FinReg Europe is a monthly overview of essential banking regulation news, published on the first Tuesday of every month.
TOP NEWS
➤ The European Commission has postponed implementing tougher trading rules under the final Basel III reforms in the EU for a second time, commission spokesperson Olof Gill said in a May 23 statement to S&P Global Market Intelligence.
The decision reflects implementation delays "by other major global jurisdictions, raising concerns on the international level playing field and the impact on EU banks," Gill said.
The EU started implementing most of the final Basel III reforms on Jan. 1, 2025, but had initially delayed adoption of the new trading rules, known as the Fundamental Review of the Trading Book, to Jan. 1, 2026, following delays in the UK and the US. The UK is due to start implementing all final reforms from Jan. 1, 2027, while the US timeline is unclear.
Large EU lenders with sizable global operations and big investment banks are seen as the most affected by the new trading rules. Sizing up capital rules for global systemically important banks (G-SIBs) shows that those based in Europe face some of the highest minimum requirements, Market Intelligence data shows. Nine of 13 G-SIBs with minimum common equity Tier 1 ratio requirements above 10% are based in Europe, with five based in the EU, according to the data.
➤ UK authorities are exploring potential changes to postcrisis ring-fencing regulations, which require domestic banks to separate their core retail banking businesses from their investment banking activities to protect taxpayers from future bailouts.
Sam Woods, head of the UK Prudential Regulatory Authority (PRA), has asked staff to review options for easing the ring-fencing rules without removing the core depositor protections envisioned in the regime, the Financial Times reported May 19.
UK Chancellor Rachel Reeves has also told the CEOs of HSBC Holdings PLC, Lloyds Banking Group PLC, NatWest Group PLC and Santander UK PLC that she is "open-minded" about potential amendments to the rules, Sky News reported. Reeves was responding to a letter from the four banks pushing for the regime's abolition, Sky News said.
Some of the banks' bosses spoke in favor of removing or easing ring-fencing rules during recent earnings calls. "The bar to be able to compete in the UK for banks has become stiffer and more difficult," HSBC CEO Georges Elhedery said in a first-quarter earnings presentation, noting the UK is the only major jurisdiction to have a ring-fencing regime.
Barclays PLC CEO C.S. Venkatakrishnan took a different view from peers during the group's first-quarter earnings call. He spoke against any relaxation or removal of the current regime, which he said offers an "extremely strong and secure form of depositor protection in the UK."
➤ European Commission looks to simplify SFDR next
The European Commission called for evidence and feedback on the Sustainable Finance Disclosure Regulation (SFDR) in a move to align the rules with its proposed simplifications of other major sustainability regulations.
➤ ECB reluctant to delay Basel III market risk rules as banks seek reprieve
The European Central Bank cautioned against a second implementation delay of FRTB rules under the final Basel III capital reforms amid an industry push to postpone.
➤ FinReg Europe: EC mulls Basel trading rules delay; ECB rejigs Pillar 2 regime
Regulatory action
– Swiss financial watchdog Finma flagged weaknesses in domestic banks' standards for evaluating mortgage applications and called for improving their approaches. Many banks tend to overestimate consumers' creditworthiness and grant a higher portion of financing to borrowers who do not meet their own affordability criteria, the regulator said May 22.
– The European Banking Authority (EBA) launched a consultation on proposed changes to EU banks' disclosure requirements for environmental, social and governance risks; equity exposures; and aggregate exposure to shadow banks, aimed at simplifying the process and reducing costs. The consultation runs until Aug. 22.
– The UK PRA introduced a new £300 million threshold for protected retail and small business deposits at foreign banks operating in the country. Beyond this threshold, international banks must run their local units as subsidiaries rather than branches, the regulator said May 20. The change was made partly in response to the collapse of US-based Silicon Valley Bank in 2023, when most of its UK unit's deposits were not covered by the local Financial Services Compensation Scheme.
– The UK is implementing new rules that will require buy-now-pay-later firms to run affordability checks before offering loans from 2026. The Treasury is also proposing reforms to the five-decade-old Consumer Credit Act, according to a May 19 statement.
– German financial market supervisor BaFin will exempt smaller banks from some of the EBA's ESG risk management guidelines, which it deems overly granular. BaFin also plans to only partially adopt EBA financial sanction monitoring guidelines, as some could be redundant in the country, it said May 7.
– The UK Financial Conduct Authority plans to restrict retail investors' use of credit cards to purchase crypto assets as part of proposals to regulate the fast-growing digital assets market. The regulator is seeking feedback on the proposals until June 13.
Fines & cautions
– Sweden's financial regulator has fined Swedbank AB (publ) 12.5 million kronor for lapses in the lender's protective security analyses. The bank skirted key components of the protective security regulatory framework, exposing the country to vulnerabilities, the watchdog said May 14. CEO Jens Henriksson said Swedbank's security protection systems were "robust" and the shortcomings had been remedied over a year ago.
– The UK PRA placed Bank of London Group Ltd. under enhanced supervision due to "historical matters" related to inaccurate record-keeping, lax regulatory reporting and governance failures, the bank said in its 2023 financial accounts filed May 13. Auditing firm EY flagged material uncertainties over the bank's capacity to continue operating.
– A Credit Suisse unit agreed to pay a $511 million settlement after pleading guilty to tax evasion charges, the US Justice Department said May 5. Credit Suisse Services AG conspired with clients to hide over $4 billion from the Internal Revenue Service in at least 475 offshore accounts, breaching a plea agreement from 2014, the DOJ said. Swiss bank UBS Group AG said it was not involved in the underlying conduct, which began before its takeover of Credit Suisse in 2023, and that it has zero tolerance for tax evasion.
