Financial Services SpeedRead: 21 May 2025 edition

Welcome to the latest edition of the Financial Services SpeedRead, a collection of bite-sized updates designed to help you keep on top of key regulatory developments in financial services over the preceding fortnight. Please get in touch if you want to explore any of the topics covered in this fortnight's edition of Financial Services SpeedRead in more detail.

Financial Markets

1.  HM Treasury publishes the Financial Services and Markets Act 2023 (Private Intermittent Securities and Capital Exchange System Sandbox) Regulations 2025

On 15 May 2025, HM Treasury published the Financial Services and Markets Act 2023 (Private Intermittent Securities and Capital Exchange System Sandbox (PISCES)) Regulations 2025 which introduces the PISCES sandbox, a multi-lateral system designed to test the efficiency and effectiveness of a new kind of share trading system for private companies. 

PISCES will allow for trading to occur at set intervals, give companies more control over when and how shares are traded and who can participate.  Participation in PISCES is limited to certain types of private companies and investors such as professional clients, high net worth individuals, sophisticated investors, and certain employee share schemes or trustees.

The Regulation will come into force on 5 June 2025 and remain in effect until 5 June 2030, after which the rules will expire. The final rules underlying PISCES are expected to be published shortly after the legislation comes into force. Companies wishing to participate will then be able to apply to the FCA and the first PISCES trading event is expected to take place in Q4 2025.

2.  HM Treasury publishes the Financial Services and Markets Act 2023 (Commencement No. 9) Regulations 2025 

On 13 May 2025, HM Treasury published the Financial Services and Markets Act (FSMA) 2023 (Commencement No.9) Regulations 2025. 

The Commencement Regulations have the effect of revoking certain provisions of retained EU law, including:

• UK MiFIR (revocation taking effect 14 May 2025): Commission Delegated Regulation (EU) 2017/583 on regulated technical standards supplementing UK MiFIR relating to transparency requirements for trading venues and investment firms in respect of bonds, structured finance products, emission allowances and derivatives; and 
• Capital buffers (revocation taking effect 31 July 2025): the Capital Requirements (Capital Buffers and Macro-Prudential Measures) Regulations 2014 (SI 2014/893) (Capital Buffers Regulations). HM Treasury published a draft statutory instrument restating the Capital Buffers Regulations in September 2024 (see here).

The Commencement Regulations also revoke various insurance related provisions of FSMA 2000.  

Banking and Prudential

3.  EU Commission publishes calls for evidence in relation to the Savings and Investments Union Strategy

On 8 May 2025, the EU Commission published two calls for evidence in relation to the Savings and Investments Union Strategy (see here, and here ). These propose the creation of an EU Regulation and a EU Directive, which would facilitate the establishment of a Savings and Investments Union aimed at enhancing financial opportunities for EU citizens and businesses.

The key initiatives as part of this strategy seek to:

• facilitate market-driven consolidation of market infrastructure and liquidity pools across the EU; 
• support a prudentially strong and sound asset management sector; and 
• ensure a more unified system of supervision across the EU. 

In doing so, the EU Commission expects to see reduced compliance costs and increased market efficiency, which would lead to larger liquidity pools. In turn, this would trigger greater access to finance for companies, increased cross-border investments and more financial inclusivity. 

The feedback period for the calls for evidence is set to cease on 5 June 2025, with the adoption of the legislation set for Q4 2025. 

4.  ESMA publishes response to the EU Commission's commodity derivatives review

On 6 May 2025, ESMA published their response to the EU Commission's consultation paper on the functioning of commodity derivatives, further to the Commission's targeted consultation on the review of the functioning of commodity derivatives markets published on 26 February 2025. ESMA's response, dated 2 May 2025, responds to the issues identified by the Commission on a topic by topic basis.

The key areas covered in ESMA's response are the following:

• data aspects (data harmonisation, reporting and data sharing, transparency and transaction reporting);
• ancillary activity exemption (Article 2(1)(d) and (j) MIFID II);
• position management and position reporting;
• position limits;
• C(6) carve out contracts; and 
• circuit breakers.

The response also addresses various elements covered by the Draghi Report such as the obligation to trade in the EU, the market correction mechanism ('MCM'), the application of organisational and operational requirements to the spot market, and enhanced supervisory cooperation in the energy sector. For further details on the final reports issued by ESMA, please see our previous Financial Services SpeedRead here.

5.  EBA publishes final report containing draft ITS on resolution planning reporting

On 7 May 2025, the EBA published a final report on the draft implementing technical standards (ITS) regarding the provision of information for the purposes of resolution plans under the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD). The ITS will replace and repeal the existing Commission Implementing Regulation (EU) 2018/1624.
 
The purpose of the new ITS is to align reporting requirements in the EU to promote harmonisation, proportionality and simplification of resolution planning reporting. Measures to support this aim include to relieve entities from repeated data requests, reduce the scope of reporting obligations for certain categories of reporting entities (based on their size and complexity), and remove duplication of overlapping data points.  

The EBA will submit the draft ITS to the European Commission for endorsement prior to being published in the Official Journal of the European Union. The draft ITS provide for the new framework to be operational in 2026, with a first reporting reference date of 31 December 2025. It will also publish the data point model, XBRL taxonomy and validation rules based on the final draft ITS in Q4 2025.

6.  UK Government publishes the Bank Resolution (Recapitalisation) Act 2025

On 15 May 2025, the UK Government published the Bank Resolution (Recapitalisation) Act 2025, which seeks to enhance the UK's regime for managing bank failures. 

The Act, through amendment of FSMA 2000 and the Banking Act 2009, introduces a new framework empowering the BoE to require the Financial Services Compensation Scheme (FSCS) to transfer to the BoE, upon request, funds required to cover the costs associated with the resolution of a failing (or failed) bank under the special resolution regime.

The Act will come into force on a date as set by HM Treasury through a commencement order.

7.  EBA repeals guidelines on the specification of types of exposures to be associated with high risk

On 16 May 2025, the EBA published a press release repealing its guidelines (EBA/GL/2019/01) on the specification of the types of exposures classified as high risk under CRR. 

The EBA's decision to repeal the guidelines is on the basis that "high risk exposures" no longer exist as an exposure class under CRR 3 (Regulation (EU) 2024/1623), given the revised Article 128 now only refers to 'subordinated debt exposures'.

8.  EBA publishes report on the monitoring of the liquidity coverage ratio and net stable funding ration in the EU

On 14 May 2025, the EBA published a fourth report on the monitoring of the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) in the EU. Following the Basel Committee's 'Report 2023 on the banking turmoil' (see here), the EBA aims to ensure liquidity risks on main deposit categories are effectively managed and mitigated.

The report clarifies how to calculate LCR inflows from open reverse repos without a maturity date within 30 days, outlining two approaches: (i) building on a trigger event to terminate the transaction; or (ii) relying on historical experience. The report emphasises that banks must clearly distinguish between operational deposits (used for daily business needs) and which are excess (not needed for operations), and states that only operational deposits should receive favourable liquidity treatment.

Finally, as an addendum to the 2023 report, the EBA confirms that regulatory expectations for interdependent assets and liabilities in the NSFR apply to indirect client clearing activities involving affiliated institutions, not just those using an IPS structure.

Fund Management

9.  FCA publishes policy statement on investment research payment optionality for fund managers

On 9 May 2025, the FCA published a policy statement (PS25/4) on investment research payment optionality for fund managers, finalising the new rules following the consultation in November 2024 (CP24/21).

The FCA will now permit fund managers to adopt a joint payment option for the purchase of research and execution services, subject to specific requirements, including:

• establishing written policies on approach to joint payments;
• separating and explaining research costs within total charges;
• implementing fair research cost allocation and budgeting processes;
• disclosing details of joint payments to investors; and
• regularly assessing the value and price of research.

The adoption of joint payments by fund managers of authorised retail funds will constitute a 'significant change', under the new rules requiring notification to both unitholders and the FCA. The new rules came into force on 9 May 2025.

Senior Managers and Governance 

No new entries.

Financial Crime

No new entries.

Retail Services

10. FCA publishes policy statement on a new consumer credit regulatory return

On 7 May 2025, the FCA published policy statement (PS25/3) on the introduction of a new regulatory return for consumer credit firms, following the FCA's consultation paper published in September 2024 in relation to the same (CP24/19).

The aim of the new return is to make the FCA's expectations of consumer credit firms clearer. The return will apply to firms carrying out the following activities: (i) credit broking; (ii) debt adjusting; (iii) debt counselling services; and (iv) the provision of credit information services.

Aside from the inclusion of specific questions pertaining to the permissions listed above, the return includes 5 mandatory sections for firms to detail, including:

• Permissions: the regulated activities undertaken in the last year;
• Business model: the financial products, goods and/or services provided by the firm; 
• Marketing: the channels used to acquire consumers; 
• Revenue: the total revenue generated from credit-related and non-credit related activities; and
• Staff: the number of employees, as well as details of incentive and remuneration arrangements. 

In the long term, the FCA foresees the gradual replacement of all of its existing consumer credit reporting returns but will be delaying the implementation of the remaining phases in this process to avoid over-burdening firms, in light of the three new Product Sales Data returns already introduced under PS24/3.

11.  FCA publishes consultation paper on mortgage rule review

On 7 May 2025, the FCA published a consultation paper (CP25/11) proposing changes to mortgage regulations as part of its ongoing Mortgage Rule Review (MRR). The proposed changes aim to simplify the mortgage framework, making it easier for consumers to manage their mortgages and for firms to understand their regulatory expectations in relation thereto. 
 
The FCA is proposing to:

• make it easier, faster, and cheaper for consumers to speak to their mortgage provider, reduce their mortgage term, or remortgage with a new lender;
• allow consumers to engage with their mortgage provider without always requiring formal mortgage advice; and
• simplify mortgage regulation to reduce the number of sources firms must consult. 

Responses to the consultation can be submitted by 4 June 2025. Following the consultation period, the FCA aims to publish a Policy Statement in Q3 2025. A public discussion on the future of the mortgage market will be launched in June 2025, considering the needs of different consumers and the wider UK economy.

12. ESAs publish updated consolidated Q&As on PRIIPS KID

On 5 May 2025, the EBA, ESMA and EIOPA (the ESAs) published an update to the consolidated Q&As on the packaged retail investment product key information document (PRIIPS KID). 

The updated Q&As address market risk measure class determination, performance scenarios and calculation of summary cost indicators. Prior to this, the consolidated Q&As were last updated in June 2024.

Digital Finance and Fintech

No new entries.

Payments

No new entries.

ESG

13.  EU Commission publishes call for evidence on the review of the EU SFDR

On 2 May 2025, the EU Commission published a call for evidence concerning the review of the EU Sustainable Finance Disclosure Regulation 2019/2088 (SFDR).

The EU Commission identifies that feedback to date on SFDR implementation indicates that while there is continued support for the broad objectives of the SFDR and the value of a common sustainability disclosure framework at EU level, there is a general lack of legal clarity on key concepts, inconsistencies with other parts of the EU's sustainable finance framework and limited relevance of some of the disclosure requirements.

Accordingly, the review (and subsequent impact assessment) seek to improve the functioning of the SFDR by addressing such limitations, with the aim of reducing operational and compliance costs in the EU and to facilitate sustainable investing.

Specifically, a revised SFDR would:

• accommodate different investor groups and types of financial products; 
• make it easier for retail investors to understand investment products; 
• better account for the international reach and exposures of investments; and 
• help direct investments towards diverse sustainability-oriented aims (while avoiding greenwashing).

The feedback period is set to end on 30 May 2025, with the adoption of the legislation being planned for the fourth quarter of 2025.

Other

14.  FCA publishes review into smaller asset management firms

On 8 May 2025, the FCA published its findings and feedback on its review of 410 asset manager and alternative firms of different business models, which was conducted across 3 phases in April 2023, November 2023 and September 2024.

The FCA's identified the following in relation to its review:

• High-risk investments: smaller firms offering high-risk investments were able to clearly categorise their products. However, some lacked sufficient processes for the types of investor assessments they need to undertake, or misunderstood their differences and applicability.
• Conflicts of interest: the FCA observed that while some firms evidenced good control practice of conflicts, some respondents had ineffective conflict management arrangements (e.g. senior staff holding more than 1 role and failure to identify the conflicts that could arise from such overlapping roles).
• Consumer Duty: most firms have made significant progress to implement the Consumer Duty, while others have yet to recognise how it applies to their business model and have not fully adjusted their processes. 

The FCA sets out good practice in relation to the above topics and will continue to monitor firm conduct in these areas.

Authors: Penny Chamberlain, Junior Associate; Tiegan Cormie, Junior Associate; Roni Fass, Junior Associate; Anjali Naik, Legal Apprentice