Europe, the Middle East, and the UK
EBA finalizes Reporting Framework 4.1 to enhance regulatory oversight
May 28: The European Banking Authority (EBA) published the final technical package for version 4.1 of its reporting framework. This framework will apply as of the second half of 2025 and supports the centralization of institutions’ prudential disclosures in the EBA Pillar 3 data hub. Further, the update provides new guidance for identifying crypto-asset providers under MiCAR.
EU regulators plan stress tests
May 28: The FT reported that EU regulators are preparing to conduct their first comprehensive stress test on non-bank financial institutions, such as asset managers and insurers, to identify potential vulnerabilities in the financial system beyond traditional banking. This initiative reflects growing concerns about systemic risks posed by the expanding non-bank sector and aims to enhance the resilience of the broader financial landscape.
EBA unveils onboarding plan for Pillar 3 Data Hub implementation
May 22: The European Banking Authority (EBA) released a detailed onboarding plan for implementing its Pillar 3 data hub. This plan outlines the phased approach and key milestones for financial institutions to connect to the data hub, emphasizing compliance with regulatory reporting requirements under Pillar 3 of Basel III. The initiative aims to enhance transparency and market discipline by improving the consistency and quality of information reported by banks across the EU.
EBA launches consultation on amended disclosure requirements for ESG risks, equity, and shadow banking exposures
May 22: The European Banking Authority (EBA) has launched a public consultation on proposed changes to the EU Implementing Regulation for Pillar 3 disclosures under CRR3. The amendments introduce enhanced and proportionate disclosure requirements covering ESG risks, equity exposures, and total exposures to shadow banking entities. The proposal also incorporates updated NACE codes for classifying economic activities within the EU. Aimed at improving transparency and consistency in regulatory disclosures, the consultation is open until 22 August 2025.
UK: Updates to Pillar2A Capital Framework to reflect Basel 3.1 standards
May 22: The Prudential Regulation Authority (PRA) published Consultation Paper CP12/25, initiating the first phase of a two-stage review of the Pillar 2A capital framework. This consultation addresses the impact of the Basel 3.1 reforms on firm-specific capital requirements, proposing updates to methodologies and guidance across credit, operational, pension obligation, market, and counterparty credit risks. Key objectives include enhancing transparency, improving proportionality, and reducing reporting burdens for firms. The PRA plans a second phase to further refine individual methodologies and assess their effectiveness. Feedback is invited from stakeholders to inform these proposed changes.
UK: Pillar 2A adjustments for SME and Infrastructure Lending
May 22: The Bank of England's Prudential Regulation Authority (PRA) announced near-final policy updates to the capital framework for small and medium-sized enterprise (SME) and infrastructure lending. These adjustments aim to mitigate potential disruptions resulting from the removal of support factors under Pillar 1 of the Basel 3.1 reforms. By introducing Pillar 2A lending adjustments, the PRA seeks to maintain overall capital requirements for these exposures, thereby supporting UK competitiveness and growth. The adjustments will be firm-specific and based on detailed data submissions, with implementation scheduled for 1 January 2027.
FCA consults on enhancing complaints reporting to strengthen consumer protection
May 22: The Financial Conduct Authority (FCA) published a Consultation Paper CP25/13, proposing significant reforms to improve the complaints reporting process for financial services firms. The changes aim to require firms to report all complaints with more detailed data, enabling better identification of issues and faster regulatory action. The goal is to enhance transparency, improve consumer protection, and ensure clearer communication about complaint escalation rights.
FINMA publishes guidance on risks in the real estate and mortgage markets
May 22: The Swiss Financial Market Supervisory Authority (FINMA) issued a statement summarising the results of its supervisory activities and explaining its expectations regarding the regulatory requirements in the mortgage lending business. The results of the supervisory activities at various banks show that the principles-based regulation concerning mortgage lending is being exploited.
EU to delay bank rules as it waits for Trump's deregulation moves: Reuters
May 22: Reuters reported that the European Union plans to delay implementing the Fundamental Review of the Trading Book (FRTB), a key component of the Basel III banking reforms, until January 1, 2027. This decision, following a previous postponement to 2026, reflects concerns that European banks could be disadvantaged if the U.S. and U.K., which have also delayed or not finalized their adoption of the rules, proceed with deregulation. The EU's move aims to maintain competitiveness and address industry feedback on regulatory disparities. The European Commission had said it would decide on whether or not to postpone the FRTB by the end of June after consulting with the industry and its supervisors.
UK: Updates to the PRA’s approach of responsible openness to international banks. UK sets new subsidiary rule for Foreign Banks with large retail deposits
May 20: The Bank of England's Prudential Regulation Authority (PRA) updated its approach to supervising international banks operating in the UK. A key change introduces an indicative threshold of £300 million for total retail and small business instant access deposits covered by the UK's compensation scheme. International banks exceeding this threshold are now expected to establish subsidiaries rather than operate solely through branches. This move aims to enhance financial stability and reflects lessons learned from the collapse of Silicon Valley Bank in 2023.
BaFin issues general directive on Remuneration Reporting for Securities firms
May 20: The Federal Financial Supervisory Authority (BaFin) issued a general directive requiring securities firms to report specific remuneration data to the Deutsche Bundesbank as of the reporting date of December 31, 2024. This applies to medium and large firms that must submit information on employees receiving total remuneration of at least €1 million, as well as on approved increases to the variable remuneration cap ("bonus cap"). The data will subsequently be forwarded to the European Banking Authority (EBA). Reports must be submitted by June 15, 2025. Small securities firms are exempt from this reporting obligation.
UK to regulate buy now, pay later lenders
May 19: The UK government announced legislation to regulate the Buy Now, Pay Later (BNPL) sector, bringing it under the Financial Conduct Authority's oversight. Starting in 2026, BNPL providers like Klarna and Clearpay will be required to conduct affordability checks, provide transparent information on fees and credit impacts, and offer consumers the right to escalate complaints to the Financial Ombudsman. These measures aim to protect the estimated 10 million UK BNPL users from unmanageable debt and ensure consistent standards across the sector.
South Africa's Prudential Authority seeks feedback on revised large exposure requirements
May 19: The South African Reserve Bank’s Prudential Authority has proposed updates to the Large Exposure Requirements directive aimed at strengthening the measurement, management, and reporting of large exposures to single counterparties or groups. The changes seek to enhance risk control, increase transparency, and align regulations with international standards to bolster the financial system's resilience. Stakeholders are invited to provide feedback on the proposed directive.
Application of the Guidelines of the European Securities and Markets Authority on certain aspects of the suitability requirements
May 19: Luxembourg has aligned its regulatory approach with the European Securities and Markets Authority's (ESMA) Guidelines on suitability requirements and the format of periodic statements for portfolio management activities under the Markets in Crypto-Assets Regulation (MiCAR). The guidelines apply to crypto-asset service providers offering advisory or portfolio management services related to crypto-assets. By adopting these ESMA Guidelines, the CSSF aims to promote consistent supervisory practices across the European financial system.
The EBA repeals its Guidelines on the specification of types of exposures to be associated with high risk
May 16: The European Banking Authority (EBA) officially repealed its Guidelines on identifying high-risk exposures, following the adoption of the revised Capital Requirements Regulation (CRR 3). This move is intended to give the market greater legal clarity.
Originally published on March 15, 2019, under the mandate of Article 128 of the previous CRR, the Guidelines outlined which exposures qualified as “high risk.” However, CRR 3 eliminates this exposure class. Article 128 now addresses only ‘subordinated debt exposures’, rendering the Guidelines obsolete.
ECB overhauls supervisory review process for greater efficiency and risk focus
May 15: In its May 2025 Supervision Newsletter, the European Central Bank (ECB) announced significant reforms to the Supervisory Review and Evaluation Process (SREP). These changes aim to streamline supervision by delivering clearer, more strategic decisions that concentrate on key risks. Starting this summer, banks will receive draft SREP decisions in a new, simplified format designed to enhance communication and facilitate more effective dialogue between banks and supervisors. The reforms are part of the ECB's broader initiative to reduce unnecessary complexity while maintaining the resilience of European banks.
ECB enhances ICAAP oversight to strengthen bank capital management
May 14: The European Central Bank (ECB) is intensifying its scrutiny of banks' Internal Capital Adequacy Assessment Processes (ICAAP) to ensure robust capital management. The ECB emphasizes the need for banks to integrate ICAAP into their strategic decision-making, aligning capital planning with risk profiles. This enhanced supervisory approach aims to promote proactive risk management and ensure that banks maintain adequate capital buffers to withstand potential financial stresses. The ECB's focus on ICAAP underscores its commitment to reinforcing the resilience of the European banking sector.
U.S. and Canada
All Agree to Pause the Stress Testing Lawsuit
May 27: The Federal Reserve (FRB) and several industry groups have agreed to pause their stress-testing lawsuit given the FRB’s expected changes. The FRB will issue a proposed rulemaking notice by September 30 to include:
- Disclosing the models it will use in its stress testing,
- Seeking public comment on scenarios it will use, and
- Seeking public comment when any material changes are made to the models or scenarios.
The Bank Policy Institute (BPI) and the American Bankers Association (ABA), along with other industry groups, stated that this is a sincere effort to improve the transparency and accountability of the stress testing regimen.
OSFI Quarterly Release Announcements
May 22: As part of its Spring 2025 Quarterly Release Day, the Office of the Superintendent of Financial Institutions (OSFI) announced three consultations and other changes. The consultations and changes balance new innovations and modernization within the industry with sound supervisory oversight. This allows institutions to compete and take reasonable risks while also protecting depositors, creditors, and policyholders.
OSFI is consulting on the following:
Public consultation on the draft Liquidity Adequacy Requirements (LAR) Guideline
- OSFI is beginning a 60-day consultation on proposed changes to the LAR Guideline to enhance the stability of financial institutions and ensure they have enough liquid assets to meet their obligations to depositors and creditors even during challenging times. This includes proposed new funding categories for deposits involving non-bank financial intermediaries and for products such as structured notes, a type of deposit where returns are linked to the value of other securities. These proposed updates complement previous updates made on intraday liquidity in the LAR Guideline, including the introduction of a new Intraday Liquidity Regulatory Return, developed in collaboration with the Canadian Bankers Association.
Public consultation on the Internal Liquidity Adequacy Assessment Process (ILAAP) discussion paper
- OSFI is launching a 90-day consultation on Pillar 2 liquidity and funding risk, with a discussion paper describing a more structured supervisory review process for liquidity risk in Canadian deposit-taking institutions, specifically, an ILAAP. OSFI has identified funding and liquidity as the most prevalent risks facing Canadian deposit-taking institutions.
Public consultation on the draft Minimum Capital Test (MCT) Guideline
- OSFI is launching a 90-day public consultation on proposed changes to the MCT Guideline. OSFI is proposing to simplify the MCT guidance on insurance risk (specifically unexpired coverage). This is to ensure it is understood and interpreted consistently to address risk. OSFI also proposes updating regulatory adjustments to net assets available for insurance receivables and updating the capital confirmation requirements for user fees.
OSFI also announced the following:
Regulatory Notice on Adjustments to the Life Insurance Capital Adequacy Test (LICAT)
- The Regulatory Notice outlines two important updates that enhance insurers' flexibility in risk management and strengthen reinsurance oversight and transparency.
- The first removes the 5% cap on reduction in Tier 1 capital deduction with respect to stop-loss reinsurance. This gives insurers greater flexibility in capital management and aligns with principles-based regulation while maintaining robust oversight.
- The second ensures that the capital treatment for unregistered reinsurance of segregated fund guarantees aligns with other products.
On June 6, 2025, OSFI will hold a virtual Industry Day on the items released and the opportunity to ask questions.
Asia-Pacific
Bangko Sentral ng Pilipinas to ease regulations for Islamic Banking
May 13: The Bangko Sentral ng Pilipinas (BSP) is set to introduce new measures aimed at facilitating the growth of Islamic banking in the Philippines. These initiatives include easing regulations to attract more participants and enhancing the framework for Shariah-compliant financial services. The BSP's move is expected to promote financial inclusion and expand the scope of Islamic banking offerings in the country's financial landscape