Banking Regulations Update

The UK PRA’s new standards introduce 5 step change in how banks and insurers are expected to manage climate risk. Are you ready? The Prudential Regulation Authority’s final Supervisory Statement SS 5/25 raises expectations for identifying, governing, and managing climate risks, and it goes further than many firms think. Here are five shifts that matter most, compared with SS 3/19: 1️⃣ Boards are now explicitly on the hook Boards must formally review and document material climate risks, with climate risk appetite clearly cascaded across the business, not treated as a siloed sustainability issue. 2️⃣ Scenario analysis must influence decisions Firms are expected to run tailored, regularly updated climate scenarios and show how outputs are used in strategy and risk management, with methodologies clearly documented. 3️⃣ Litigation risk is now explicit Climate-related litigation is formally recognized as a transmission channel, a meaningful expansion of how non-financial risks are framed. 4️⃣ New expectations for insurers Insurers must now embed climate risks into ORSA and SCR assessments, reinforcing that climate risk is a core prudential issue. 5️⃣ Proportionality has been reframed Expectations scale with exposure to climate risk, not firm size. All firms must assess materiality and respond accordingly. The PRA has been clear: firms should already be demonstrably progressing on these elements, with supervisory assessment expected from June 2026. We’ve mapped these changes side-by-side against SS 3/19 to show what has actually changed, and what supervisors are likely to focus on next. We’re supporting clients with operations in the UK as they prepare for these expectations. 💬 Comment “SS 5/25” or DM me if you’d like our deep-dive on the new supervisory expectations and what “good” now looks like in practice. #PRA #SS525 #climaterisk #riskmanagement #financialregulation

The Prudential Regulation Authority (PRA) has just published a consultation paper (CP) with proposals to set requirements in rules and expectations for firms to report operational incidents, and their material third-party arrangements (including via a rules-based outsourcing and third party (OATP) register). This is a major milestone in UK operational resilience policymaking, which: 1) Will put the collection of firms' OATP registers on rules-based, systematic footing to improve the identification of critical third parties (CTPs). 2) Will introduce a framework for the reporting of operational incidents by firms, which is strongly aligned to the FSB's proposed Format for Incident Reporting Exchange (FIRE). Congratulations to all my colleagues who led on this instrumental piece of work, including Jo Hall. Our approach has been developed jointly with the FCA, which has also published a CP on it today (CP17/24). https://lnkd.in/efe7-gSF

Compliance isn’t one-size-fits-all. Global Anti-Money Laundering (AML) regulations vary widely. Understanding these differences is critical for staying ahead. Here’s how major regions stack up: ➡️ EU Prioritizes Know Your Customer (KYC) processes and due diligence. Focuses on identifying beneficial ownership. Sets a high compliance benchmark for transparency. ➡️ US Driven by the Bank Secrecy Act (BSA) and Patriot Act. Enforces stricter financial controls through the Corporate Transparency Act. Advocates for tech-driven solutions in transaction monitoring and risk management. ➡️ Asia Features a mix of regulatory maturity. Singapore and Hong Kong align with global standards, emphasizing risk prevention. Emerging markets are evolving rapidly to strengthen AML measures. ➡️ Africa Nigeria and South Africa lead with stronger AML regulations. Efforts focus on Financial Action Task Force (FATF) standards, corruption, and inclusion. Highlights the need for region-specific compliance strategies. 💡 What does this mean for businesses? Agility is key. Adapting to these diverse frameworks ensures compliance and protects reputations.

As we kick off the new year, we’ve reached a major turning point: the final set of Basel III requirements is now applicable to all EU banks. The implementation of the Basel III international standards in the EU is a major milestone, as it finalises the prudential regulatory reform of the banking sector initiated in response to the 2008 global financial crisis. This reform provides an important additional layer of resilience to the EU banking system. We hope to see similar progress soon in other jurisdictions, notably in the US, which will be crucial in ensuring financial stability and a level-playing field globally, which are both necessary conditions for the competitiveness of the EU economy.   The journey towards the EU’s Basel III implementation is not over yet and further work is needed in two key areas: first, the adoption of the regulatory and implementing technical standards that the European Banking Authority (EBA) was mandated to draft to operationalise the newly introduced requirements and, second, deciding on the way forward as regards the market risk aspects that were postponed by one year.   Work on the technical standards linked to the Basel III implementation in the EU is progressing well. The EBA has started to deliver on its mandates (full list at the link below), launching public consultations on several draft technical standards, gathering valuable feedback and comments from stakeholders. Two key implementing technical standards on reporting and disclosure by banks were published a few days ago and other technical standards that are essential for the functioning of the new framework have been prioritised and are forthcoming.   The date of application of the market risk prudential requirements under Basel III (the “Fundamental Review of the Trading Book”, FRTB) has been postponed by one year in the EU, by means of a delegated act, adopted by the Commission in July 2024 and endorsed by co-legislators in October 2024. However, the underlying concerns that prompted the Commission decision, such as issues in other major jurisdictions with the implementation of the Basel III standards, which could create an international unlevel playing field for banks in their trading activities, unfortunately are still there. The Commission will continue its monitoring of the international implementation of Basel and will engage with the co-legislators, the EBA and other stakeholders before deciding on the next step for the FRTB. This will be a priority for the Commission in 2025.   But today we should focus on the major achievement that the implementation of the Basel III standards represents for the EU. It ensures that the EU banking sector remains resilient and effectively supervised, ready to meet the new challenges we face. The stability of the EU banking system is the bedrock of the EU’s competitiveness. 📃 More info on the EBA’s roadmap on the implementation of the banking package 👇

Navigating New Waters: Unveiling the Enhanced EBA Guidelines on IRRBB and CSRBB As the financial landscape continuously evolves, so does the regulatory framework guiding it. The European Banking Authority (EBA) has recently introduced new Guidelines on Interest Rate Risk in the Banking Book (IRRBB) and Credit Spread Risk in the Banking Book (CSRBB), replacing the previous guidelines from 2018. These updated guidelines reflect a prudent adaptation to the current economic conditions marked by rising interest rates, high inflation, and financial market instability. The new guidelines are not merely a revision but an advancement, offering a more robust framework for the realistic and accurate identification and management of IRRBB and CSRBB. They delve deeper into the technicalities, providing financial institutions with more comprehensive tools to navigate the nuanced landscape of interest rate and credit spread risks. Moreover, the introduction of Regulatory Technical Standards (RTS) on the IRRBB standardised approach and supervisory outlier tests underlines the EBA’s proactive approach towards ensuring a consistent risk management framework across the banking sector within the European Union. I delve deeper into these new guidelines, comparing them with the previous ones, and elucidating the implications and advantages of the updated framework in my latest article. This comparative analysis aims to provide a clearer understanding of the EBA's enhanced guidelines, fostering a prudent and realistic approach towards managing the inherent risks in the banking sector. With the new guidelines, the EBA manifests its commitment towards fostering a resilient and stable financial environment within the European Union. The detailed exploration in the article offers insights into how financial institutions can align themselves with these guidelines to manage the associated risks effectively and contribute towards financial stability.

📣 It’s that time of year again 2025 was the year regulators stopped asking “do you have a policy?” and started asking “can you prove this actually works?” Across AML, fraud, sanctions, digital assets and AI, supervision has shifted decisively toward evidence, outcomes, and real-world effectiveness. Controls are no longer assessed on design alone, they’re being tested on performance, speed, and resilience. That’s why we’ve published Plenitude’s RegIntel: 2025 Recap & 2026 Outlook: an analysis of how financial crime regulation evolved across 2025, and what firms must now prepare for in 2026. The report brings together developments across the UK, EU, US, Singapore and global bodies, and shows how: • AML, fraud, sanctions, crypto and AI risk are rapidly converging • Supervisors are moving from policy review to deep operational testing • AI, instant payments and digital assets are reshaping both risk and regulatory expectations • Accountability is shifting decisively to demonstrable, board-level ownership Most importantly, the paper translates regulation into action. Each section distils change into: ✔ what actually matters ✔ Key Actions firms can take now ✔ a forward-looking 2026 outlook to support real planning, not box-ticking As we move into 2026, the message from regulators is consistent and unmistakable: ▶️Show me the evidence. ▶️Show me it works. 👏 This paper is never a small effort and I want to particularly call out the massive efforts of Thomas Hudson, Ciarán McMullan, & Daniel Keay As always, each year we aim to improve upon the previous year. Have suggestions? We'd love to hear them

India has officially notified the DPDP Rules 2025, triggering the operational rollout of the DPDP Act. For the banking sector, this is a defining moment. The rules now make data governance, breach reporting, consent, and security controls a regulatory obligation — not a best practice. Banks handle the most sensitive personal data in the country. With the new rules, they must strengthen security (encryption, access controls, audit logs), redesign customer consent journeys, and notify customers and the government quickly in case of a breach. Retention and deletion rules also tighten — data can’t be kept beyond its purpose without legal basis. Most large banks will now fall under the category of Significant Data Fiduciaries, bringing additional responsibilities like annual data-protection audits, DPIAs, and tighter oversight on data flows, especially cross-border. This will force banks to rethink their data architecture, vendor ecosystem, and operating model over the next 12–18 months. My view: this is not just a compliance change — it’s a trust opportunity. Banks that act early and communicate transparently will earn customer confidence and stand out in an increasingly digital financial ecosystem. The DPDP era has begun. Are we ready to lead it?

Major #SFDR Overhaul: EU sustainable finance rules completely restructured The European Commission just proposed a fundamental redesign of the Sustainable Finance Disclosure Regulation (SFDR). Here's what's changing: THE TRANSFORMATION FROM: Complex disclosure-heavy framework TO: Streamlined 3-category product system Impact: 25-50% cost reduction for financial firms NEW PRODUCT CATEGORIES Article 9 - Sustainable: Already sustainable investments | 70% threshold | Strictest exclusions (no fossils, high-carbon) Article 7 - Transition: Companies transitioning to sustainability | 70% threshold | Moderate exclusions plus fossil expansion limits Article 8 - ESG Basics: Broader ESG integration | 70% threshold | Light exclusions (weapons/tobacco/violations) BEFORE vs AFTER: KEY CHANGES Scope Before: Financial market participants + advisers After: Only product manufacturers/managers Entity Disclosures Before: Principal adverse impacts + remuneration policies required After: Completely eliminated (€56M annual savings) Product Framework Before: Articles 8 & 9 as vague quasi-labels After: Clear categories with specific criteria "Sustainable Investment" Before: Complex definition causing confusion After: Definition deleted; embedded in category criteria Disclosure Length Before: Lengthy templates, no limits After: Maximum 2 pages pre-contractual Marketing Rules Before: Must not contradict disclosures After: ONLY categorised products can use sustainability terms in names MAJOR DELETIONS ⇢Entity-level principal adverse impact disclosures ⇢Remuneration policy requirements ⇢"Sustainable investment" definition ⇢Entire Delegated Regulation 2022/1288 repealed NEW ANTI-GREENWASHING MEASURES ⇢Only categorised products can use ESG terms in names ⇢"Impact" term reserved for specific strategies ⇢Member States prohibited from adding requirements KEY ADDITIONS ⇢Fast-track: 15%+ EU Taxonomy-aligned = automatic qualification ⇢Formal data & estimates documentation requirements ⇢Clear fund-of-funds framework TIMELINE ⇢General application: 18 months after entry into force ⇢Insurance/pension products: 30 months (12-month grace period) WHAT DOES THIS MEAN ⇢For Asset Managers: Lower compliance costs, clearer rules, predictable supervision ⇢For Investors: Better comparability, reduced greenwashing, easier product matching ⇢For Markets: Efficient capital allocation, stronger single market, competitive advantage The EU is choosing clarity and enforceability over comprehensive complexity. This fundamental restructuring bets that simpler rules with stronger enforcement better serve both market integrity and the sustainable transition. #sustainablefinance #sfdr #esg #regulation #assetmanagement #greenfinance #compliance #europeanunion

GFTN Global Digital Assets Report This inaugural GFTN Global Digital Assets Report provides a comprehensive cross-jurisdictional analysis of the evolving digital asset ecosystem, focusing on market developments, regulatory trends, and forward-looking policy implications. The report is designed to serve as a practical reference for policymakers, central banks, industry participants, and international standard-setting bodies navigating the rapid transformation of digital money, tokenization, and decentralized finance. Thank You Arthur D. Little | Arjun Vir Singh 🞕 Trends and Key Highlights ➟ At least nine of 12 jurisdictions studied have implemented or are drafting digital-asset frameworks, signalling growing recognition of responsible innovation in the space. ➟ 47% of survey respondents highlighted that digital assets could enhance efficiencies in cross-border payments, while 36% projected new financial services driven by programmability and smart contracts. ➟ A majority of respondents surveyed see capital market efficiencies via tokenisation (56%) as key growth opportunities for digital assets, with nearly half (46%) also highlighting programmable money as an emerging frontier. ➟ Asia leads in cross-border payments and tokenisation pilots, driven by public-private collaboration and live projects such as Project Nexus. ➟ Europe continues to advance regulatory clarity through MiCA and digital-euro trials. ➟ The Middle East is emerging as a fast-growing innovation hub, leveraging digital-asset sandboxes and sovereign-wealth investment. ➟ The Americas are moving toward institutional adoption, supported by the U.S. GENIUS Act and listings of digital-asset exchange-traded funds. 🞕 Real-World Impact ➟ Small and medium enterprises (SMEs) gain faster, cheaper access to cross-border payments and financing through tokenised assets and programmable money. ➟ Migrant workers benefit from instant, low-cost remittances powered by stablecoins and interoperable payment systems. ➟ Investors can access fractionalised portfolios of previously illiquid assets such as infrastructure and real estate. ➟ Governments and regulators leverage blockchain-based transparency to improve supervision and public-sector efficiency. ➟ Financial institutions deploy blockchain and AI-enabled compliance tools to reduce settlement times and strengthen risk management. Excellent Report By combining first-hand inputs from global decision-makers with structured analysis of market activity and regulatory frameworks, the methodology provides a comprehensive and forward-looking assessment of the industry.

The Reserve Bank of India (RBI) draft guidelines on the Liquidity Coverage Ratio (LCR) - impact on the banking sector. These guidelines aim to enhance banks' liquidity resilience by adjusting the valuation of high-quality liquid assets (HQLA) and increasing run-off rates for certain deposit categories, notably digital banking deposits. Key Implications: ->> Incremental Deposit Requirement: Banks may need to mobilize additional deposits amounting to ₹2.7 lakh crore to comply with the new LCR norms. ->> Earnings Impact: The sector could experience a 1% decline in earnings due to the implementation of these guidelines. ->> Net Interest Margins (NIMs): The anticipated impact on NIMs varies between 3 and 26 basis points. Public sector banks (PSBs) are better positioned to absorb these changes, given their higher existing LCRs. In contrast, private sector banks like AU SMALL FINANCE BANK and IDFC FIRST Bank might face more substantial NIM declines of 26 and 22 basis points, respectively. ->> Credit Growth Constraints: Challenges in raising deposits may further constrain credit growth, which has already slowed to 11.9% as of November 2024. The forecast for FY25 credit growth has been revised downward to 11% from 12.5%, reflecting tighter liquidity conditions. The final LCR guidelines are expected to be implemented from April 2025. Banks will need to strategically balance asset-liability management to ensure sustainable credit growth while adhering to the evolving regulatory norms. #india #growth #banking #msmes #lending Findestination