EU & UK Reg Round-Up: 09/07/2025

European Banking Authority

The EBA consults to amend its technical standards on own funds and eligible liabilities

9th July 2025

The European Banking Authority (EBA) launched a public consultation to amend the EU Delegated Regulation on own funds and eligible liabilities under the Capital Requirements Regulation (CRR). The primary proposal is to reduce the processing time for applications to reduce own funds and eligible liabilities instruments from four to three months, aiming to simplify processes and enhance flexibility in capital planning for institutions. This change reflects insights gained by competent and resolution authorities and aligns with the EBA’s 2021 commitment to monitor application processes. Additionally, the simplified procedure for reducing MREL-eligible liabilities for liquidation entities is proposed for removal, consistent with recent Level 1 text amendments. The consultation is open until October 9, 2025.

The EBA Publishes Hotfix for Reporting Framework 4.1

4th July 2025

The European Banking Authority (EBA) released a hotfix for its Reporting Framework 4.1 to address technical issues identified in the initial release, ensuring consistency and accuracy in reporting requirements for financial institutions. The EBA published a list of issues and corrections, detailing fixes applied in the hotfix and interim solutions for issues to be resolved in Framework 4.2, available on the EBA’s Reporting Framework 4.1 webpage. Additionally, the EBA announced a delay in the mandatory adoption of the xBRL-CSV reporting format under Framework 4.2, shifting the reference date from December 2025 to March 2026 to allow institutions more time to adapt their systems.

List of issues: https://www.eba.europa.eu/sites/default/files/2025-07/91e9ea35-b1fa-48c2-a82a-8a2fae949abf/Hotfix-%20List%20of%20issues.xlsx

The EBA publishes its final Guidelines on Acquisition, Development and Construction exposures to residential property under the standardised approach of credit risk

4th July 2025

The European Banking Authority (EBA) published its final Guidelines on the treatment of Acquisition, Development, and Construction (ADC) exposures to residential property under the Capital Requirements Regulation (CRR), as part of the first phase of the EU Banking Package’s credit risk implementation roadmap. The Guidelines specify conditions allowing institutions to apply a 100% risk weight to ADC exposures instead of 150%, provided they meet specific credit risk-mitigating criteria. These conditions include: (1) at least 50% of contracts being pre-sale (with ≥10% cash deposit), pre-lease (with ≥3 months’ lease deposit), or sale/lease contracts; and (2) obligors having at least 25% equity at risk (reduced from 35% following consultation feedback and 2024 Quantitative Impact Study data). For public housing, flexibility is introduced, allowing the first condition to be met if demand exceeds supply at the municipality level, with a lower 20% equity requirement and expanded eligibility for subsidies, grants, and junior loans. These Guidelines, shaped by a May 2024 consultation, aim to balance prudential standards with practical considerations for residential and public housing projects.

The EBA provides its technical advice to the European Commission on fees to validate pro forma models under the European Market Infrastructure Regulation

30th June 2025

The European Banking Authority (EBA) published its response to the European Commission’s Call for Advice on fees for validating pro forma models, such as ISDA SIMM, under the European Market Infrastructure Regulation (EMIR). The Technical Advice recommends: (1) a Delegated Act allowing the EBA to recover all direct and indirect costs related to its new role as central validator of pro forma models; (2) simpler, proportional methodologies for calculating the 12-month average notional amount of non-centrally cleared OTC derivatives to determine annual fees, addressing industry feedback on complexity; and (3) specific payment modalities and information requirements for fee determination and invoicing. Mandated by Article 11(12a) of EMIR, these fees will cover the EBA’s costs for validating pro forma models used by financial and non-financial counterparties to calculate initial margins. The response, informed by a March 2025 consultation, supports the Commission’s preparation of a Delegated Act.

The EBA and the ECB support harmonised implementation of updated NACE classification across EU reporting frameworks

30th June 2025

The European Banking Authority (EBA) and the European Central Bank (ECB) endorsed the Joint Bank Reporting Committee’s (JBRC) advice to implement the updated NACE Rev. 2.1 statistical classification of economic activities in a harmonized manner across EU statistical, supervisory, and resolution reporting frameworks, effective for reporting from January 1, 2026. The updated classification, adopted by the European Commission in October 2022, aims to reduce reporting costs for banks and enhance data quality. This coordinated approach, consulted through the Reporting Contact Group (RCG), reflects the EBA and ECB’s commitment to minimizing burdens on institutions while improving analytical consistency. The related Q&A 2024_7158 will be archived as obsolete.

The banking sector in the EU continues to show resilience in capital, liquidity and profitability, but geopolitical events could pose significant challenges for the industry

27th June 2025

The European Banking Authority (EBA) published its Spring 2025 Risk Assessment Report (RAR), accompanied by the Risk Assessment Questionnaire (RAQ), analyzing the risk landscape and funding plans of EU/EEA banks. The report highlights that, as of late 2024, banks maintained strong capital bases and historically high profits, though sustainability is threatened by rising uncertainty and financial market volatility. Liquidity levels remain robust, exceeding minimum standards, but face risks from increased volatility. Credit risks may rise due to exposures to sectors impacted by tariffs and geopolitical supply chain disruptions. Operational risks are growing, driven by cyber threats and fraud. Banks’ funding plans focus on leveraging deposits and issuing secured debt to support asset growth. Climate-related risks, both transitional and physical, pose significant challenges, with varying impacts across banks and countries.

Risk assessment report: https://www.eba.europa.eu/publications-and-media/publications/risk-assessment-report-june-2025

European Securities and Markets Authority

ESMA publishes its first Climate Transition Plan

08 July 2025

The European Securities and Markets Authority (ESMA) published its first Climate Transition Plan, aligning its operations with EU climate objectives and the Paris Agreement. ESMA commits to reducing gross greenhouse gas (GHG) emissions by 15.4% by 2027 and 31.4% by 2030, compared to 2023 levels, focusing on staff business travel, energy use, and food consumption. Short-term measures include introducing an annual GHG budget for air travel, optimizing floor occupancy to cut energy use, and incentivizing lower-carbon procurement practices. The plan, based on current data, will be regularly reviewed and updated, with progress reported annually in ESMA’s Annual Report and Environmental Statement.

ESAs sign Memorandum of Understanding with AMLA for effective cooperation and information exchange

03 July 2025

The European Supervisory Authorities (EBA, EIOPA, and ESMA) signed a multilateral Memorandum of Understanding (MoU) with the EU’s Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) to establish a framework for effective cooperation and information exchange. The MoU aims to promote supervisory convergence, facilitate timely and efficient information sharing, and foster cross-sectoral learning to combat money laundering and terrorist financing across the EU’s financial sector. AMLA, tasked with direct and indirect supervision of high-risk financial and non-financial entities and coordinating Financial Intelligence Units, will leverage this collaboration to enhance the consistency and quality of AML/CFT supervision. The ESAs, through their Joint Committee chaired by EIOPA in 2025, commit to supporting AMLA’s mandate to strengthen the integrity and resilience of the EU financial system.

Bank of England

Prudential Regulation Authority announces review of the Loan to Income (LTI) flow limit rule and offers interim modification by consent

08 July 2025

On July 9, 2025, the Prudential Regulation Authority (PRA), following a recommendation from the Financial Policy Committee (FPC), announced a review of the Loan to Income (LTI) flow limit rule, which currently restricts mortgage lenders to no more than 15% of new residential mortgage loans with an LTI ratio of 4.5 or higher per year. To provide flexibility during the review, the PRA is offering a modification by consent, effective immediately, allowing lenders to disapply the 15% LTI limit until June 30, 2026, or until the rule is revised. Lenders opting for this modification must submit details of changes to their business plans, risk appetite, and risk management frameworks within one month and report monthly on high LTI mortgage approvals and completions. The FPC’s recommendation aims to allow individual lenders to exceed the 15% limit while maintaining the sector-wide 15% aggregate flow, supporting competition and growth. The PRA will consult on permanent changes later and may revoke or revise the modification if the aggregate high LTI lending exceeds 15% or if it no longer aligns with regulatory objectives under the Financial Services and Markets Act (FSMA) 2000. Firms can request the modification via email to [email protected], with approvals published on the Financial Services Register.

PS8/25 – Updates to the UK policy framework for capital buffers

03 July 2025

The Prudential Regulation Authority (PRA) published its Policy Statement (PS) detailing amendments to the UK framework on capital buffers, following Consultation Paper (CP) 10/24. The changes, aligned with HM Treasury’s (HMT) updates via The Capital Buffers and Macro-prudential Measures Regulations (SI 2025/572), transfer certain regulatory requirements from assimilated EU law (SI 2014/894) to PRA policy materials under the Financial Services and Markets Act (FSMA) 2023. This includes revoking UK Technical Standards on Global Systemically Important Institutions (G-SIIs) identification, introducing a new Statement of Policy (SoP) for G-SII identification and buffer setting, and making minor amendments to SoPs for Other Systemically Important Institutions (O-SIIs) and related PRA rules. The updates streamline policy materials for clarity and usability, affecting PRA-authorised UK banks, building societies, designated investment firms, and their qualifying parent undertakings. The PRA received one supportive response to CP10/24, confirming the final policy aligns with its objectives and regulatory principles, unchanged by a new November 2024 HMT remit letter.

SoP – The PRA’s  to identifying Global Systemically Important Institutions (G-SIIs) and setting G-SII buffers

03 July 2025

The Prudential Regulation Authority (PRA) issued a Statement of Policy (SoP) detailing its approach to identifying Global Systemically Important Institutions (G-SIIs), the UK equivalent of Global Systemically Important Banks (G-SIBs), and setting their capital buffers, aligning with the Basel Committee on Banking Supervision (BCBS) framework. Applicable to PRA-authorised UK banks, building societies, designated investment firms, and their qualifying parent undertakings, the policy assesses G-SII status at the group consolidated level using a BCBS-aligned quantitative methodology across five equally weighted categories: size, interconnectedness, substitutability, complexity, and cross-jurisdictional activity. Firms scoring above 130 basis points are designated G-SIIs, with buffers ranging from 1.0% to 3.5% of risk-weighted assets (RWAs), met solely with Common Equity Tier 1 capital. Supervisory judgment may be applied in exceptional cases to designate or adjust buffer levels, subject to BCBS principles and peer review. G-SIIs face an additional leverage ratio buffer (ALRB) and cannot use G-SII buffer capital for other requirements. The PRA will announce G-SII designations and buffer rates annually by December 1, effective from January 1 of the second following year (e.g., 2024 announcements apply from January 1, 2026).