The EU and the UK regulators were both busy late in 2025 setting out updates to regulatory regimes and specifying the work programmes for the coming year. This article provides a summary of the most recent regulatory updates from ESMA and the FCA, as well as work programmes from other regulators, such as the European Banking Authority.
By GreySpark’s Declan Sharp, Consultant and Rachel Lindstrom, Head of Capital Markets Intelligence practice
EU Update
The EU is set to delay the implementation and enforcement of the sections of the EU AI Act that received major pushback from technology firms on the classification of ‘high risk’ activities within Article 6. The proposed amendments to the EU AI Act are part of the Digital Omnibus Regulation Proposal put forward in November 2025. These measures could be delayed until August 2027, while the rest of the act will be implemented by August 2026.
The AI Act contains four risk categories for AI models based on the use cases in which the system is deployed: unacceptable risk, high risk, limited risk and minimal risk. The act distinguishes between providers (developers or branded distributors of AI systems) and deployers (users of AI systems). Providers must conduct full conformity assessments, post market monitoring and register the system, while deployers ensure human oversight, logging and fundamental rights assessments. A deployer can become a provider if they:
- Rebrand an AI system under their name.
- Repurpose it for a high-risk application, e.g. credit evaluation.
- ‘Substantially modify’ a high-risk system, e.g. architecture, decision logic or retraining. (However, the definition of this threshold is unclear).
- Fine-tune general-purpose AI for high-risk uses.
In the financial services, it is likely that two categories of AI systems are classified as ‘high risk’ because of their potential impact on consumers’ financial wellbeing and overall market integrity: creditworthiness and risk assessment. Deployers of high-risk AI systems in credit underwriting will need to meet four key obligations under the EU AI Act: monitor system performance, suspend use when risks arise, report incidents promptly and ensure users receive proper disclosures. To inhibit the need for reactive legal and technical changes, firms should have a provider-deployer
technical and service offering matrix to understand how decisions could affect their obligations in the future. The European Bank Authority (EBA) announced that it had not found ‘significant contradictions…between the EU AI Act and EU banking and payment legislation’ and will be working with banks in the coming year for implementation of the EU AI Act into financial services.
The EU recently announced that it would delay the deadline for adoption of some of the MiFID II level II measures (Regulatory Technical Standards or Implementation Technical Standards) to 01 October 2027, but it provides limited detail on whether there will be a timeline, thereafter. The EC identified in the annex to its statement, that there were 115 ‘Non-essential empowerments’ (RTS or ITS) that are not essential for the operation of the level I legislation or for achieving current EU policy objectives. All 115 ‘empowerments’ within the letter are delayed until at least 01 October 2027. Some relevant ‘empowerments’ with affected timelines are shown in Figure 1.
Figure 1: Delay to Adoption Deadline of Some of the MiFID II level II Measures
Source: European Commission, Norton Rose Fulbright, GreySpark analysis
In November 2025, ESMA both published the adoption of various regulatory measures and adopted measures that would have application to firms in 2026. These are summarised in Figure 2.
The EU’s Markets in Crypto-assets (MICA) Regulation is expected to be fully implemented in member states by 01 July 2026. Under MICA, which first entered into force in December 2024, there was an 18-month transitional period in which firms in participating member states could continue to offer crypto-asset services and apply for a simplified authorisation procedure within Article 143 of MICA until July 2026. At the time of writing in January 2026, the number of Crypto Asset Service Providers is 143, a sharp rise in the number of licenses awarded by nationally competent authorities after the first ones were awarded in December 2024 and only rising to roughly 40 by mid-2025.
In December 2025, the EC launched a major legislative package, called the ‘Market Integration Package’, which is aimed at fully integrating EU capital markets, which have remained fragmented despite decades of the larger single market existing. The package assists the goals of the previously proposed Savings and Investment Union (SIU) that aims to streamline and ease the facilitation of pan-European banking and investment abilities for citizens, business and financial institutions. The package aims to simplify and harmonise fund regulatory procedures across Member States. It would streamline passporting and marketing notifications for UCITS and AIFs by moving these rules into the Cross‑Border Distribution Regulation, reduce inconsistent national requirements.
Figure 2: RTS and ITS To Be Implemented in 2026
Source: Official Journal of the EU, GreySpark analysis
The legislative package has been submitted to the European Council and Parliament. It is expected to take at least a year to pass for adoption. Key proposals:
A single amending Act that would reform key capital markets regulations:
- Regulation establishing the European Securities and Markets Authority (ESMA)
- European Markets Infrastructure Regulation (EMIR)
- Markets in Financial Instruments Regulation (MIFIR)
- Central Securities Depositories Regulation (CSDR)
- Distributed Ledger Technology Pilot Regulation (DLTPR)
- Markets in Crypto-asset Regulation (MiCA)
- Cross-Border Distribution of Funds Regulation (CBDR)
Facilitating innovation: The package strengthens support for distributed ledger technology (DLT) by expanding the DLT Pilot regime to ‘increase flexibility, proportionality and legal certainty’.
Strengthening EU-level supervision of market infrastructure: Proposes expanded direct supervisory powers for ESMA over key market infrastructures (CCPs, CSDs) and the introduction of ‘Pan-European Market Operator’ (PEMO) “status for operators of trading venues to streamline” approval processes.
UK Update
The UK regulatory regimes have diverged from MiFID II and MiFIR over the last 2 years. The Public Offers and Admissions to Trading Regulation 2024 (POATRs) framework regime for prospectus uses will come into effect on 19 January 2026. As part of this regulatory package, Public Offer Platforms (POPs) for corporate bond issuance will go live on 19 January 2026. Similarly, Private Intermittent Securities and Capital Exchange System (PISCES) will begin hosting auctions of private company shares in 2026. The FCA has now approved two operators for PISCES platforms, approving LSEG in August 2025 and challenger, JP Jenkins, in November 2025. In other market infrastructure news, the FCA is consulting on the Equity Consolidated Tape (CT).
Trade transparency will also be a significant focus of regulatory and compliance teams in UK capital markets businesses. The launch of the Consolidated Tape for Bonds was intended to be in 2026, but it is on hold due to a court challenge to the award of the contract. Furthermore, the new commodity derivatives regulatory framework published in Policy Statement PS25/1 will come into force on 06 July 2026. The UK’s new post-trade transparency regime took effect from 01 December 2025, and on the same date, the FCA removed the Systematic Internaliser (SI) regime for bonds, derivatives, emission allowances and structured finance products, changing the legal requirements of market making firms in these asset classes in the UK. Announced in November 2025, from 30 March 2026, firms will be allowed to engage in matched principal trading on the MTFs that they operate and will be able to run an OTF within the same legal entity in which they act as a systematic internaliser. This means that in equities markets, firms will be able to run both an SI and OTF, or in the other asset classes where the SI designation no longer exists, operate an OTF and continue market making businesses that would have previously warranted an SI classification. As of yet, no major British Investment Bank has announced that it would be operating an OTF in these asset classes.
The FCA has an ongoing consultation process on the reduction of transaction reporting requirements for trading in various asset classes, especially those admitted to EU exchanges. The FCA’s hope is that it will reduce U K-MiFID (on-shored) related reporting market costs by GBP 100 million a year. The Bank of England (BoE) is also proposing to cut out 37 reporting fields requirements for banks.
The BoE Financial Policy Committee (FPC) announced in December 2025 that it would be lowering the capital requirements for banks from holding 14% to 13% ‘tier 1 capital’ in terms of its total risk weighted assets. The FPC said that the assessment and ultimate decision to lower this requirement was based on the ‘macroeconomic costs of capital’ and the experience the BoE has had in the ‘10 years since it first assessed the appropriate overall level of capital’. Shares in the largest UK banks rose immediately after the announcement. The new capital requirements would take effect from 01 January 2027. The move came under some criticism for weakening the regulatory requirements of banks, not least from one of the original architects of the post-GFC regulation in the UK.
