Financial Regulation Weekly Bulletin - 3 July 2025

GENERAL

EUROPEAN SUPERVISORY AUTHORITIES

Integration of ESG risks in financial stress tests - ESAs consult on draft joint guidelines - 27 June 2025

The European Supervisory Authorities (comprising the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA)) (ESAs) have published a joint consultation paper on draft joint guidelines on ESG stress testing under the Capital Requirements Directive (2013/36/EU) and the Solvency II Directive (2009/138/EC). The guidelines set out how competent authorities for the banking and insurance sectors should integrate ESG risks when performing supervisory stress tests and seek to harmonise methodologies and practices among supervisors. 

Feedback is welcomed by 19 September 2025. The ESAs will hold a public hearing on the draft guidelines on 26 August 2025. They will consider feedback on the proposals in Q3 and Q4 2025 and intend to finalise the guidelines by the end of 2025. The ESAs are required to publish the final joint guidelines by 10 January 2026. 

UK PARLIAMENT

Growth of private markets in the UK - Financial Services Regulation Committee launches inquiry - 2 July 2025

The House of Lords Financial Services Regulation Committee has launched an inquiry into the growth of private markets in the UK following the reforms introduced after 2008 and has published a related call for evidence. In particular, the inquiry will examine: 

• whether the regulatory capital and liquidity reforms introduced after 2008 have reduced banks’ ability or willingness to lend, pushing risk away from the banking sector and towards private markets; and
• how much visibility the Bank of England has on the size of these private markets, their interconnections with the banking sector and any potential spillover risks.

Comments are welcomed by 18 September 2025.

PRUDENTIAL REGULATION AUTHORITY

Future banking data - PRA publishes roundtable summary - 2 July 2025

The PRA has published a summary of the roundtable it hosted on 19 May 2025 with chief financial officers (CFOs) of the largest, most systemic firms operating in the UK to discuss future banking data. A recurring theme was the fragmentation of current reporting requirements, and there was widespread support among participants for the development of a data dictionary to help align standards and definitions. Firms also reported that aggregating and transforming data is a major driver of reporting costs, particularly where this occurs across different but similar requests.

Given this feedback, the PRA expects to focus further engagement this year on developing a clearer understanding of the desirability of, and best approach to, delivering a data dictionary across UK reporting, as well as moving towards more granular reporting. The PRA will develop a vision for a multi-year programme of change in reporting by the end of 2025 and will separately publish a discussion paper on current data use and challenges.

FINANCIAL CONDUCT AUTHORITY

Data decommissioning - FCA publishes policy statement - 27 June 2025

The FCA has published a policy statement (PS25/7) titled ‘Data Decommissioning: Removing reporting and notification requirements’, confirming (following a period of consultation) that it will decommission two regular data returns, a notification requirement and outdated Handbook content. The decommissioning of the returns outlined in the policy statement will come into force on 27 June 2025, and affected firms do not need to take any action. The FCA confirms that it will continue to review other regulatory returns as potential candidates for decommissioning.

Harnessing AI and technology - FCA publishes speech - 1 July 2025

The FCA has published a speech delivered by Jessica Rusu, FCA chief data, information and intelligence officer, on harnessing AI and technology to deliver the FCA’s four priorities that form part of its strategy for 2025 to 2030 (published in March 2025). 

Among other things, Rusu highlights strong support for the FCA’s new AI live testing service, where applications will go live next week. She also notes stakeholder concerns regarding potentially ambiguous governance frameworks stopping firms from innovating with AI, and reiterates that the FCA believes its existing frameworks (such as the Senior Managers Regime and the Consumer Duty) give it oversight of AI without the need for new rules.  

Rusu ends by remarking that the FCA is “tech positive and open for business” and “wants the UK to be a global hub for AI adoption”. To achieve this, the FCA and industry must work together. 

Tackling non-financial misconduct in financial services - FCA publishes policy statement and further consultation paper - 2 July 2025

The FCA has published a policy statement and a further consultation paper (CP25/18) on tackling non-financial misconduct (NFM) in financial services. This follows its March 2025 announcement that it would not be taking its work on diversity and inclusion forward (which it consulted on in September 2023 (CP23/20)), save for the proposals on NFM, as reported previously in this Bulletin. 

CP25/18 confirms the final rules in a policy statement (detailed in Chapter 2) that extend existing NFM rules in banks to non-banks. Specifically, the FCA is expanding the scope of the Code of Conduct (COCON) sourcebook to non-banking firms to make it clear that serious misconduct such as bullying, harassment and violence is a matter of regulatory concern. The new rule will match that in banks for these types of NFM from 1 September 2026. 

The paper also sets out (in Chapter 3) the FCA’s proposals for new Handbook guidance in COCON and the Fit and Proper Test for Employees and Senior Personnel (FIT) sourcebooks. The FCA explains that the proposed guidance seeks to make it easier for Senior Managers and Certification Regime firms to interpret and consistently apply the conduct rules, as well as clarify statutory and FCA requirements for fitness and propriety. Feedback on the draft guidance is welcomed by 10 September 2025. The FCA intends to set out its final regulatory approach before the end of 2025. 

Finally, the FCA confirms that it is not proceeding with any amendments to the Threshold Conditions (COND) and Senior Management Arrangements, Systems and Controls (SYSC) sourcebooks, and of particular note, confirms that its existing rules and guidance on regulatory references in SYSC 22 are sufficient.  

FINANCIAL OMBUDSMAN SERVICE 

Financial complaints hit a six-year high - FOS publishes complaints data - 2 July 2025

The Financial Ombudsman Service (FOS) has published its annual complaints data and insight for 2024/25, covering the period between 1 April 2024 to 31 March 2025. The FOS reports that it received 305,726 new complaints in this period - the highest level of complaints for six years and a 54% increase on complaints reported in the previous year. It has seen rises across most of the main product areas, with complaints for some issues and products at their highest ever recorded levels. This includes complaints about motor finance commission, fraud and scams, and credit cards. The FOS further highlights that this significant increase in demand, driven in large part by concerns around motor finance and unaffordable lending, is adding substantial pressure to the current redress system.

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SECURITIES AND MARKETS

HM TREASURY

Draft Markets in Financial Instruments (Miscellaneous Amendments) Regulations 2025 - 3 July 2025

The draft Markets in Financial Instruments (Miscellaneous Amendments) Regulations 2025 (the Regulations) have been published, together with a draft explanatory memorandum. In short, the draft Regulations retain key definitions within the MiFID Organisational Regulation (or MiFID Org Regulation) (that is, UK Commission Delegated Regulation (EU) 2017/565) in domestic financial services legislation. A subsequent commencement statutory instrument will be made to revoke the MiFID Org Regulation and bring the Regulations into force.

The explanatory memorandum observes that, without having the key definitions from the MiFID Org Regulation restated in domestic legislation, firms would be uncertain about whether their activity constitutes a regulated activity and gaps would emerge in the legislative framework.

HM TREASURY AND FINANCIAL CONDUCT AUTHORITY

Ancillary activities exemption - Draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2025 published - 3 July 2025

The draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2025 (the Order) has been published, together with a policy note.

The draft Order makes amendments to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) which would change the scope of the ancillary activities exemption (AAE). The AAE exempts firms from seeking authorisation as an investment firm if they trade in commodity derivatives, emission allowances or derivatives of emissions allowances as an ancillary activity to their main business. In short, the revisions will allow the AAE to be defined either based on a firm’s ancillary activity or an annual threshold. It would also give the FCA a rule-making power to determine a simpler and more proportionate ancillary activities test (AAT) and an annual threshold. Consequential amendments to the RAO are also made that relate to the FCA’s new power to make rules.

Separately, the FCA has published a consultation paper (CP25/19) on changes to the AAT, which coincides with the draft Order to allow it to define the conditions under which firms can rely on the AAE. The FCA proposes to establish three separate and independent tests to assess whether a firm can use the AAE. These include a new annual threshold test which will exempt firms that undertake trading in commodity derivatives on a relatively small scale, and which will be based on a specific monetary threshold. The test will also include the existing trading and capital employed tests, subject to some proposed modifications. A firm can use the AAE if it meets the conditions set out in any of the three tests.

Technical comments on the draft Order and feedback on the proposals in CP25/19 are welcomed by 28 August 2025.

FINANCIAL CONDUCT AUTHORITY

Supporting consumers' pensions and investment decisions - FCA consults on proposals for targeted support - 30 June 2025

The FCA has published a consultation paper (CP25/17) containing proposals for targeted support in pensions and retail investments. This builds on its December 2024 consultation paper (CP24/27) on a framework for targeted support for pensions. The FCA is now taking forward its proposals for investments and pensions with a small number of changes.

The FCA explains that targeted support would enable firms to make specific recommendations designed for groups of consumers with common characteristics (for example, consumers under-saving for retirement) to help them make informed financial decisions. As a new form of support, targeted support is intended to narrow the gap between information and existing forms of investment advice, and is designed to help consumers achieve better outcomes than if they had not received targeted support. The FCA confirms that the proposals do not change the regulatory framework for activities that can currently be delivered as guidance without FCA authorisation.

The provision of targeted support will be regulated differently to existing forms of advice, with a bespoke set of conduct standards set out in FCA rules and a dedicated authorisation gateway. To enable this, HM Treasury has published a press release announcing that the government will publish a policy note setting out proposed changes to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to create a new specified activity of targeted support. The note and draft statutory instrument will be published alongside the Chancellor’s Mansion House speech on 15 July 2025.

In addition, CP25/17 sets out the FCA’s intention to consult on simplifying its advice rules and guidance in the Conduct of Business Sourcebook (COBS) 9 and COBS 9A, in order to create a clearer distinction between simplified and more holistic advice. The FCA also plans to improve its existing guidance on the boundary between the provision of information and guidance on the one hand, and different forms of advice on the other. Finally, the FCA has published consumer research and behavioural testing that helped inform its proposals in CP25/17.

Feedback on the proposals is welcomed by 29 August 2025. The FCA aims to publish a policy statement containing final rules by the end of 2025. It will also consult later in 2025 on any consequential changes relating to the proposals.

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FINANCIAL CRIME

FINANCIAL ACTION TASK FORCE 

Travel rule supervision - FATF publishes report on best practices - 27 June 2025

The Financial Action Task Force (FATF) has published a report which seeks to assist with the implementation across FATF jurisdictions of the so-called ‘Travel Rule’, by setting out best practices in Travel Rule supervision. The Travel Rule requires virtual asset service providers and financial institutions to obtain, hold and transmit specific originator and beneficiary information immediately and securely when transferring virtual assets. 

UK GOVERNMENT

UK Russia regime sanctions - FCDO publishes guidance for non-UK businesses - 30 June 2025

The UK government’s Foreign, Commonwealth and Development Office (FCDO) has published guidance on UK sanctions for non-UK businesses operating outside the UK that are seeking to avoid circumvention of sanctions. The FCDO explains that the aim of the guidance is to help businesses in third countries to be aware of the risks of losing access to services and goods provided by UK and other international banks and suppliers. It also includes practical steps for businesses to manage sanctions risks and increase compliance. The guidance is specific to sanctions targeting Russia.

BANK OF ENGLAND AND PRUDENTIAL REGULATION AUTHORITY

Whistleblowing disclosures - Bank of England and PRA publish annual report - 27 June 2025

The Bank of England (the Bank) and the PRA have published their annual report on whistleblowing disclosures for the period between 1 April 2024 to 31 March 2025 under the Prescribed Persons (Reports on Disclosures of Information) Regulations 2017 (SI 2017/507). Alongside the disclosures received in 2024/25, the report contains three case studies that the Bank and the PRA describe as anonymised examples of the concerns reported and the action taken by their whistleblowing team. These relate to risk management, governance failings and financial irregularities.

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