EU & UK Reg Round-Up: 27/05/2025

Sophie Rose -

European Banking Authority

EBA issues an opinion on a measure to address macroprudential risk following a notification by the Norwegian Ministry of Finance (23 May 2025)

The EBA issued an Opinion following a notification from the Norwegian Ministry of Finance about extending and recalibrating a macroprudential measure, originally introduced on 31 December 2020 and extended until 30 June 2025. The measure sets an exposure-weighted average risk weight floor for retail exposures secured by immovable property in Norway, applicable to institutions using the Internal Ratings-Based (IRB) approach. It aims to address systemic risks from high household debt and financial imbalances. The EBA does not object to the measure, effective from 1 July 2025 to 31 December 2026, but advises Norway to monitor overlaps with existing microprudential requirements and the phased-in output floor requirements to avoid unintended consequences.

EBA publishes onboarding plan to implement the Pillar 3 data hub (22 May 2025)

EBA published an onboarding plan for the Pillar 3 Data Hub (P3DH), a centralized platform for public disclosures under the Capital Requirements Regulation (CRR3). The plan outlines steps for large and other institutions to access and submit data via the EUCLID Regulatory Reporting Platform, with a phased-in approach allowing compliance with existing Pillar 3 obligations in 2025. The P3DH, effective from December 2025, enhances transparency and comparability of prudential data, fostering market discipline. FAQs support implementation, and transitional provisions give banks time to align processes. This aligns with the CRR3/CRD6 Banking Package and Basel III reforms.

EBA launches consultation on amended disclosure requirements for ESG risks, equity exposures and aggregate exposure to shadow banking entities (22 May 2025)

The EBA launched a public consultation on amendments to Pillar 3 disclosure requirements under CRR3, focusing on ESG risks, equity exposures, and shadow banking entities. The proposal introduces a proportionate ESG disclosure framework, simplifying requirements for small and medium banks while clarifying obligations for large-listed banks without adding new requirements. It aligns with the EU’s NACE codes and Taxonomy Regulation, enhancing the Green Asset Ratio (GAR) templates. Transitional measures and supervisory flexibility, including a potential no-action letter, aim to ease compliance burdens. An updated mapping tool supports implementation. The consultation runs until 22 August 2025, with a public hearing on 26 June 2025.

EBA observes that EU Deposit Guarantee Scheme funds to protect depositors against bank failures have reached €79bn (22 May 2025)

EBA published end-2024 data showing that EU Deposit Guarantee Scheme (DGS) funds reached €79 billion, meeting the minimum target of 0.8% of covered deposits by 3 July 2024. These funds, built over 10 years through bank contributions, protect depositors up to €100,000 per depositor in case of bank failure. Covered deposits in the EU grew by 3.2% to €8.6 trillion from 2023 to 2024. All 33 EU DGSs met or exceeded the target, with total EEA funds at €81 billion and covered deposits at €8.8 trillion. The data enhances transparency and accountability of DGSs.

The EBA publishes 2024 Report of its key achievements and activities (20 May 2025)

the EBA published the first part of its 2024 Annual Report, highlighting key achievements. The EBA completed over 93% of its Work Programme tasks, advancing Basel III reforms to enhance bank resilience and financial stability. It strengthened the Single Rulebook with guidelines on credit, market, and operational risk, and supported the European Green Deal through ESG risk guidelines, greenwashing reports, and scenario analysis. The EBA monitored financial stability amid high interest rates and geopolitical uncertainty, issuing two Risk Assessment Reports and transparency exercise results. It also updated stress-testing methodologies and conducted a climate risk stress test under the Fit-for-55 package, noting limited transition risk but potential macroeconomic impacts. 

Link to the annual report: Annual Report

EBA repeals its Guidelines on the specification of types of exposures to be associated with high risk (16 May 2025)

EBA repealed its Guidelines on the specification of types of exposures to be associated with high risk, originally published on 15 March 2019, due to changes in the Capital Requirements Regulation (CRR3). The Guidelines defined high-risk exposures under CRR Article 128, but this exposure class has been replaced in CRR3, which now only references subordinated debt exposures. The repeal ensures legal clarity for banks, effective immediately, impacting risk-weighted asset calculations and credit risk models for 2026.

EBA updates Report on the monitoring of the liquidity coverage ratio and net stable funding ratio in the EU (16 May 2025)

EBA published an updated Report on monitoring the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) in the EU, prompted by the 2023 banking turmoil and changing interest rate environments. The report clarifies LCR inflow calculations for open reverse repos without a maturity date, based on trigger events or historical experience, following Q&A 2024_7053. It addresses shifts in operational and excess operational deposits and updates guidance on retail term deposit penalties, building on the 2019 Report. An addendum to the 2023 NSFR Report clarifies interdependent assets and liabilities for indirect client clearing activities. The EBA will continue monitoring LCR/NSFR and assess potential updates to liquidity reporting requirements. 

Document: Report on monitoring of liquidity coverage ratio and net stable funding ratio in the EU

European Securities and Markets Authority

ESMA asks input on the retail investor journey as part of simplification and burden reduction efforts (21 May 2025)

ESMA launched a Call for Evidence (CfE) to gather feedback on the retail investor journey under MiFID II, aiming to simplify regulations and reduce barriers to capital market participation. The CfE examines retail market trends (e.g., speculative products and social media influence), MiFID II requirements like disclosures and suitability assessments, and the investor experience under the European crowdfunding framework. It seeks to balance investor protection with informed risk-taking. Responses are due by 21 July 2025, and ESMA will assess potential regulatory adjustments to enhance retail engagement.

Bank of England

Pillar 2A review – Phase 1 (22 May 2025)

The Prudential Regulation Authority (PRA) published a consultation paper (CP) outlining Phase 1 of its Pillar 2A review, addressing updates to methodologies and guidance for setting firm-specific capital requirements to cover risks not fully captured by Pillar 1. The CP aligns with the PRA’s near-final Basel 3.1 standards, enhances transparency, and reduces reporting burdens. Key proposals include:

  • Credit Risk: Remove the IRB benchmarking methodology, introduce systematic methodologies for exposures to central governments/central banks (CG/CB), regional governments/local authorities (RG/LA), and retail unconditionally cancellable commitments (UCCs), and set expectations for credit scenario analysis in ICAAPs. Reporting is streamlined by updating FSA076 and decommissioning FSA077 and FSA082.
  • Operational Risk: Enhance transparency by clarifying scenario analysis expectations, detailing Pillar 2A methodology in the Statement of Policy (SoP), and introducing good practices for significant firms. Minor clarifications are made to FSA072–075 templates.
  • Pension Obligation Risk: Remove PRA-prescribed stress scenarios and exempt firms with fully bought-in or well-funded (≥130% funding ratio) pension schemes from full Pillar 2A assessments, reducing FSA081 reporting requirements.
  • Market and Counterparty Credit Risk: Provide updated information on existing methodologies without policy changes, improving transparency in the SoP and SS31/15.

The proposals aim to advance the PRA’s safety and soundness objective, promote competition, and support competitiveness and growth. Implementation for pension and market risk changes is set for 2 March 2026, while credit and operational risk changes align with Basel 3.1 implementation. The consultation closes on 5 September 2025

Update to PS9/24 on the SME and infrastructure lending adjustments (22 May 2025)

Prudential Regulation Authority (PRA) published near-final Policy Statement PS7/25, detailing its Pillar 2A lending adjustments for SME and infrastructure exposures, following the removal of SME and infrastructure support factors under Pillar 1 as outlined in PS9/24. The adjustments aim to maintain constant overall capital requirements for these exposures, minimizing disruption to lending and supporting UK growth. Key points include:

  • Scope: Applies to PRA-authorised banks, building societies, and designated investment firms (excluding credit unions) with eligible SME and infrastructure exposures, based on prior CRR criteria. Buy-to-let business is excluded.
  • Calculation: Firm-specific adjustments are calculated as ΔRWA (difference between Basel 3.1 RWAs and RWAs with support factors applied) multiplied by a capital adjustment factor (CAF), covering Pillar 1, capital buffers, and systemic buffers. Adjustments are made during C-SREP or an off-cycle review for day 1 implementation.
  • Adjustments: For certain SME exposures (e.g., transactor retail, unrated corporate SMEs) and infrastructure exposures (e.g., high-quality project finance), ΔRWA is adjusted or set to zero to avoid double discounts or undercapitalization.
  • Credit Risk Mitigation (CRM): ΔRWA accounts for CRM by splitting exposures into protected and unprotected parts, applying the same methodology unless adjusted.
  • Output Floor: Adjustments are based on the underlying RWA calculation approach, unaffected by the output floor.
  • Reporting: Firms must submit data templates for eligible exposures with their ICAAP or during the Basel 3.1 data collection for day 1 adjustments. Non-submission opts firms out of adjustments.
  • Implementation: Effective on the Basel 3.1 implementation date, with final policy to reflect the UK’s EU withdrawal.

The policy advances the PRA’s safety and soundness objective, supports competition by applying to all eligible firms, and enhances UK competitiveness and growth by minimising lending disruptions. PS7/25 was published alongside CP12/25, which proposes broader Pillar 2A methodology updates.

International firms: Updates to SS5/21 and branch reporting (20 May 2025)

The Prudential Regulation Authority (PRA) released PS6/25, updating its supervisory approach for international banks in the UK, as outlined in Supervisory Statement SS5/21 and branch reporting rules. This applies to non-UK headquartered banks, their groups, and UK firms with global trading activities.

Key Updates:

  • Branch Risk Appetite: Increased FSCS-covered deposit thresholds by 30% to £130m and £650m to reflect inflation, and introduced a £300m threshold for instant access retail/small business deposits, encouraging subsidiaries over branches for higher amounts to enhance oversight, post-Silicon Valley Bank lessons.
  • Booking Models: Clarified expectations for UK trading banks and branches, focusing on prudent risk management for activities like secured financing, with streamlined terminology and cooperative resolution of regulatory conflicts.
  • Liquidity Reporting: Streamlined whole-firm LCR/NSFR data collection via the Branch Return Form, effective March 1, 2026, with flexible reporting dates and clarified stress reporting.

Impact: Supports UK competitiveness and growth by easing deposit limits and reporting burdens, while strengthening safety and soundness through better oversight. Implementation starts May 20, 2025, for SS5/21 updates, and March 1, 2026, for reporting changes.

Updates to the PRA’s approach of responsible openness to international banks (20 May 2025)

The PRA clarified its "responsible openness" approach for international banks in the UK via Policy Statement PS6/25. Key updates include raising FSCS-covered deposit thresholds by 30% to £130m and £650m, adding a £300m threshold for retail/small business instant access deposits to encourage subsidiarization, clarifying booking model expectations for prudent risk management, and streamlining liquidity reporting (LCR, NSFR) via the Branch Return Form, effective March 1, 2026. These changes, prompted by lessons from Silicon Valley Bank’s failure, support UK competitiveness and growth while enhancing safety and soundness.