to national policy barriers to achieve the objectives of the G20 Roadmap for enhancing cross-border payments. With the rise of digital assets, the FSB calls on authorities to carefully consider how frameworks are designed to ensure they are effective, consistent, and supportive of safe innovation and notes that it will be equally important to consider how stablecoins can operate effectively and safely across borders. The FSB's work programme for the year ahead will include a focus on stablecoins and other forms of payment.

The Network for Greening the Financial System (NGFS) has released an updated guide on climate scenario analysis for central banks and supervisors, building on the 2020 edition. The revised guide reflects significant methodological progress and best practices in scenario design, data and modelling, with a new emphasis on short-term scenarios to assess near-term financial risks from climate change and evolving policy developments. While retaining the original four-step framework, which includes: (i) identifying objectives and scope; (ii) choosing climate scenarios; (iii) assessing economic and financial impacts; and (iv) communicating and using results; the guide expands on each step with new insights, methodologies and examples. It serves as a practical reference for authorities and financial institutions integrating climate scenario analysis into their risk management frameworks and will continue evolving alongside ongoing sector developments.

The UK Prudential Regulation Authority (PRA) has published policy statement PS22/25, confirming changes to the retail deposits threshold for the UK leverage ratio requirement. Following feedback on its March consultation, the PRA has amended the final policy to increase the retail deposits threshold for major UK firms from GBP50 billion to GBP75bn, compared to the GBP70bn initially proposed. It will also calculate the metric of firms' retail deposits assessed against this threshold using a three-year averaging mechanism. The non-UK assets threshold remains unchanged at GBP10bn. Modifications by consent granted during the review, which allowed firms to disapply the leverage ratio part of the PRA Rulebook while thresholds were under consideration, will cease on 30 June 2026. The final policy will take effect on January 1, 2026. The PRA will continue annual reviews of both thresholds as part of the Financial Policy Committee's oversight of the leverage ratio framework. The final policy and rules are set out in the appendices to the policy statement.

The European Central Bank (ECB) has issued its opinion on the European Commission's proposed amendments to the EU securitisation framework, which was submitted in June. The package consists of a proposal to amend the EU Securitisation Regulation, a proposal to amend the Capital Requirements Regulation as regards exposures to securitisations and a consultation on measures to amend the Liquidity Coverage Ratio (LCR) Delegated Regulation. The ECB broadly supports the reforms aimed at enhancing the functioning of the EU's securitisation market, but makes a number of general and specific observations, including that:

• Proposed changes to synthetic securitisations require careful consideration. Although this segment is driving market growth, if not properly managed by originator credit institutions, large synthetic securitisations could amplify procyclicality through rollover risk, potentially affecting financial stability.

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The Bank of England (BoE) has published a consultation paper outlining its proposed regulatory framework for sterling-denominated systemic stablecoins. Under the framework, HM Treasury (HMT) will determine which payment systems using stablecoins, and their service providers, are recognised as systemically important. Once designated, these entities will fall within the BoE's remit and be subject to its powers under the Banking Act 2009. The proposed regime does not cover stablecoins used for non-systemic purposes which are not widely used by individuals to make retail or business payments. These activities will remain under the supervision of the UK Financial Conduct Authority (FCA).The consultation builds on feedback to the 2023 discussion paper.

Key proposals include:

• Allowing issuers to hold up to 60% of backing assets in short-term sterling-denominated UK government debt, with the remaining 40% as unremunerated deposits at the BoE. Issuers deemed systemic at launch, or transitioning from the FCA regime, may initially hold up to 95% in short-term UK government debt to support viability during growth.

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The European Commission (EC) has launched a consultation on the Fundamental Review of the Trading Book (FRTB) under Basel III, focusing on market risk for banks. Although most Basel III requirements have applied since January, the EC postponed FRTB implementation on several occasions and most recently to 1 January 2027 due to delays and uncertainty regarding FRTB implementation in other major jurisdictions. To address potential negative impacts arising from an unlevel playing field in the international implementation of the FRTB, the consultation seeks feedback on whether the EC should adopt a delegated act, using its powers under Article 461a of the Capital Requirements Regulation by the end of March 2026. This empowerment, due to previous postponements, now only allows the introduction of targeted relief measures and targeted multipliers for up to three years.

Longer term solutions will be duly and timely considered in a comprehensive way. The proposed policy options comprises two main components: (i) the introduction of temporary targeted amendments to the market risk framework that would address aspects of the framework on which other jurisdictions have already deviated or indicated that they would plan to deviate in their final FRTB implementation; and (ii) the introduction of a multiplier for the overall market risk capital requirements that banks negatively impacted by the new rules (i.e., banks facing an increase in capital requirements for market risk) would be allowed to use to significantly limit their market risk capital requirements increases for three years. The EC highlights that due to the temporary nature of the multiplier and its objective, the methodology should be simple and risk‑sensitive, and relatively easy to implement, maintain and supervise. The deadline for responses is 6 January 2026.

The European Banking Authority (EBA) has published a follow-up peer review report examining the supervisory practices of EU competent authorities regarding their assessment of credit valuation adjustment (CVA) risk of the institutions under their supervision. The same four EU competent authorities which were part of the EBA's 2023 peer review were also part of this follow up review. The EBA found that competent authorities continue to largely assess CVA risk sufficiently, using approaches which are fit for purpose in satisfying the regulatory and supervisory review and evaluation process guidelines. Furthermore, since the 2023 report, all competent authorities have made progress to strengthen their CVA risk assessments and address the follow-up measures suggested as part of that report. However, only one competent authority was found to have made specific efforts to review compliance with the regulatory technical standards (RTS) in Commission Delegated Regulation (EU) 2018/728 on the procedures for excluding transactions with non-financial counterparties established in a third country from the own funds requirements for CVA risk (Exclusion RTS). The EBA urges continued efforts to ensure robust CVA risk management and compliance with the Exclusion RTS to ensure that this risk is properly managed and capitalised by the institutions under their supervision.

The European Banking Authority (EBA) has published a final report on guidelines for environmental scenario analysis under the Capital Requirements Directive (CRD), as amended by CRD VI (Directive (EU) 2024/1619). These guidelines complement the EBA's January 2025 environmental, social and governance (ESG) risk management framework by clarifying supervisory expectations for how institutions should conduct environmental scenario analysis, including for institutions using the internal ratings-based approach for calculating the own funds requirements for credit risk. The EBA consulted on the guidelines in January. In response to feedback, the EBA has amended the guidelines with a focus on enhancing clarity and simplifying expectations in line with operational realities. The scope has been streamlined to focus on environmental risks, with climate as the priority. 

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The European Banking Authority (EBA) has launched a consultation on draft guidelines on the authorisation of third-country branches (TCBs) under Article 48c(8) of the Capital Requirements Directive (CRD), as amended by CRD VI (Directive (EU) 2024/1619). The guidelines set out: (i) the list of information to be included in the application, concerning matters such as the business plan, capital endowment, liquidity, internal governance, booking arrangement and reporting requirements and information about head undertaking(s), in particular their compliance with prudential requirements and a reasoned, third party legal opinion on the absence of impediments in the third country's framework precluding the ability of the TCB to comply with the EU and prudential legislation and regulation; (ii) the procedure for authorisation, as well as standard forms and templates for the provision of the information required; (iii) the conditions for granting authorisation; and (iv) the conditions under which competent authorities may rely on information that has already been provided in the process of any prior authorisation third country branch authorisation.

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Commission Implementing Regulation (EU) 2025/2159 (the Regulation) has been published in the Official Journal of the European Union (OJ). The Regulation amends the implementing technical standards (ITS) laid down in Implementing Regulation (EU) 2021/2284 as regards supervisory reporting and disclosures of investment firms under the Investment Firms Regulation (IFR). Due to the changes introduced by the CRR III, the reporting framework for investment firms has been revised. Consequential changes to Implementing Regulation (EU) 2021/2284 are therefore needed. To provide investment firms with sufficient time to adapt their own internal system and to comply with the revised reporting requirements, a derogation has been laid down deferring the remittance date of the first quarterly reporting obligation after the date of application of this Regulation. The Regulation enters into force on the 20th day following publication in the OJ.

The House of Lords Financial Services Regulation Committee (the Committee) has issued a formal response to HM Treasury's (HMT) reply to its report "Growing Pains: Clarity and Culture Change Required" which evaluated the progress made by the UK Financial Conduct Authority (FCA) and UK Prudential Regulation Authority (PRA) in supporting growth and competitiveness in the financial services sector and the wider UK economy. The Financial Services and Markets Act 2023 introduced a secondary objective for the UK regulators focused on international competitiveness and growth. While welcoming initial steps taken by the UK government, the Committee notes that HMT did not engage with several key findings, critical to the success of the secondary objective and broader UK economic growth. The Committee uses this opportunity to restate some of its recommendations and raise further questions on the following themes as set out below.

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The European Banking Authority (EBA) has published its final report on the draft regulatory technical standards (RTS) under Article 382(6) of the Capital Requirements Regulation (CRR), as amended by CRR3. The RTS establish a quantitative framework for assessing the materiality of credit valuation adjustment (CVA) risk exposures arising from fair-valued securities financing transactions (SFTs). Following feedback to the July 2024 consultation, the EBA retained its proposed quantitative approach to assessing materiality, opting for a ratio-based threshold of 5% to determine whether such transactions should be included in CVA capital requirements. The final RTS also uphold quarterly assessments aligned with COREP reporting cycles and clarify that the CVA capital requirement metric, rather than broader own funds or exposure values, should be used for the materiality test.

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The European Commission (EC) has adopted a communication providing guidance clarifying how banks can benefit from preferential prudential treatment under Article 133(5) of the Capital Requirements Regulation (CRR) when investing in equity through legislative programmes, which are structured public investment schemes established under EU or national law. These programmes, which combine public support (e.g. guarantees or co-investment) with private funding and oversight mechanisms, target strategic sectors such as clean technologies, digital innovation and defence. The guidance promotes consistent application across the Single Market, enabling banks to apply lower capital charges to qualifying exposures, reflecting their reduced risk profile. This initiative supports financial stability while enhancing access to equity financing for EU companies and advancing the EC's broader goals under the Savings and Investments Union (SIU), including capital market integration and competitiveness. A public register of eligible legislative programmes has been published, as well as a website with questions and answers on legislative programmes under Article 133(5).

The UK Prudential Regulation Authority (PRA) has published near-final policy statement PS18/25, confirming its intention to retire the refined methodology to Pillar 2A capital requirements. This decision follows the 2024 consultation and is aligned with the forthcoming implementation of the Basel 3.1 standardised approach to credit risk (CR SA), now scheduled for implementation on 1 January 2027. The PRA concludes that the refined methodology to Pillar 2A, originally introduced to address conservatism in CR SA relative to the Internal Ratings-Based (IRB) approach, is no longer necessary due to improvements in risk sensitivity under Basel 3.1.

Despite mixed feedback from respondents, the PRA maintains that the retirement will simplify the capital framework, reduce operational burdens and better reflect firms' risk profiles. Implementation will take effect from 1 January 2027, aligning with the extended implementation date of Basel 3.1. Final policy materials are expected in Q1 2026, following HM Treasury's revocation of relevant Capital Requirements Regulation (CRR) provisions. Final minor amendments to policies concerning interest rate risk in the banking book (IRRBB) and pension obligation risk have also been published, with implementation deferred to 1 July 2026. The appendices to this near-final policy statement contain the PRA's near-final policy materials regarding the retirement of the refined methodology, as well as final policy materials related to IRRBB and pension obligation risk.

The UK Prudential Regulation Authority (PRA) has published near-final policy statement PS19/25, setting out its approach to restating remaining provisions of the Capital Requirements Regulation (CRR) into the PRA Rulebook and associated policy materials. This follows the 2024 consultation and complements earlier finalised proposals in the PRA's July policy statement.

The statement is structured into four chapters:

• Chapter 1 – provides an overview, summarises feedback to the consultation and outlines the scope of the near-final rules.
• Chapter 2 – covers amendments to the securitisation requirements, including updates to supervisory statements SS9/13 and SS10/18 and introduces new statements of policy (SoP7/25 and SoP8/25).
• Chapter 3 – covers other CRR provisions including the Groups Part, Credit Risk: Internal Ratings Based Approach Part, Counterparty Credit Risk Part and introduces a new Settlement Risk (CRR) Part of the Rulebook. It also updates supervisory statements SS15/13 and SS4/24 and introduces SoP6/25 on Internal Model Method permissions.
• Chapter 4 – focuses on changes related to the mapping of external credit rating agency ratings to credit quality mapping aligned with Basel 3.1 standards.

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The UK Prudential Regulation Authority (PRA) has published near-final policy statement PS20/25, marking the second and final phase of its "strong and simple" framework. This introduces a simplified capital regime for smaller, domestically focused banks and building societies, referred to as small domestic deposit takers (SDDTs). The framework aims to reduce regulatory complexity and compliance costs for these firms while maintaining their financial resilience. Phase 1, which focused on liquidity and disclosure simplifications, was finalised in the December 2023 policy statement. Phase 2, as outlined in this near-final policy statement, builds on phase 1 and incorporates feedback from the 2024 consultation.

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The Basel Committee on Banking Supervision (BCBS) has published a final technical amendment to the Basel framework, clarifying the treatment of guarantees and credit derivatives used to hedge counterparty credit risk (CCR) from derivative exposures. The technical amendment, revised following consultation feedback, applies specifically to a bank's use of fixed or capped protection and excludes securities financing transactions (SFTs) and securitisation exposures. Amendments have been made to the credit risk and CCR standards to align the treatment of guarantees and credit derivative protection with that of eligible collateral under the CCR framework.

These changes aim to clarify how fixed or capped protection should be reflected in exposure calculations and address inconsistencies in the application of the framework. As a technical amendment, it does not constitute a substantial change to the standards but resolves ambiguities that could not be addressed under the existing rules. Supervisors and the BCBS will monitor implementation and potential circumvention strategies, with the possibility of extending similar treatment to SFTs and securitisations if necessary. BCBS members have agreed to implement the amendment as soon as practical and within three years at the latest.

The European Banking Authority (EBA) has launched a consultation on its revised guidelines for the supervisory review and evaluation process (SREP) and supervisory stress testing, mandated under the Capital Requirements Directive (CRD). The proposed guidelines consolidate all relevant SREP provisions into a single, comprehensive framework as part of the EBA's efforts to simplify and enhance the EU supervisory framework. The update integrates new elements, including environmental, social and governance factors, operational resilience and mandates under the revised Capital Requirements Directive (CRD VI) relating to third-country branches and the output floor.

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The European Banking Authority has published two Q&A under the Capital Requirements Regulation (CRR): (i) 2025_7363 addresses how exposures to institutions should be treated under the Credit Risk Standardised approach, if such institutions have been waived of individual capital requirements under Article 7 of the CRR; and (ii) 2025_7470 addresses the eligibility as collateral under Article 207(2) of the CRR of secured notes designed specifically to remove any material positive correlation between the value of the note and the credit quality of its issuer.

A draft of the Financial Services and Markets Act 2023 (Prudential Regulation of Credit Institutions) (Consequential Amendments) Regulations 2025 has been laid before the UK Parliament, and published together with a draft explanatory memorandum. The draft regulations are part of the UK's continued process to repeal and replace assimilated EU financial services law following Brexit, under the Financial Services and Markets Act 2023 (FSMA 2023). Under section 1 of FSMA 2023, several provisions of the UK Capital Requirements Regulation (UK CRR) will be revoked, effective from 1 January 2026, by virtue of the FSMA 2023 (Commencement No. 10 and Saving Provisions) Regulations 2025. These provisions, which set prudential standards for credit institutions and investment firms, will largely be replaced by rules made by the UK Prudential Regulation Authority (PRA) and the Bank of England.

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Regulation (EU) 2025/1958 of the European Central Bank (ECB), amending Regulation (EU) 2015/534 on the reporting of supervisory financial information (the Financial Reporting Regulation) under the Single Supervisory Mechanism (SSM), has been published in the Official Journal of the European Union. Adopted on 9 September, the Regulation amends the Financial Reporting Regulation to allow the ECB to collect additional data from less significant credit institutions and branches with total assets of EUR3 billion or less. The additional information is considered necessary for the ECB to foster comparability of the outcomes of the supervisory review and evaluation process assessment. The Regulation enters into force on 6 November and will apply from 30 December.

The UK Prudential Regulation Authority (PRA) has published consultation paper LIAC02/25, proposing a series of low-impact amendments to its Rulebook and policy materials.

Key proposals include:

• The conditional disapplication of certain PRA general provisions to implement the deference arrangements under the UK-Swiss Berne Financial Services Agreement.
• A minor technical amendment to the Transitional Measure on Technical Provisions (TMTP) formula to improve consistency in reporting.
• Miscellaneous corrections across the PRA Rulebook to ensure its accuracy.

The deadline for comments is 13 November with implementation for all amendments expected in December. In addition to LIAC02/25, the PRA has published low impact amendments to its rules and policy materials that it has made without further consultation (LIAF02/25).

The European Banking Authority (EBA) has released its 2024 annual report on the convergence of supervisory practices across the EU. The report outlines the EBA's ongoing efforts to strengthen the alignment of supervisory approaches across Member States and across key areas of its activities, including prudential, resolution, digital finance, consumer protection and until the end of this year anti-money laundering/counter-terrorist financing (AML/CFT). In the area of prudential regulation, the report reflects on findings from its 2024 European Supervisory Examination Programme focused on liquidity and funding risk, interest rate risk and hedging, and recovery operationalisation. The report notes that risk levels in these areas remain stable, though challenges persist around data quality, stress testing scenarios and modelling assumptions. The EBA will continue monitoring risks related to online deposit platforms and compliance with Supervisory Outlier Tests in 2025.

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The UK Prudential Regulation Authority (PRA) and the UK Financial Conduct Authority (FCA) have published joint policy statement PS21/25, setting out the final policy changes to the remuneration rules for dual-regulated firms. The policy statement also provides a summary of feedback to the regulators' November 2024 consultation.

The final rules go beyond the original proposals with key changes including:

• Reducing the bonus deferral period for Senior Management Functions (SMFs) further, so a uniform four-year bonus deferral period will apply to all Material Risk Takers.
• Removing the requirement for a 50/50 split between cash and instruments in both upfront and deferred bonus proportions. Firms may now pay a higher proportion of bonuses in cash up front, provided the deferred portion contains a correspondingly higher proportion of instruments.
• Reducing bonus deferral requirements for many individuals, with the 40% deferral rate applying to the first GBP660,000 and 60% above that threshold.

To support the shift toward a unified framework, the FCA remuneration Handbook rules will be cut by more than 70% as firms will now largely only need to refer to the PRA's remuneration rules.

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The UK Financial Conduct Authority (FCA) has published policy statement PS25/14, accompanied by a press release, setting out final rules to simplify and consolidate the definition of regulatory capital, also known as "own funds", for FCA investment firms under chapter MIFIDPRU 3 of its Handbook. The FCA will delete and replace the existing rules in MIFIDPRU 3 in their entirety. Following feedback to its April consultation, the FCA is removing all cross-references to the UK Capital Requirements Regulation from MIFIDPRU 3 and is establishing a standalone framework for regulatory capital tailored specifically to investment firms. The changes do not alter overall levels of regulatory capital firms must hold or require firms to alter their capital structures, but instead they clarify what qualifies as own funds, reduce unnecessary complexity of requirements and remove banking-specific provisions that are not relevant to investment firms. The new rules, set out in the "Definition Of Capital For Investment Firms Instrument 2025" in the Annex to PS25/14, will apply to all entities subject to MIFIDPRU, including MIFIDPRU investment firms, UK parent entities and parent undertakings subject to the Group Capital Test. For mixed groups containing FCA investment firms and PRA-regulated entities, the rules apply to the FCA investment firm on a solo basis. The new rules will come into force on 1 April 2026.

The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have published their joint final report on technical advice in response to the European Commission's Call for Advice on the Investment Firms Regulation (IFR) and the Investment Firms Directive (IFD). The report, mandated under Article 60 of the IFR and Article 66 of the IFD, proposes limited but targeted revisions to the existing prudential framework which has been deemed fit-for-purpose following feedback to its 2024 June discussion paper. The authorities make a series of 49 recommendations in the report, which aim to: (i) enhance the proportionality and functioning of the prudential framework; and (ii) improve the framework's ability to contribute to a level playing field among investment firms, and between investment firms and financial institutions that perform similar activities.

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Delegated Regulation (EU) 2025/1311 supplementing the Capital Requirements Regulation (Regulation (EU) No 575/2013) (CRR) has been published in the Official Journal of the European Union (OJ). The Delegated Regulation sets out regulatory technical standards (RTS) specifying the materiality assessment of extensions, and changes to, the use of alternative internal models and changes to the subset of modellable risk factors. The RTS reflect a mandate in Article 325az(8) of the CRR. The Delegated Regulation also sets out detailed documentation requirements and clarifies supervisory expectations for model governance, validation and IT infrastructure changes. It enters into force on 3 November.

Delegated Regulation 2025/1265 supplementing the Capital Requirements Regulation (Regulation (EU) No 575/2013) (CRR) has been published in the Official Journal of the European Union (OJ). The Delegated Regulation, adopted in July, sets out regulatory technical standards (RTS) specifying the method for identifying the main risk driver of a position and for determining whether a transaction represents a long or short position as referred to in Articles 94(3), 273a(3), and 325a(2) of the CRR. The Delegated Regulation enters into force on 3 November.

The European Banking Authority (EBA) has published a Q&A (2021_6017) providing clarification on the net stable funding ratio (NSFR) treatment of capital instruments with a residual maturity of at least 6 but less than 12 months under the Capital Requirements Regulation. The EBA confirms that in accordance with Article 428l(d), such instruments should be subject to a 50% available stable funding factor under the NSFR framework. The EBA notes that the relevant reporting template currently does not allow firms to report this. The template and related instructions will be adjusted in the next NSFR reporting framework release.

The UK Prudential Regulation Authority (PRA) has published a Dear CFO letter to selected deposit-takers providing thematic feedback from its review of written reports from auditors of UK-headquartered banks and building societies. The PRA's focus this year was accounting for IFRS 9 expected credit losses (ECL) and climate risk. The review highlighted several key findings: (i) model risk remains elevated in light of persistent macroeconomic and geopolitical uncertainty, with current credit risk factors differing from those that existing models were built to capture. The PRA emphasises the need for firms to critically assess the responsiveness of their modelling frameworks and the completeness of post-model adjustments; (ii) firms are making progress on multi-year model redevelopment plans to address longstanding limitations. The PRA encourages firms to ensure that investment is appropriately targeted to better capture risk, and that it is supported by strong governance and controls; (iii) the risk of historical bias in Loss Given Default (LGD) estimates continues, and so the PRA urges firms to strengthen their processes to challenge the realism of recovery assumptions, particularly underpinning LGD for vulnerable sectors and borrowers; and (iv) regarding climate risks, the PRA acknowledges improvements in firms' capabilities to incorporate climate-related factors into ECL modelling, despite ongoing data limitations, and encourages further efforts to align with existing supervisory expectations, including those set out in its recent consultation.

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The European Banking Authority (EBA) has announced the launch of its 2025 EU-wide transparency exercise, aimed at enhancing transparency and market discipline across the EU financial system. The exercise complements banks' own Pillar 3 disclosures under the Capital Requirements Directive (CRD) and will cover data from over 100 major EU banks, including capital positions, financial assets, risk exposures, sovereign exposures and asset quality, spanning Q3 2024 to Q2 2025. The results, to be published in December alongside the EBA's risk assessment report, will be based solely on supervisory reporting data, ensuring no additional burden on banks. The EBA will also provide interactive tools for data comparison across time, jurisdictions and individual banks.

The UK Prudential Regulation Authority (PRA) has published a consultation paper CP21/25, proposing changes to streamline regulatory reporting for banks as part of its Future Banking Data project. The proposals include: (i) deleting 34 Financial Reporting (FINREP) templates; (ii) consolidating FINREP requirements into a single chapter within the PRA Rulebook; and (iii) removing three further templates including two Common Reporting templates and PRA 109, which are now considered obsolete. These changes mark the first phase of broader efforts to simplify data collection and are intended to eliminate reporting that no longer materially contributes to the PRA's supervisory or policy objectives. The changes will be implemented through the draft statutory instrument and draft amendments to Supervisory Statement 34/15 on guidelines for completing regulatory reports, both of which are included in the appendices to the consultation paper. The deadline for comments is 22 October, with implementation proposed for 31 December. A discussion paper outlining the PRA's future approach to banking data is expected later this year. The consultation complements wider simplification efforts across the financial sector, including for resolution-related reporting, which is addressed in a separate consultation.

The Bank of England (BoE) has announced a consultation on discontinuing the collection and publication of statistical data via Form BN, on the further sectoral breakdown of non-resident business by UK Monetary Financial Institutions (MFIs). Following an internal review, the BoE concluded that the operational costs of collecting and publishing Form BN data outweigh its benefits, as sufficient non-resident data is already available through Forms CC and CL (albeit on a quarterly rather than monthly basis). If the proposal is confirmed, the final reference period for Form BN will be April 2026, with publication expected in May 2026. The deadline for comments, particularly on the impact of the proposal, is 31 December.

Delegated Regulation 2025/1496 amending Regulation 575/2013 (the Capital Requirements Regulation or CRR) regarding the date of application of the own funds requirements for market risk has been published in the Official Journal of the European Union (OJ). While the application of the new market risk requirements, which form part of the Fundamental Review of the Trading Book (FRTB) under the Basel III international standards, had already been postponed to 1 January 2026, this Delegated Regulation further delays their application to 1 January 2027. It follows continued delays and uncertainty regarding FRTB implementation in other key jurisdictions, raising concerns about a level playing field for internationally active banks. Until the new date, financial institutions must continue to apply the existing market risk framework as set out in the CRR as of 8 July 2024 and maintain current reporting and disclosure requirements under pre-FRTB approaches. Competent authorities are encouraged to exercise flexibility in their assessment of internal models during this transitional period to avoid unintended impacts on own funds requirements that are not linked to increases in the underlying market risk. The Regulation entered into force on 20 September and applies from 1 January 2026.

The European Central Bank (ECB) has launched a consultation on a draft Guideline, accompanied by a press release, aimed at harmonising the supervisory approach of national competent authorities (NCAs) to non-performing exposures (NPEs) held by less significant institutions (LSIs). The Guideline seeks to address persistent legacy NPE challenges by establishing supervisory coverage expectations for exposures originated before 26 April 2019, which fall outside the scope of existing Capital Requirements Regulation deduction requirements. Developed in collaboration with NCAs, it reflects the ECB's oversight role within the Single Supervisory Mechanism, promoting the consistent application of high supervisory standards across participating Member States while allowing for the NCAs' supervisory discretion under the Pillar 2 framework. Building on the successful application of a similar approach for significant institutions since 2018, the Guideline is tailored to the specific characteristics of LSIs.

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The UK Financial Services and Markets Act 2023 (Capital Buffers and Macro-prudential Measures) (Consequential Amendments) Regulations 2025 have been made and an explanatory memorandum published. The Regulations are part of the continued process to repeal and replace assimilated EU financial services law following Brexit. The Regulations make consequential amendments to UK legislation following the replacement as of 31 July by the new Capital Buffers and Macro-prudential Measures Regulations 2025 (S.I. 2025/653) of the Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014 (S.I. 2014/894), which have been revoked. The Regulations amend existing UK legislation to replace references to the 2014 Capital Buffers Regulations with references to the Capital Buffers and Macroprudential Measures Regulations 2025. The Regulations will enter into force on 30 November.

The European Central Bank (ECB) has adopted Regulation (EU) (ECB/2025/31) (Amending Regulation) amending Regulation (EU) 2015/534 on the reporting of supervisory financial information (the Financial Reporting Regulation) under the Single Supervisory Mechanism (SSM). The Financial Reporting Regulation sets out reporting requirements based on templates developed by the European Banking Authority and laid down in Commission Implementing Regulation (EU) 2021/451, now repealed and replaced by Implementing Regulation (EU) 2024/3117. In line with the principle of proportionality, less significant credit institutions and branches with total assets of EUR3 billion or less are subject to reduced reporting requirements, limited to a subset of data points as specified in Annex III of the Financial Reporting Regulation. In order to exercise oversight over the functioning of the SSM and to promote the consistent application of high supervisory standards, the ECB needs additional data points concerning these less significant credit institutions. The Amending Regulation amends the Financial Reporting Regulation to enable the ECB to collect additional data on those institutions, to enable comparability of outcomes of the supervisory review and evaluation process. The Amending Regulation will enter into force on the twentieth day following its publication in the Official Journal of the European Union and will apply from 30 December.