Market Structure Update – What's going on? 6 November 2025 edition

Welcome to the latest edition of the Ashurst Market Structure Update.

Some key things we've seen in the last few weeks:

• AFM MiCA proprietary dealing view: the Dutch AFM says proprietary trading on your own account, with no clients, should not need a MiCA licence; they use MiFID's best execution four-fold test as litmus test (will other EU regulators follow? And what about liquidity to retail…?)
• Pre-hedging: IOSCO has set high-level rules for how dealers should pre-hedge, in line with existing codes, aiming to manage risk without giving room for unfair trading – it is another mini-step towards more explicit and restrictive rules in this space (which will be welcome my some, but not all).
• FCA fund tokenisation: this is big stuff, the FCA has consulted on using blockchain in authorised funds, with clear controls over the register, privacy and AML, and a simpler ‘direct to fund’ dealing model – comments run through Nov–Dec 2025, with final rules expected in the first half of 2026.
• Other highlights: the FCA opened retail access to crypto notes (where traded on a UK RIE), ESMA updated settlement and transparency rules, the FCA consulted on derivatives reporting and short selling, the UK extended CCP recognition, and global bodies pushed on crypto, BigTech, AML and prudential policy.

As usual, we'd love to hear from you so let us have any thoughts on these topics.

This edition will cover the following updates:

Trading and Settlement

1. FCA's latest Update on Appointing a Bond Consolidated Tape Provider 

2. ESMA Publishes Final Report on Amendments to Settlement Discipline RTS. 

3. ESMA's latest update on Publication of the first Single Volume Cap Data. 

4. ESMA Manual on post-trade transparency under MiFID II/MiFIR. 

5. FCA opens retail access to crypto ETNs 

6. IOSCO publishes final reports on pre-hedging and ESG benchmarks 

Transaction / Trade Reporting

7. FCA's Market Watch on UK EMIR Refit Implementation. 

8. FCA Consultation Paper CP25/29: Changes to the UK Short Selling Regime. 

Operational Resilience

9. ESMA Guidelines on Outsourcing to Cloud Service Providers 

10. BoE delivers Speech on Systemic Risk Perspective on Operational Resilience. 

Clearing

11. UK Government publishes the Extension and Amendment of Central Counterparties Regulations 2025. 

Digital Markets

12. AFM Reviews Client Relationship Criteria Under MiCAR for Proprietary Trading. 

13. FCA publishes consultation paper on fund tokenisation. 

14. IOSCO and FSB highlight ongoing regulatory gaps in global crypto and digital asset markets 

15. ESAs Continue Scrutiny of BigTechs’ Financial Services Activities in 2025. 9

16. EU Report on tackling Money Laundering and Terrorist Financing Risks in Crypto-Asset Services 

17. EBA Criticises European Commission’s Proposed Changes to MiCA Liquidity Standards 

18. ESMA MiCA Guidelines: Compliance snapshot 

Capital 

19. Macroprudential and monetary policy challenges in the expanding Non-Bank Financial Intermediation sector 10

20. EU Delegated Regulation publishes Amendments to CRR to postpone application date of own funds requirements 10

21.  PRA publishes update on the restatement of CRR requirements 11

Things we saw of interest

22.      FSB Highlights Risks from Incomplete Reform Implementation.

23.      Resisting Deregulation - safeguarding bank resilience.

24.      Monitoring AI adoption and vulnerabilities in the Financial Sector 

25.      ECB publishes paper on capital requirements and bank competitiveness 

Trading and Settlement

1. FCA's latest Update on Appointing a Bond Consolidated Tape Provider

On 24 September 2025, the FCA responded to a legal challenge after their decision to award the contract for the bond consolidated tape provider.

Due to the legal challenge, the FCA reports that the contract cannot be finalized as quickly as planned. The response also provides that a fair, competitive process was followed and will proceed as soon as possible, while continuing to engage with market participants.

2. ESMA Publishes Final Report on Amendments to Settlement Discipline RTS

On 13 October 2025, the European Securities and Markets Authority (ESMA) published its Final Report on amendments to the Regulatory Technical Standards (RTS) concerning settlement discipline under the Central Securities Depositories Regulation (CSDR). The report outlines key reforms aimed at improving settlement efficiency across EU financial markets.

3. ESMA's latest update on Publication of the first Single Volume Cap Data

ESMA has set to publish the first results of the new single volume cap mechanism (VCM) on 9 October. This single volume cap mechanism replaced the previous double volume cap system to ensure greater consistency across EU trading venues. It's an easier system than the previous Heath Robinson like architecture – time will tell whether the 7% cap on reference prices trades soothes policy fears.

Our bet is no, the reference price waiver and negotiated waiver are two waivers that public policy continually amends and revises (much more than the large in scale waiver).

4. ESMA Manual on post-trade transparency under MiFID II/MiFIR

On 10 October 2025, the European Securities and Markets Authority (ESMA) published  an updated Manual on post-trade transparency under MiFID II/MiFIR. As a stylistic point this Manuel now runs to over 400 pages, includes a number of visuals and diagrams – arguably, it is a work of art. What type of art, and whether you like it – well, that's probably in the eye of the beholder.

Given it started life as a (legally questionable) exercise in third country post-trade reporting guidance its grown legs.

Key amendments:

• MiFID II/MiFIR review: changes effective from March 2024, including revised post-trade transparency obligations and updated technical standards (RTS 1 and RTS 2). These are the most important amendments. There have been removals (e.g. RFQ / Voice non-equity trading now sits back outside the pre-trade requirements), extensions (in post-trade deferral time for some non-equity), changes in liquidity calculations and post-trade flags (both equity and non-equity).
• Designated Publishing Entity ("DPE"): the report highlights the DPE regime (which is live) and how branches of third country firms can receive this designation – but branches can only act in that way for the country they are branches in. This tracks general principles of EU law, seems something that could have been made more flexible.
• New guidance, on the treatment of transactions with a third-country dimension, deferral regimes, and the publication of aggregated or limited trade details. Much of this is a reflection of the agreed texts now – e.g. amending deferral times for equity and non-equity transactions. Trading venues will in particular need to have operationalised these changes.
• Transparency calculations, clarification of the process and data requirements for transparency calculations, including the transition from FITRS to transaction reporting data (as part of the burden simplification agenda). This is important for trading venues that ingest this data and supply this data (as changes will be required in operational set up).

ESMA will continue to update the Manual.

5. FCA opens retail access to crypto ETNs

The FCA announced that, from 8 October 2025, retail consumers in the UK will be able to access crypto exchange traded notes (cETNs) through FCA-approved, UK-based investment exchanges. This development marks a shift in the regulatory landscape, as retail access to cETNs was previously restricted.

Firms offering cETNs must adhere to strict financial promotion rules and the FCA’s Consumer Duty, which mandates clear communication and responsible conduct. However, cETNs will not be covered by the Financial Services Compensation Scheme (FSCS), so investors must be aware of the risks involved. The FCA’s ban on retail access to cryptoasset derivatives remains in force, maintaining a cautious approach to higher-risk products.

This update is part of the FCA’s broader strategy to establish a comprehensive regulatory framework for cryptoassets, including ongoing consultations on stablecoins and other digital asset products. The FCA noted that they will continue to monitor the market and review its approach to high-risk investments.

6. IOSCO publishes final reports on pre-hedging and ESG benchmarks

This is an emotive topic, so we will be brief (happy to discuss in further detail to those interested). On 3 November 2025, following their board meeting in Madrid, IOSCO published two final reports as part of its 2025 work plan. 

The publications covered:

1. Final report on Pre-Hedging – the report provides principle-based guidance to align the practice of pre-hedging trading by dealers. Key principles set (i) conduct expectations for dealer in managing risk and benefiting clients; (ii)  governance and control to protect clients; and (iii) practice consideration for clients (e.g:, monitoring outcomes, asking for information, RFQ design). The report also maps guidance on existing standards (FX Global Code, Global Precious Metals Code, FMSB). For some the guidance will not go far enough - there are many who in many situations consider pre-hedging a form of market abuse, while for others it is viewed as a risk management tool. The IOSCO reports seems to have charted a middle ground that may end up pleasing few but represents a trajectory to ever closer specific and detailed rules regarding pre-hedging by regulators. 

2. Final Report on ESG indices as Benchmarks – the report explains how ESG indices used as benchmarks should meet the same core principles as traditional financial benchmarks. IOSCO says administrators should therefore (i) strengthen governance and oversight, manage conflicts, and supervise third party data; (ii) be transparent about what the index is trying to measure, the data sources used, and where expert judgment is applied; and (iii) verify submissions, keep robust audit trails, and maintain complaint processes suited to ESG. Methodologies should also be clearly disclosed and changes explained in advance with their likely effects.

IOSCO is expected to publish later in November further reports on tokenization of financial assets, neo-brokers, and the valuation of collective investment schemes (CIS).

Transaction / Trade Reporting

7. FCA's Market Watch on UK EMIR Refit Implementation

On 30 September 2025, the FCA published its Market Watch 84 to review the first year of the UK EMIR Refit, which updated derivatives reporting requirements to improve data quality and align with international standards.

For those who wonder whether the data reported is being used. The FCA noted that: "Following April’s tariff announcements, we used OTC SONIA Swaps activity, enhanced by MiFID transaction data for other products, to build a clearer picture of participants’ rates exposure". It would have been interesting to hear a bit more about this – what did it tell the FCA / what data points were useful, etc - but perhaps it wasn't felt to be the time or place.

The good news is that most firms have met the deadlines for the new reporting requirements (31 March 2025) - with 95% achieving compliance by the deadline. However, some firms failed to uplift all trades, breaching their reporting obligations. The FCA highlights the key challenges included inadequate resource planning and over-reliance on third-party vendors, leading to delays and reporting errors.

The FCA emphasises that the responsibility for accurate reporting remains with the counterparty, even when using vendors (fair point, but equally the FCA will generally take into account how firms have engaged in vendors at what point / at what scale before throwing the book at any firm).
The FCA is increasing its monitoring of notifications and will focus on improving data quality, reconciliation rates, and firms’ systems and controls over the next year. Firms are urged to review their arrangements to ensure ongoing compliance with UK EMIR reporting requirements.

8. FCA Consultation Paper CP25/29: Changes to the UK Short Selling Regime

On 28 October 2025, the FCA published Consultation Paper CP25/29, setting out proposed changes to the UK’s short selling regime. The consultation follows the Treasury’s Short Selling Regulations 2025 (SSR 2025), which provide a new legislative framework for short selling in the UK. It's important in of itself, given that the SSR has been on the books since 2012 and earlier if you count the temporary ban on financial institution in September 2008 (some of us are old enough to recall sitting at our desks when that first came in thinking how radical it was. The FCA is proposing more evolution than radicalism this time around).

Why is the FCA making these changes?

The UK’s current short selling regime is based on assimilated EU law, which the SSR 2025 now seeks to replace. The FCA’s consultation builds on feedback from the Treasury’s earlier Call for Evidence, which indicated broad support for the existing regime but called for targeted modifications to reduce disproportionate burdens.

Main Proposed Changes:

Reporting Net Short Positions (NSPs):

• You’ll still need to report net short positions in UK-listed shares when they hit 0.2% of a company’s issued share capital, and at every 0.1% increment above that. However, you’ll now have until 23:59 on the next working day to submit your report (previously 15:30), giving you more time, especially helpful for firms operating across time zones.
• The FCA will clarify how to determine a company’s issued share capital, pointing to sources like Companies House and regulatory disclosures. You’re expected to use reasonable, publicly available information.
• If your group as a whole crosses the reporting threshold, only one group entity needs to report. If the group position drops below the threshold, individual entities must report their own positions on the same day.
• The FCA will introduce a new system allowing bulk submission of position reports, reducing manual effort for firms. This will go live six months after the main commencement day.

Covering Short Sales:

• The FCA will clarify what qualifies as an “easy-to-borrow” list and ensure that any such list reflects actual share availability.

Reporting Shares List (RSL):

• The FCA will publish a list of shares that are subject to short selling reporting and covering requirements. This replaces the old list of exempt shares.
• The FCA will look at where a share is mainly traded, its importance to the UK market, and whether similar rules apply in other countries.  This should mean fewer shares on the list and less compliance work for firms.
• The list will be updated every two years (on 1 April) and monthly for new admissions or removals.  It will be published in a format that’s easy to integrate into your systems.

Market Maker Exemption:

• New market makers only need to notify the FCA 15 days before using the exemption (down from 30 days).  Existing market makers can add new instruments immediately upon notification.
• Existing exemptions will continue until 1 June 2027.  After that, you’ll need to re-notify using the new system.
• An electronic system for managing market maker exemptions will be introduced six months after the new rules start.

Aggregate Net Short Position (ANSP) Disclosure:

• The FCA will publish the total net short position for each company, combining all individual positions above 0.2%. Individual firms will not be named, protecting your confidentiality. These figures will be published two working days after the relevant trading day, from 12:00 onwards.
• If a report is late or seems unreliable, the FCA may exclude it from the published total until it’s verified.

What should you do next?

The FCA is inviting feedback until 16 December 2025, and final rules will be published ahead of the new regime’s start date. One thing we think could be clarified / or made more explicit is how firms (in particular market makers) can take into account cross product positions at a central risk book level for hedging/trading.

Operational Resilience

9. ESMA Guidelines on Outsourcing to Cloud Service Providers

If you feel the dust has just settled on DORA issues this will send a shiver through you, but don't worry – in the main- a reflection of existing practice. The European Securities and Markets Authority (ESMA) published updated guidelines on outsourcing to cloud service providers on 30 September 2025, aiming to strengthen risk management and oversight for financial market 

Firms are required to ensure that their cloud outsourcing arrangements comply with ESMA’s key principles, which include conducting thorough pre-outsourcing analysis and due diligence to assess the cloud service provider’s ability to deliver services reliably and securely. Written contracts should contain clear provisions regarding data security, access and audit rights (sigh), as well as the ability to terminate arrangements without undue disruption to business operations. ESMA’s guidance  highlights the need to maintain an up-to-date register of all cloud outsourcing arrangements (this should be more or less in place in any event post DORA), which should be available to competent authorities upon request, and to implement robust risk management frameworks, including regular risk assessments and appropriate contingency plans. Firms must also ensure compliance with all relevant legal and regulatory requirements, such as data protection and confidentiality obligations, and notify competent authorities in a timely manner of any planned outsourcing of critical or important functions.

10. BoE delivers Speech on Systemic Risk Perspective on Operational Resilience

On 18 September 2025, the Bank of England’s Executive Director, Liz Oakes, delivered a keynote speech at the Cross-Market Operational Resilience Group 2025 Conference, focusing on the growing importance of operational resilience within the financial sector. One important point that reflects the regulatory rules around the issue was the importance of identifying maximum tolerable levels of disruption to important business services and using scenario testing to understand their ability, via recovery and response arrangements, to remain within these tolerances. It was noted that recent operational incidents have underscored the need for operational resilience frameworks and that firms must continue to invest in their capabilities to respond to evolving threats.

Clearing

11. UK Government publishes the Extension and Amendment of Central Counterparties Regulations 2025

On 30 October 2025, the UK government published the Extension and Amendment of Central Counterparties Regulations 2025. This regulation extends the temporary recognition regime (TRR) for overseas central counterparties (CCPs) and the transitional regime for qualifying CCPs (QCCPs) by 12 months.

The extensions take effect immediately, with the TRR now set to expire at the end of 2027 for most firms. The government plans to introduce new statutory instruments in 2026 to implement the permanent framework, after which the TRR and transitional regimes will be wound down.

Digital Markets

12. AFM Reviews Client Relationship Criteria Under MiCAR for Proprietary Trading

In short the position AFM's is that as long as carrying out "prop" activities (where there is no client service) there is no need to be authorised under MiCA. The regulator ties this to the four fold tests under MiFID best execution, which is a workable proxy. We will see if other regulators agree (as there is the potential for a degree of disunity on the point).

The AFM is currently engaging with stakeholders and intends to provide further guidance in the near future to clarify when a client relationship may arise under MiCAR, helping firms understand their regulatory obligations.

13. FCA publishes consultation paper on fund tokenisation

On 14 October 2025, the FCA published a consultation paper (CP25/28) proposing measures to accelerate the adoption of distributed ledger technology (DLT) within the UK’s authorised funds regime. The FCA views tokenisation as a means to enhance the UK’s competitiveness in investment management, offering operational efficiencies and cost savings by representing assets or ownership interests on DLT platforms.

The paper provides guidance for authorised fund managers (AFMs) on using DLT to maintain fund registers while complying with existing regulations, such as the Collective Investment Schemes sourcebook (COLL) and OEIC Regulations. Key points include the need for robust technology controls, such as eligibility verification and whitelisting, to manage peer-to-peer transfers and maintain register integrity. AFMs must retain independent authority over the register, with mechanisms to correct errors and process redemptions, and ensure contingency arrangements for DLT outages. The FCA also highlights privacy and risk considerations when using public DLT networks and the potential need for registration under Money Laundering Regulations.

The FCA explores how tokenisation could enable personalised digital portfolios, allowing investors direct access to assets via digital wallets and supporting customised portfolio management through smart contracts. This evolution may shift industry roles, with custodians focusing on blockchain interoperability and managers adopting more data-driven approaches.

A significant proposal is the Direct-to-Fund (D2F) dealing model, allowing investors to transact directly with the fund or depositary, reducing AFM balance sheet exposure and operational risk. The introduction of an Issues and Cancellations Account (IAC) would further streamline fund operations.

Looking ahead, the FCA is inviting feedback on Chapters 2-4 (tokenised fund operations and D2F model) by 21 November 2025, and on Chapter 5 (future tokenisation roadmap) by 12 December 2025. The regulator plans to publish a policy statement in the first half of 2026, finalising new rules and guidance.

14. IOSCO and FSB highlight ongoing regulatory gaps in global crypto and digital asset markets

The IOSCO Report has caught the focus of regulators. It comes at a time where there was a "bump" in daily leveraging at some exchanges (with different exchanges responding differently to the deleveraging that occurred). This highlights a point not raised by IOSCO in relation to exchange responses and operational resilience/controls.

On 16 October 2025, the International Organization of Securities Commissions (IOSCO) published its report on Thematic Review Assessing the Implementation of IOSCO Recommendations for Crypto and Digital Asset Markets. The review, done with the Financial Stability Board (FSB), focused on protecting investors and ensuring fair markets.

The report found that while progress has been made, there are still important gaps. These include:

• inconsistent rules between countries,
• risks of regulatory loopholes, and
• the need for stronger enforcement.

The fast-changing nature of crypto markets means risks to investors and market integrity remain. IOSCO urges countries to fully implement its recommendations as soon as possible and plans to help by sharing knowledge and supporting countries in building their regulatory systems. The report also highlights the need for better international cooperation, since most crypto service providers operate globally, and calls for improved ways to share information.

14. ESAs Continue Scrutiny of BigTechs’ Financial Services Activities in 2025

The punchline: the European Authorities expect "big-Tech" to scale the regulated business lines rapidly. Others suggest that at scale, the regulated business lines of these entities may be purchased or consolidated (depending on whether we are talking insurance or payments). Time will tell.

In more detail, the European Supervisory Authorities (ESAs) published the results of their 2025 monitoring exercise on BigTech companies’ financial services activities in the EU, such as Alphabet, Amazon, Apple, Meta, Microsoft and others. The exercise identifies that 11 out of 13 monitored BigTech groups have subsidiaries providing financial services in the EU, primarily payment services, e-money issuance and insurance intermediation. These services are delivered either through licensed entities or by relying on exclusions under the second Payment Services Directive (PSD2), such as the limited network and electronic communications exclusions. No new licences or financial service types have been introduced since 2023.

The ESAs highlight the broad client base of BigTechs, serving both retail and corporate customers, and their potential to scale rapidly due to their large user networks and integrated business models. The monitoring exercise emphasises ongoing efforts to enhance supervisory coordination, data sharing and regulatory oversight, particularly in light of new rules under the Digital Operational Resilience Act (DORA) and the Digital Markets Act (DMA), including the potential designation of BigTechs as critical ICT third-party service providers (CTPPs) and 'gatekeepers’ in the financial sector.

15. EU Report on tackling Money Laundering and Terrorist Financing Risks in Crypto-Asset Services

The European Banking Authority (EBA) and European Securities and Markets Authority (ESMA) have published a report addressing the risks of money laundering and terrorist financing in the crypto-asset sector. MiCA and the updated AML/CFT framework became effective in December 2024, with a transitional period for existing providers lasting until July 2026. We suspect significant increased intervention in this area in the year to come.

16. EBA Criticises European Commission’s Proposed Changes to MiCA Liquidity Standards

Ouch. The European Banking Authority (EBA) published two opinions criticising the European Commission’s proposed amendments to the draft Regulatory Technical Standards (RTS) under the Markets in Crypto-Assets Regulation (MiCA). The EBA warns that the Commission’s changes, such as allowing asset-referenced token (ART) issuers to invest reserve funds in non-highly liquid assets (like commodities or crypto-assets) and classifying all money market funds as highly liquid, would introduce significant liquidity risks and undermine the prudential soundness of the MiCA framework. The EBA argues these amendments are inconsistent with MiCA’s requirements that reserves be immediately and reliably convertible to cash, especially under stress.

The EBA also highlights that the Commission’s approach could create regulatory arbitrage and weaken alignment with existing banking liquidity rules, potentially threatening financial stability. While the EBA supports some non-substantive drafting clarifications, it urges the Commission to maintain strict liquidity, credit and concentration risk standards for crypto-asset reserves to ensure robust investor protection and market integrity.

17. ESMA MiCA Guidelines: Compliance snapshot

ESMA published three separate compliance tables showing how national regulators across the EU and EEA are applying its MiCA guidelines on (i) reverse-solicitation by third-country crypto-asset firms, (ii) transfer-service procedures and client rights, and (iii) suitability and periodic-statement requirements for portfolio management. For each set of guidelines, the vast majority of competent authorities — including those in Austria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, France, Germany, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Slovakia, Slovenia, Spain, Sweden, Liechtenstein and Norway — confirm full compliance.

A smaller group (notably the Hellenic Capital Market Commission, the Bank of Greece, Hungary’s MNB and the Central Bank of Iceland) states an intention to comply, usually by end-2025 or early-2026, while legislative processes are finalised.

Belgium, Poland, Portugal and Romania are recorded as “non-compliant by default” because each Member State has yet to designate a MiCA supervisor.

ESMA stresses that, after the application dates, any authority still “intending to comply” will be re-labelled non-compliant unless national measures have entered into force.

Capital

18. Macroprudential and monetary policy challenges in the expanding Non-Bank Financial Intermediation sector

More prudential regulation of non-bank sector is on its way (but not quite yet).

The European Central Bank (ECB) published a working paper examining the rapid growth and evolving risks of the non-bank financial intermediation (NBFI) sector in the euro area. Over the past fifteen to twenty years, NBFIs including investment funds, insurance companies, pension funds, and money market funds has grown to account for nearly half of global financial assets.
The publication identifies key vulnerabilities, such as liquidity mismatches, leverage, and interconnectedness, which can heighten financial stress and systemic risk.  It advocates for stronger macroprudential regulation, improved data sharing, advanced risk modeling, and comprehensive system-wide stress testing. The ECB also recommends that authorities adopt flexible, time-varying macroprudential tools to limit systemic spillovers from NBFIs.

These recommendations are positioned as ongoing policy priorities, with the development of effective macroprudential frameworks for the NBFI sector highlighted as a key next step.

19. EU Delegated Regulation publishes Amendments to CRR to postpone application date of own funds requirements 

On 19 September 2025, Commission Delegated Regulation 2025/1496 was published in the Official Journal of the EU. This regulation postpones the application date of the new own funds requirements for market risk under the Capital Requirements Regulation (CRR).

Specifically, it introduces a new Article 520a to the CRR, which stipulates that the current market risk requirements will continue to apply until 1 January 2027. After this date, the updated market risk requirements set out under CRR III will come into effect. This extension is intended to provide institutions with additional time to adapt their systems, processes, and controls to the new prudential framework for market risk. By maintaining the existing requirements for an extended period, the regulation aims to ensure a smoother transition and greater preparedness across the financial sector before the more stringent CRR III standards are implemented.

The Delegated Regulation will formally enter into force on 20 September 2025 and will apply from 1 January 2026.

20. PRA publishes update on the restatement of CRR requirements

On 28 October 2025, the Prudential Regulation Authority (PRA) published feedback on consultations regarding the restatement of Capital Requirements Regulation (CRR) provisions into the PRA Rulebook, following feedback from recent consultations. This update covers the definition of capital, the mapping of external credit ratings (ECAI mapping), and supervisory expectations for securitisation. 

These changes apply to PRA-regulated banks, building societies, and investment firms. The PRA will publish final rules in early 2026, with no need for firms to reapply for existing permission. The majority of the new requirements are scheduled to take effect from 1 January 2027, aligning with the UK’s implementation of the Basel 3.1 standards.

Things we saw of interest

21.  FSB Highlights Risks from Incomplete Reform Implementation

On 13 October 2025, the Financial Stability Board (FSB) issued a press release warning that incomplete implementation of agreed financial reforms continues to leave the global financial system exposed to potential shocks. In a letter to G20 Finance Ministers and Central Bank Governors, the FSB Chair stressed that while progress has been made, significant gaps remain in the adoption and enforcement of post-crisis regulatory measures. The FSB’s interim report on the G20 Implementation Monitoring Review further details these shortcomings, noting that inconsistent or delayed reforms undermine the resilience of financial markets and could heighten vulnerabilities during periods of stress. The FSB called on jurisdictions to accelerate efforts to fully implement outstanding reforms, emphasising the importance of international cooperation and robust oversight to safeguard financial stability.

These updates underline the ongoing need for vigilance and commitment to reform in order to strengthen the global financial system against future risks.

22. Resisting Deregulation - safeguarding bank resilience

On 3 October 2025, Isabel Schnabel, member of the Executive Board of the ECB gave a speech on the importance of maintaining robust banking regulation across Europe.

Schnabel reflected on the lessons learned from the 2008 financial crisis, noting that the regulatory reforms implemented in its aftermath have significantly strengthened the resilience of euro area banks.  Rather than proposing specific regulatory changes, she advocated for the preservation of the post-crisis banking regulations already in place, particularly those that mandate high capital and liquidity requirements.

She also focused on improving the efficiency of existing regulations by eliminating unnecessary duplication and harmonising reporting requirements throughout Europe. Additionally, she touched on the need to extend macroprudential regulation to cover non-bank financial institutions and stablecoins, given their increasing significance and interconnectedness with the traditional banking sector.

This speech highlighted the focus on the need to resist deregulation and to enhance the effectiveness of the existing regulatory framework.

23. Monitoring AI adoption and vulnerabilities in the Financial Sector

On 10 October 2025, the Financial Stability Board (FSB) published a report aimed at helping financial authorities monitor the adoption of AI and identify related vulnerabilities within the financial sector.
The report introduces a set of direct and proxy indicators designed to assist authorities in tracking AI adoption and its associated risks. It places particular emphasis on third-party dependencies and service provider concentration, especially in the context of generative AI (GenAI). The report also highlights improved data collection methods, such as simplified surveys increased data sharing among domestic regulators, as well as the use of AI tools to enhance monitoring and risk management.

The report also points to the importance of international cooperation, the harmonisation of definitions and indicators, and ongoing efforts to close data gaps and strengthen monitoring frameworks. A case study on GenAI supply chain risks is included, offering practical indicators for assessing the criticality, concentration, substitutability, and systemic importance of third-party AI service providers.

National authorities are encouraged to adopt the report’s indicators and recommendations to strengthen their monitoring of AI-related risks.  The FSB and international standard-setting bodies will continue to promote cross-border collaboration, share best practices, and work towards more consistent and comprehensive monitoring of AI vulnerabilities in the financial sector.

24. ECB publishes paper on capital requirements and bank competitiveness

ECB published a paper on whether euro-area capital rules hamper bank competitiveness. Drawing on supervisory data for 2019-2024 and applying Data Envelopment Analysis, the authors estimate “profit efficiency” for 35 listed significant institutions. Results show no statistically significant link between profit efficiency and the overall capital requirement (OCR), nor with its micro-prudential (Pillar 1 + P2R) or macro-prudential (buffer) components.

Capital levels do matter, but only to a point. Profit efficiency improves as the Common Equity Tier 1 (CET1) ratio rises, peaks at about 18 %, then falls—an inverted U-shaped relationship. Median CET1 ratios (~16 %) and OCRs (~11 %) sit below this peak, indicating that current regulation is not constraining competitiveness.

Efficiency instead correlates with larger size, stronger asset quality and a retail-tilted balance sheet. A wave of macro-prudential tightening from 2022, alternative efficiency metrics and an expanded sample of unlisted banks leave the main findings unchanged. The authors conclude that existing capital standards bolster resilience without undermining banks’ ability to compete; loosening them risks eroding financial stability for little competitive gain.

Well…