Financial Regulation Weekly Bulletin - 8 May 2025

Welcome to the latest edition of the Financial Regulation Weekly Bulletin.

If you would like to discuss in more detail, please contact your relationship partner or email one of our Financial Regulation team.

BANKING AND FINANCE

EUROPEAN BANKING AUTHORITY

BRRD - EBA publishes final draft ITS on resolution planning reporting - 7 May 2025

The European Banking Authority (EBA) has published a final report containing updated final draft implementing technical standards (ITS) on the provision of information for the purposes of resolution plans pursuant to the Bank Recovery and Resolution Directive (2014/59/EU) (BRRD), repealing Commission Implementing Regulation (EU) 2018/1624. In an accompanying press release the EBA notes that proportionality has been a key driver behind the draft ITS, which seek to avoid duplication of data requests and to eliminate data points that are either redundant or of limited value.

The EBA will submit the draft ITS to the European Commission for endorsement before they are published in the Official Journal of the EU. The draft ITS provide for the new framework to be operational in 2026, with a first reporting reference date of 31 December 2025.

EUROPEAN CENTRAL BANK

Application of prudential framework for market risk - ECB publishes response to European Commission targeted consultation - 7 May 2025

The European Central Bank (ECB) has published its response to the European Commission’s March 2025 targeted consultation on the application of the EU’s market risk prudential framework.

The ECB states that postponing the start date for the application of the full new market risk framework for a further year to 1 January 2027 as suggested by the European Commission, or substantially amending the framework, would not be necessary from a prudential viewpoint and would not remove uncertainty about how the fundamental review of the trading book (FRTB) framework will finally be implemented. The ECB further notes that supervisors and banks have already done considerable work on FRTB implementation ahead of the framework’s planned entry into force in 2026. A delay would unfairly penalise banks that have duly prepared.

Instead, the ECB proposes a combination of policy options, including delaying the internal models approach and introducing the standardised approach with targeted adjustments, to help maintain momentum on FRTB implementation.

HOUSE OF COMMONS TREASURY COMMITTEE

Bank IT systems failure - Treasury Committee publishes correspondence - 8 May 2025

The House of Commons Treasury Committee (the Committee) has published the responses received from the chief executive officers of three banks and one building society concerning the failure of their IT systems on 28 February 2025, along with the initial letters the Committee had sent to the firms. 

The Committee wrote to the firms on 8 April 2025 asking several questions regarding the failure, which resulted in a number of their customers experiencing issues when making payments through online and mobile banking. The questions related to the impact the failure had on customers, how the firms responded to the outage, and the estimated compensation firms expected to pay out.

BANK OF ENGLAND

Next steps for the UK stablecoin regime - Bank of England publishes speech on digital money and assets - 6 May 2025

The Bank of England (the Bank) has published a speech delivered by Sarah Breeden, the Bank’s deputy governor for financial stability, on developments in digital money and assets, which includes discussion of the next steps for the UK stablecoin regime. Breeden sets out three themes of feedback the Bank received following its November 2023 discussion paper on a proposed regulatory framework for the use of stablecoins in retail payments. These are:

• first, that the proposed regime does not align with existing stablecoin business models whose revenues are based on interest income, and that the Bank’s focus on ‘singleness of money’ for stablecoins widely used for payments is in conflict with the existing use cases for stablecoins (for example, supporting settlement in the cryptocurrency ecosystem);
• second, transition to the Bank’s proposed regime may be more challenging the more it differs from the FCA’s regime for non-systemic stablecoins; and
• third, a regime which differs from those implemented in other countries may pose challenges for firms wanting to operate cross-border businesses.

Breeden goes on to outline the next steps for the UK stablecoin regime. She states that it would be helpful to differentiate more clearly between ‘payment coins’ which are used in the real world and other types of stablecoin, which have more investment use cases or play a settlement role. Similarly, Breeden distinguishes between very large, systemic payment coins and those which are smaller but may have the potential to be systemic in future (with the caveat that any rapid growth in stablecoins which do not start off as systemic must be appropriately managed).

To conclude, Breeden emphasises that the Bank is keen to ensure “that its regime enables safe, systemic payments coins in the UK to have a viable business model” and that, as it continues to develop proposals, the Bank will maintain its focus on the singleness of money and financial stability. She intimates that a sandboxed approach could be beneficial in a payment context, noting the success of the Digital Securities Sandbox.

PRUDENTIAL REGULATION AUTHORITY

Supervising building societies' treasury and lending activities - PRA consults on withdrawing SS20/15 - 8 May 2025

The PRA has published a consultation paper (CP11/25) on a proposal to withdraw its supervisory statement on supervising building societies’ treasury and lending activities (SS20/15). The PRA explains it considers that the expectations set out in SS20/15 are no longer consistent with its broader policy approach. The PRA also recognises that SS20/15 presents a potential level-playing field issue as it imposes prescriptive expectations on building societies that banks are not subject to, and that risk management in the building societies sector has become more sophisticated since SS20/15 was introduced. As such, the PRA comments that withdrawing the supervisory statement will help building societies to compete and grow in the UK market.

Feedback on the proposal is welcomed by 8 August 2025. The PRA proposes that the implementation date for the changes would be 1 January 2026.

FINANCIAL CONDUCT AUTHORITY

Mortgage rule review - FCA consults on simplifying rules and increasing flexibility - 7 May 2025

The FCA has published a consultation paper (CP25/11) on proposals to simplify responsible lending and advice rules for mortgages. This forms part of the work plan set out in the FCA’s letter to the UK government at the start of year, which outlined a number of commitments in support of growth.

The FCA proposes to remove the interaction trigger at MCOB 4.8A7R(3) to improve customer journeys and allow firms more freedom to interact with consumers during a sale or contract variation. It also proposes to remove the requirement for a full affordability assessment when reducing the term of a mortgage, and to amend the modified affordability assessment to permit lenders to enter into a new mortgage contract where it is more affordable than either (i) a customer’s current mortgage, or (ii) a new mortgage product that is available to that customer from their current lender.

Alongside these proposals, the FCA plans to retire two pieces of non-Handbook guidance, namely FG13/7 (which concerns dealing fairly with interest-only mortgage customers who risk being unable to repay their loan) and FG24/2 (which provides guidance for firms on supporting existing mortgage borrowers impacted by rising living costs). Feedback on the proposals is welcomed by 4 June 2025. The FCA intends to publish a policy statement in Q3 2025.

The FCA has also published a speech delivered by Emad Aladhal, the FCA’s director of retail banking, on supporting home ownership in the UK through mortgage reform. On the consultation paper, Aladhal comments that the proposals seek to “allow lenders greater scope to innovate and develop their own approaches to deliver good outcomes, and in doing so empower borrowers to make the right choices for their mortgage”. Aladhal also announces that, in June 2025, the FCA intends to open a discussion on the future of the mortgage market and conduct regulation.

Consumer credit regulatory reforms - FCA publishes policy statement - 7 May 2025

The FCA has published a policy statement (PS25/3) setting out its final rules and guidance for a new regulatory reporting return for consumer credit firms engaging in one or more of the regulated activities of credit broking, debt adjusting, debt counselling services and providing credit information services. This follows its September 2024 consultation paper (CP24/19) in which the FCA proposed to introduce the return. The FCA explains that the new return will replace elements of the CCR002 and CCR007, and that the new return seeks to make its expectations of firms clearer using common industry terminology to aid understanding.

Firms that are affected by these changes need to make sure they meet the requirements under the new rules so that their reporting is in line with the changes set out in PS25/3. Firms will also need to implement the changes within the timescales set out in Appendix 1. Although the FCA anticipates further consultations on the data it collects on the consumer credit market, it will delay further consultations on other consumer credit activities until after the implementation of these returns.

RECENT CASES 

Re Sainsbury's Bank plc and another [2025] EWHC 1062 (Ch), 1 May 2025

Part 7 of FSMA - banking business transfer scheme - unstamped applications

The High Court has approved a banking business transfer scheme (the Scheme) which effects the transfer of substantially all of the banking business of Sainsbury’s Bank plc (Sainsbury’s) to National Westminster Bank plc. The Scheme marks the culmination of a strategic review of Sainsbury’s business and the decision that Sainsbury’s should focus its efforts on its retail business and dispose of its banking operations, including credit cards, personal loans and savings accounts. The Court sanctioned the Scheme, having considered the submissions and documents supporting the Scheme, along with objections put forward by customers.

Among other things, the Court considered the requirement under regulation 5(5) of the Financial Services and Markets Act 2000 (Control of Business Transfers) (Requirements on Applications) Regulations 2001 (SI 2001/3625) for a copy of the application to be supplied free of charge to the PRA and the FCA. It suggested that an “unstamped application suffices provided, of course, that it is issued through the court and authentic, and that it is served in time”.

Back to top

ASSET MANAGEMENT

FINANCIAL CONDUCT AUTHORITY

Smaller asset managers and alternative business models - FCA publishes findings of multi-firm review - 8 May 2025

The FCA has published the findings of its multi-firm review of business models for smaller asset managers and alternatives. The FCA carried out the review across three phases in April 2023, November 2023 and September 2024, covering 410 firms with assets under management worth less than £1 billion.

The findings highlight several areas requiring improvement, including in relation to ensuring high-risk investments are only sold to appropriate clients, conflict management arrangements and understanding how the consumer duty applies to business models.

The FCA will continue to monitor firm conduct in these areas, including through subsequent tranches of this questionnaire, with a particular focus on its supervisory priorities as set out in its February 2025 portfolio letter to asset managers and alternatives.

Back to top