European financial institutions face a busy regulatory agenda. New EU benchmarking rules take effect from 01 September 2026, alongside T+1 settlement preparations and reforms covering third-country branches, private credit and operational risk. Switzerland is tightening post-Credit Suisse rules, while the UK advances fund liquidity, prospectus and MiFIR reforms. Meanwhile, regulators warn of rising leverage and AI-driven cyber risks.
By GreySpark’s Declan Sharp, Analyst Consultant, Capital Markets Intelligence practice
1.0 European Union
This quarter’s European regulatory agenda centres on implementation deadlines rather than new policy direction. The EU is working through a dense sequence of technical standards, from supervisory benchmarking and T+1 settlement readiness to consultations on private credit reclassification and operational risk management, while the Commission’s rejection of the EBA’s capital buyback RTS signals continued friction between the Commission and the EBA over the pace and proportionality of CRR implementation.
1.1 Supervisory Benchmarking
Implementing Regulation (EU) 2026/1872 updates the framework for benchmarking internal models under the Capital Requirements Directive. It takes effect on 1 September 2026 and introduces revised benchmark portfolios, new reporting templates and updated instructions, intended to keep supervisory assessments accurate and consistent across the EU.
1.2 Trading and Settlement Changes
ESMA used a statement on 20 July to press firms across trading and settlement to finish readiness work for the EU’s move to T+1 settlement. Firms must change their processes in line with the incoming rules by 7 December 2026, ahead of go-live on 11 October 2027. This is a significant post-trade deadline for any firm active in EU securities markets.
Separately on 7 July, the EBA published final guidelines on the authorisation of third-country bank branches under CRD. The guidelines harmonise an approach that national regulators had previously applied inconsistently, and the new rules matter directly to UK and US banks operating branch structures in the EU after Brexit.
1.3 EBA Publishes RTS on Private Credit
The EBA has published draft consultation papers on RTS covering the reclassification of investment firms as credit institutions, a further step in bringing private credit within existing credit regulation. The consultation runs until 25 November 2026 and addresses whether certain financial institutions should be classified as credit institutions, as CRD VI requires. It focuses on the following three areas:
- Threshold Calculation: Standardising the methodology for calculating the EUR 30 billion asset limit, now explicitly restricted to EU-domiciled entities.
- Reporting and Monitoring: Updating requirements for firms with assets exceeding EUR 5 billion, so that supervisors can identify potential reclassification triggers earlier.
- Waiver Criteria: Setting consistent factors for national regulators to weigh when deciding whether to exempt a firm from reclassification.
1.4 European Commission Rejects EBA’s Draft RTS on Capital Buyback Amendments
On 20 July 2026, the European Commission rejected draft RTS submitted by the EBA on the timing of applications for prior permission to reduce own funds and eligible liabilities, under CRR Articles 78 and 78a. The proposed amendments to Commission Delegated Regulation (EU) No 241/2014 will not now proceed as drafted.
Article 78 governs supervisory permission to reduce core capital, such as common stock or capital bonds. Article 78a governs permission to reduce eligible liability instruments, such as specialized long-term convertible bonds, in the event of a fund’s collapse. The EBA’s draft would have shortened the window for institutions to submit applications to reduce these instruments, from four months to three. The Commission judged this shortening disproportionate and informed the EBA it would not endorse the amendments.
1.5 EBA Publishes Draft RTS on Operational Risk Management
The EBA published a consultation paper on 26 August 2026 proposing draft RTS on operational risk management under Article 323 of the Capital Requirements Regulation (CRR). The draft sets out a harmonised, proportionate framework across five areas.
On core requirements, firms must integrate operational risk into wider decision-making through a three-lines-of-defence governance model spanning business units, the risk management function and internal audit. On the operational lifecycle, institutions must implement rigorous processes to identify, assess, monitor, control, mitigate and report operational risk. On assessment systems, firms must calculate the Business Indicator Component, analyse risk losses and apply forward-looking assessment tools, with firms whose Business Indicator Component exceeds EUR 750 million facing enhanced data collection and reporting obligations. On Digital Operational Resilience Act (DORA) integration, firms may draw on existing DORA arrangements to streamline compliance and avoid duplicating governance. On proportionality, requirements scale with a firm’s size and complexity, and smaller firms, with a Business Indicator Component below EUR 750 million, benefit from simplified reporting and data collection standards.
2. UK Regulatory Developments
The UK regulatory agenda is continuing to evolve across asset management, capital markets and prudential supervision. Recent developments include significant reforms to fund liquidity management, new requirements for equity prospectus submissions and a streamlined MiFIR transaction reporting regime. At the same time, the Bank of England (BoE) and Prudential Regulation Authority (PRA) are reassessing aspects of the prudential framework while highlighting emerging risks associated with leverage, artificial intelligence and cyber threats.
2.1 Financial Conduct Authority (FCA) Strengthens Fund Liquidity Risk Management
The FCA’s Policy Statement PS26/17 introduces targeted reforms to liquidity risk management for authorised fund managers (AFMs) of UK UCITS and non-UCITS retail schemes (NURS), bringing the UK’s framework further into line with international standards.
A significant development is the introduction of mandatory antidilution tools (ADTs). These mechanisms are designed to ensure that funds cover the costs associated with large investors entering or exiting a fund, such as broker fees and taxes, rather than passing those costs on to remaining investors.
The reforms also remove the presumption that listed assets are inherently liquid for regulatory threshold purposes. AFMs will therefore need to adopt more robust approaches to assessing the liquidity of underlying assets, rather than relying primarily on their admission to a trading venue as a proxy for liquidity.
The new rules take effect on 01 February 2027, with transitional provisions extending to August 2027. Firms will also be required to establish procedures for annual retrospective assessments of their use of ADTs.
2.2 FCA Introduces New Equity Prospectus Declarations
From 21 September 2026, issuers submitting equity prospectus documents to the FCA for the first time will be required to include an inside information declaration form.
The FCA will not allocate submissions for review until the required declaration has been provided. The new requirement is intended to strengthen and streamline the FCA’s internal review and case allocation processes.
Firms should ensure that their prospectus submission procedures are updated ahead of the September 2026 deadline and begin preparations for the forthcoming fund liquidity reforms in 2027.
2.3 UK MiFIR Transaction Reporting Requirements Streamlined
The FCA has finalised significant changes to the UK’s MiFIR transaction reporting regime, with the aim of reducing reporting costs and simplifying firms’ compliance obligations.
The reforms will reduce the number of reportable data fields from 65 to 52 and shorten the period for back-reporting errors and omissions from five years to three. According to the FCA, the changes could save the industry more than GBP 100 million annually once the new regime takes effect in April 2028.
Firms will nevertheless need to undertake substantial systems and data work to prepare for the revised reporting framework.
2.4 Prudential Reforms and Growing Financial Stability Concerns
The PRA is consulting on material changes to the Basel 3.1 internal model approach for market risk. Separately, the PRA has proposed removing the ring-fenced bodies’ shared-services rules as part of HM Treasury’s broader review of the UK’s bank ringfencing regime.
Alongside these regulatory reforms, the BoE has highlighted a number of emerging financial stability risks. Its July 2026 Financial Stability Report pointed to record levels of hedge fund leverage, increasing leveraged ETF exposure to AI-related equities and growing debt issuance by major AI infrastructure providers.
The Bank also warned that increasingly capable frontier AI models could lower the cost and technical barriers associated with preventing cyberattacks on financial infrastructure, reinforcing concerns about the potential intersection of financial, technological and operational risks.
3. A Note on Switzerland
Switzerland is undertaking a significant overhaul of its financial stability framework in the wake of the collapse of Credit Suisse. On 12 August, the Federal Council launched a final consultation, running until 19 November, on a package of post-Credit Suisse reforms commonly referred to as the ‘too-big-to-fail’ measures.
The proposals include the introduction of a senior manager accountability regime, expanded supervisory and enforcement powers for Swiss Financial Market Supervisory Authority (FINMA), and enhanced preparedness arrangements for the provision of lender-of-last-resort support.
Separately, FINMA has converted its existing liquidity risk management circular into a legally binding Liquidity Ordinance, which will take effect on 01 January 2027. The new framework introduces enhanced requirements for firms to identify and disclose emerging liquidity shortfalls, further strengthening Switzerland’s prudential framework.
Disclaimer: The regulatory analysis contained within this article are not legal advice. Any analysis or predictions based on current regulation are therefore subject to legal risk and regulation changes. This is not an exhaustive list of EU, UK and Swiss financial regulations, but is a collection of relevant updates, material changes and interesting developments according to the team at GreySpark Partners.
