On 19 June 2026, the Prudential Regulation Authority (PRA) published a consultation on the internal model approach to market risk (IMA), which represents the final piece of Basel 3.1’s implementation in the UK.BackgroundThe PRA published the final rules and policy for the IMA in policy statement (PS) 1/26 – Implementation of Basel 3.1: Final rules as part of finalising its implementation of the Basel 3.1. In PS1/26, the PRA confirmed that, while the implementation date for most of the final Basel 3.1 rules and policy would be 1 January 2027, the implementation of the IMA would be delayed to 1 January 2028. The delay reflected continued uncertainty over the timing of the implementation of the Basel 3.1 market risk framework in some other jurisdictions.Since publication of the final rules, proposals for implementation of the IMA have become clearer. In addition, the PRA has reviewed data from the Basel Committee on Banking Supervision’s Quantitative Impact Study and firms’ applications for IMA approval. As a result, the PRA is consulting on proposed adjustments to the IMA.SummaryThe PRA sets out that it is consulting on certain targeted adjustments to the market risk IMA rules and related materials finalised in PS1/26 and proposes the following changes: PLAT test: Extend the monitoring period for the profit and loss attribution test (PLAT) from one year to three years. During this period, the PLAT test will not be binding. RFET test: Adjust the risk factor eligibility test (RFET) by: reducing the number of required verifiable prices to pass the quantitative RFET from 24 to 16 for risk factors with a liquidity horizon of greater than 20 days; and introducing a proportionate RFET requirement for new issuances. NMRF framework: Introduce targeted adjustments and operational simplifications to the non-modellable risk factors (NMRF) framework by: Introducing a new category of NMRFs that satisfy qualitative data standards, but do not meet the quantitative verifiable price requirements (Type 1). Type 1 NMRFs would be included within the expected shortfall (ES) model. Reflecting that these risk factors do not have a sufficient number of verifiable prices, they would also be subject to an NMRF capital add-on, with an assumption of zero correlation between the risk factors. Risk factors that fail both the quantitative and qualitative requirements (Type 2) would continue to be capitalised as set out in PS1/26. Making a number of operational simplifications, including aligning the NMRF stress period with the stress period used for the expected shortfall (ES) model, reducing the calculation frequency for Type 2 NMRFs to monthly, and removing the distinction between idiosyncratic and non-idiosyncratic NMRFs. IMA approval: Reduce barriers to the gradual nature of IMA approval for any given firm by: recognising diversification between Advanced Standardised Approach (ASA) and IMA portfolios through a marginal ASA adjustment; and replacing the existing partial caps on IMA capital with a permission-based cap on IMA capital at the full ASA level. CIU treatment: Adjust the treatment of collective investment undertakings (CIUs) by introducing a 90% de minimis look-through threshold for IMA inclusion and extending the ASA treatment of index-tracking funds to IMA. IMA framework: Make a number of minor operational adjustments and clarifications to the IMA framework, including: clarifying the process for determining the own funds requirements for general interest rate risk internal hedges desks; providing IMA firms with the option to use alternative tests to assess the reduced set of risk factors, subject to notifying their respective PRA supervisors; and clarifying the treatment of listed closed-ended investment funds that also meet the definition of a CIU within the trading book boundary. Miscellaneous: Update reporting and disclosure obligations to align with the above proposals. Next stepsThe PRA has asked for responses to this consultation by 18 September 2026.

On 19 June 2026, the Bank of England (BoE) published a report setting out its findings and observations from the 2025 central counterparties (CCP) Global Default Simulation (CIDS) exercise and identified areas for consideration in the development of CCPs’ default management processes and future exercises.BackgroundIn November 2025, 38 CCPs around the globe, together with many of their members, conducted a simultaneous default management exercise involving the simulation of the default of a hypothetical common clearing member.SummaryThe report summarises the 2025 CIDS exercise and sets out feedback from participating clearing members and clients, alongside observations and recommendations. In particular, it identifies areas where the BoE and other relevant international authorities would expect to see further progress, including on the following priorities: The exercise found continued variation in procedures and communication conventions, which presents challenges for clearing members and may inhibit CCPs’ ability to achieve optimal auction outcomes, potentially at hidden financial cost. As a result, the report asks for industry led progress in this area, for example through the development of a voluntary auction file standard that could be offered alongside proprietary tools, and greater use of portal-based solutions, with less reliance on email processes. The report also suggests that regulators support further coordination on this issue, including with relevant industry groups. The report suggests that there should be more realistic testing of porting in future iterations of the CIDS exercise, which would hopefully ensure that the exercise remains proportionate and aligned with what might realistically occur in a live default scenario. Relatedly, future exercises will consider the need to provide more explicit guidance for CCPs and members. In addition, future exercises may include an additional voluntary “market stress overlay” module, under which CCPs could request stressed bids based on a coherent, cross-CCP macro stress scenario, whilst continuing to apply CCP-specific risk frameworks. CCPs could then subsequently analyse auction performance and loss allocation beyond the default fund, under conditions of heightened market volatility. This would support CCPs and their members in more fully testing operational capacity and constraints under conditions in stressed but plausible conditions. Next stepsThe next CIDS fire drill exercise is expected to occur in 2027, and the BoE set out that in the meantime it looks forward to continuing to work closely with fellow regulators, CCPs, clearing member firms.

On 19 June 2026, the Bank of England (BoE) announced the launch of the scenario phase of the private markets system-wide exploratory scenario. The BoE has also sent participants a hypothetical stress scenario that details a severe, but plausible, global macro-economic recession over a five-year period.BackgroundIn December 2025, the BoE launched its second system-wide exploratory scenario (SWES) exercise that will focus on developments in the private markets ecosystem. The BoE have now begun the scenario analysis phase of the SWES and have sent participants a hypothetical stress scenario that details a severe, but plausible, global macro-economic recession over a five-year period. The severity of this shock has been calibrated to represent a tail-risk outcome for the global economy and is broadly consistent with the severity of other stress tests the BoE have run, such as the Bank Capital Stress Test (BCST).PurposeThe private markets SWES scenario is a hypothetical scenario and not a forecast of macroeconomic and financial conditions. The scenario is a tool to allow the BoE to explore the impact of a stylised shock to the private market ecosystem and related credit markets. The exercise will improve the understanding of key actors in the private markets ecosystem and their actions under stress. It will allow the BoE to explore potential vulnerabilities and whether and how these may transmit across the ecosystem to pose systemic risks.Industry collaborationThe private markets SWES is being run as a collaborative exercise. The BoE have worked closely with participants, industry experts and regulators to inform the design of the private markets SWES scenario. The BoE has also completed initial information gathering which will help it to address key information gaps on the private markets ecosystem and has informed the design of the scenario.Round 1The BoE expects to use Round 1 of the private markets SWES to better understand how banks and non-banks active in private markets would respond to a severe but plausible global downturn, how their actions interact at a system level, and whether these interactions can amplify stress across the financial system and pose risks to UK financial stability and the provision of finance to the UK real economy. Following Round 1 the BoE will provide participants with aggregated feedback on how other participating firms acted and any implications for the financial system and real economy. Firms will then have the options to update their responses based on this feedback.Next stepsThe BoE will share findings from its initial information gathering in the July Financial Stability Report.Interim findings from Round 1 will be shared later this year, and the final report in 2027.

On 17 June 2026, the Financial Conduct Authority (FCA) published a speech delivered by Therese Chambers, joint executive director of enforcement and market oversight, regarding financial crime supervision and enforcement, which had been delivered at the International Bar Association Anti-Corruption Conference.Key points of note from the speech include: Changing threat: Financial crime is becoming more complex and more widespread than ever before, with technology, including artificial intelligence, accelerating the pace and scale of financial crime activity. In light of this, the FCA is adapting its supervision and enforcement approach. Interventionist supervision: As part of its evolving strategy, the FCA is driving earlier intervention with supervisory tools, market oversight and proactive detection. Last financial year saw a total of 369 voluntary outcomes across the FCA. The FCA makes the point that this is not separate from enforcement – these outcomes are enforcement “even if they don’t look like the kind you’re used to”. Whistleblowing: Whistleblowing disclosures are up 20% in the past year. Enforcement outcomes: The FCA is still taking cases to enforcement – it had 42 enforcement outcomes in 2024, another 38 in 2025, and as of June 1st, 18 so far this year. Speeding up investigations: The FCA is moving faster than ever before. Since July 2024, 10 investigations have reached a public outcome within 16 months or less. For further regulatory updates in relation to financial crime, please see our Financial Crime Knowledge Hub.

On 18 June 2026, the Financial Conduct Authority (FCA) provided an update to its webpage in relation to establishing a bond consolidated tape.BackgroundThe FCA is establishing a consolidated tape (CT) for bonds to collate market data with the aim of providing a comprehensive picture of bond transactions, in order to strengthen UK bond markets by making them more transparent, efficient and liquid.The FCA are also considering the design of a CT for equities, which will include shares and exchange-traded funds (ETFs).UpdateIn May 2026, the FCA authorised Etrading Software Limited (ETS) as the UK bond consolidated tape provider (CTP). ETS is now ready to launch the UK Bond CT service on 22 June 2026, with all launch criteria agreed by the Bond CTP Board and the FCA having been met.

On 18 June 2026, the Financial Services Regulation Committee (the Committee), a House of Lords Select Committee, published a letter to Lord Stockwood, Minister for Investment, about the Financial Services and Markets Bill.The letter outlines the Committee’s concerns with clause 17 of the Bill, which removes the requirement that the Prudential Regulation Authority and the Financial Conduct Authority must have regard to the regulatory principles in section 3B of the Financial Services and Markets Act 2000, and removes the requirement for the regulators to show how they have had regard to the regulatory principles when notifying the Committee of consultations. As a result, the Committee is concerned that the framework of accountability to Parliament will be effectively eliminated and that the Committee will no longer be able to do the job that Financial Services and Markets Act 2023 and parliamentary resolutions require of it.The Committee have asked to discuss this with the Minister.

On June 17, 2026, the German regulator, the Federal Financial Supervisory Authority (BaFin), launched a consultation on its new circular “Notes on the amendments to the Capital Investment Code introduced by the Fund Risk Limitation Act”(Hinweise zu Änderungen im Kapitalanlagegesetzbuch durch das Fondsrisikobegrenzungsgesetz) (Circular).The Fund Risk Limitation Act (Fondsrisikobegrenzungsgesetz – FRiG) is the German Act for the transposition of Directive (EU) 2024/927 (AIFMD 2). The FRiG was published in the Federal Gazette on 14 April 2026 and entered into force on 16 April 2026 for most of its provisions.The FRiG led to extensive amendments to the German Capital Investment Code. These particularly concern the mandatory introduction of liquidity management tools (LMTs) for open-ended funds, changes to the licensing procedure, and the granting of loans by investment funds. According to the explanatory statement, the FRiG is intended to implement AIFMD 2 without any deviations (no “goldplating”) in order to avoid putting the German fund industry at a competitive disadvantage. However, market participants raised various questions to BaFin regarding the interpretation of the statutory provisions and the applicability of grandfathering rules. The Circular addresses key questions raised by market participants and provides guidance on the interpretation of the new provisions.First, the Circular addresses the mandatory implementation of at least two LMTs within the liquidity management system of open-ended investment funds. In addition to general requirements for LMTs, the Circular also discusses the specific features of each individual tool. Furthermore, the Circular deals with the changes to the licensing procedure, in particular the additional information required regarding managing directors. Finally, the Circular also addresses loan origination.The consultation period ends on 6 July 2026.

On 16 June 2026, the Australian Prudential Regulation Authority (APRA) issued a consultation paper setting out updated requirements designed to strengthen governance across banking, superannuation and insurance.APRA’s governance review commenced with the release of a discussion paper in March 2025. In October 2025, APRA provided an update on key policy positions. This consultation paper accompanies APRA’s new draft governance standard CPS 510 – Governanceand amendments to CPS 001 – Defined terms and explains how the review has taken feedback from industry and governance practitioners into account.In relation to the new draft CPS 510, APRA is seeking to minimise requirements although the way an entity meets them should be proportionate to its size, complexity, risk profile and structure. In some areas, such as board performance assessments and committee requirements, the standard sets a higher bar for significant financial institutions.APRA also seeks to reduce the overlap between fit and proper requirements and the Financial Accountability Regime. APRA proposes to narrow the cohort of responsible persons and removing routine fit and proper reporting requirements for remaining responsible persons. APRA believes that the changes to reporting requirements would mean that forms are no longer required to be submitted for 6,000 individuals.As part of its consultation, APRA seeks feedback on: The new consolidated draft CPS 510. Related definitional changes to CPS 001, which includes definitions for superannuation for the first time. The implications of removing routine reporting for its fit and proper regime (reporting forms SRS 520.0 Responsible Persons Information and CRF 520 Responsible Persons under CPS 520 – Fit and Proper). Next stepsThe deadline for comments on the consultation paper is 28 August 2026.The final standard and related guidance is planned for release in late 2026.APRA expects new requirements to be in effect from early 2028.

On 16 June 2026, the Australian Securities and Investments Commission (ASIC) and Australian Prudential Regulation Authority (APRA) announced that they will be streamlining certain aspects of the Financial Accountability Regime (FAR). In particular ASIC will remove key functions and requirements from the FAR; raise the materiality threshold for notifying ASIC and APRA of changes in accountability; and no longer require information on accountable persons’ direct reports in accountability maps.Next stepsASIC and APRA will consult on the changes and aim to implement them by the end of 2026. ASIC and APRA will also support the Government in its legislative changes to the FAR.

On 12 June 2026, the European Parliament’s Economic and Monetary Affairs (ECON) Committee published draft reports containing draft amendments to the European Commission’s (Commission) Market Integration and Supervision (MISP) package.The MISP package is central to the Commission’s Savings and Investments Union (SIU) strategy, which aims to create an integrated and connected EU-wide capital market. It seeks to simplify the EU’s regulatory and supervisory framework by moving supervision to the EU level and further harmonising regulatory frameworks to remove barriers for financial market participants to provide cross-border services. A general overview of the MISP package can be found in our previous blog post.The draft legislative package proposes changes to different pieces of EU legislation. These changes are contained in three proposals, namely: A proposed Omnibus Regulation amending the: 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) The proposed Omnibus Regulation also makes certain targeted amendments to other pieces of EU legislation to align them with the proposed changes to the ESMA Regulation. This includes the Benchmark Regulation and the Securities Financing Transactions Regulation.2. A proposed Omnibus Directive amends the:Undertakings for Collective Investment in Transferable Securities (UCITS) DirectiveAlternative Investment Fund Managers Directive (AIFMD) Markets in Financial Instruments Directive II (MiFID II) 3. A proposed Regulation replacing the Settlement Finality Directive and amending the Financial Collateral Directive.Each of the three proposals was assigned to a different ECON Committee rapporteur: The draft report on the MISP Omnibus Regulation contains rapporteur Markus Ferber’s (European People’s Party) proposed amendments. The draft report on the MISP Omnibus Directive contains rapporteur Eero Heinäluoma’s (Socialists & Democrats) proposed amendments. The draft report on the proposed Regulation on Settlement Finality contains rapporteur Giovanni Crosetto’s (European Conservatives and Reformists) proposed amendments. Each of the draft reports sets out proposed legislative amendments and these are summarised below.1. MISP Omnibus RegulationIn his explanatory statement, Ferber emphasises the need for an ambitious market integration agenda and calls for greater ambition than the Commission’s original proposal. He proposes a secondary competitiveness objective and a stronger supervisory mandate for ESMA. Competitiveness: A key Ferber proposal is a secondary competitiveness objective for ESMA. In addition, the proposed ESMA supervisory handbook would be further strengthened by including expectations on competitiveness and innovation capacity of EU financial markets, shaping day-to-day supervisory expectations across all Member State competent authority (NCA) interactions. ESMA’s annual report would be enhanced so that it assesses the European Supervisory Authority’s contribution to EU capital markets competitiveness. Ferber also proposes enhancements to no-action relief by adding level playing field considerations—such as disproportionate implementation burdens or material competitive disadvantages—as distinct grounds for action by ESMA. When drafting regulatory technical standards (RTS) or implementing technical standards (ITS), ESMA would consider the impact on international competitiveness of EU market participants and capital markets. ESMA governance: Ferber proposes quite extensive changes to ESMA’s governance with an Executive Board of five independent members with double voting rights in the Board of Supervisors. Executive Board members must have capital markets experience. Reporting: Ferber proposes to formalise the “report once”-principle through an explicit requirement in the ESMA Regulation. Trading and market structure: Ferber proposes extensive changes in the trading and markets space by making systematic internalisers (SIs) more transparent by requiring them to publish rulebooks disclosing access criteria, execution processes and fee structures. He also proposes mandatory minimum price improvement of one tick size over the best lit market price for SI executions, extended from retail to all orders. The liquid market determination would be redesigned to increase SI-traded instruments subject to pre-trade transparency. ESMA would assess whether large SIs should be subject to direct supervision. Pre-trade transparency would be extended to hybrid trading systems and the EMIR intragroup transaction reporting exemption would be applied at group level. Consolidated tape: Notably, Ferber proposes deleting the Commission’s list of core market data for dissemination by the equity and exchange traded fund (ETF) consolidated tape (CT), deeming it premature as the equity CT is not yet live. Post-trade infrastructure supervision: A key proposal is the extension of ESMA’s supervision to all EU central counterparties (CCPs) and central securities depositories (CSDs), not only significant ones. The settlement framework would also be updated to ensure distributed-ledger technology (DLT) based recording satisfies the book-entry obligation. Digital finance: Viewing the Commission’s DLT Pilot Regime treatment as too cautious, Ferber proposes reframing it as a permanent mainstream infrastructure regime with significantly raised caps. The sunset clause would be replaced with an ESMA graduation assessment mechanism. Unlike the approach to post-trade infrastructure, Ferber proposes keeping small crypto-asset service providers (CASPs) under NCA supervision, with only significant cryptoasset service providers moving to direct ESMA supervision. A framework for multi-issuer e-money token arrangements is also proposed. Asset management: The delegated act empowerment on market communications under the CBDR would be amended so that it is more principle-based and sector-diverse. A single central notification platform for asset managers is also proposed, replacing notifications to individual NCAs. 2. MISP Omnibus DirectiveRapporteur Heinäluoma generally welcomes the measures in the Omnibus Directive but calls for a stronger supervisory role for ESMA, efficient portfolio management techniques, and measures addressing non-EU alternative investment funds (AIFs) and their managers (AIFMs) in non-cooperative tax jurisdictions. ESMA supervision of asset management groups: The headline proposal is for ESMA to become the supervisory authority for large asset management groups. The threshold for such groups would be based on net asset values and cross-border operations. Direct ESMA supervisory powers over depositories is another headline proposal. Portfolio management techniques: Safeguards for efficient portfolio management techniques are proposed to ensure investor protection and reduce conflicts of interest. These include information and disclosure requirements in prospectuses and annual reports. Importantly, these require all revenues from such practices to be returned to the fund. Non-cooperative tax jurisdictions: Non-EU AIFs and AIFMs would be barred from marketing in the EU if located in jurisdictions designated as non-cooperative for tax purposes or high-risk for anti-money laundering. Financial stability measures: Regular stress testing for open-ended AIFs is proposed. Remuneration policy and ESG: Variable remuneration is linked to ESG target achievement and setting a fixed-to-variable remuneration ratio. 3. Proposed Regulation on settlement finalityRapporteur Crosetto welcomes converting the Settlement Finality Directive into a directly applicable Regulation, seeking a more coherent and harmonised framework. He aims to ensure technology neutrality to accommodate DLT, tokenisation and other emerging market infrastructure forms, whilst keeping the framework clear, proportionate and operationally workable. Definition: A definition of “final settlement” as “completed discharge of the obligations of the parties to a transaction in an unconditional and irrevocable manner as determined by common rules and standardised procedures to which each designated system shall comply” is added to the text of the draft Regulation. The definition of “settlement securities system” is linked to the CSDR. Designated systems: There are some important deletions – the joint and several liability rule for consortium system operators and the requirement for third-country systems seeking EU registration to specify in their rules the moments of transfer order entry, irrevocability and final settlement. Instead, ESMA and the European Banking Authority would specify these through two sets of RTS. Next stepsOther members of ECON Committee may table amendments to the three MISP proposals by 16 July 2026. Thereafter the ECON Committee intends to vote on its negotiating position on the three proposals at its 1 December 2026 meeting.

On 11 June 2026, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) published the following draft reports on the European Commission’s legislative proposals relating to the market integration and supervision package (MISP): Draft report on the proposal for a regulation of the European Parliament and of the Council amending Regulations (EU) No 1095/2010, No 648/2012, No 600/2014, No 909/2014, 2015/2365, 2019/1156, 2021/23, 2022/858, 2023/1114, No 1060/2009, 2016/1011, 2017/2402, 2023/2631 and 2024/3005 as regards the further development of capital market integration and supervision within the Union. Draft report on the proposal for a directive of the European Parliament and of the Council amending Directives 2009/65/EC, 2011/61/EU and 2014/65/EU as regards the further development of capital market integration and supervision within the Union. Draft report on the proposal for a regulation of the European Parliament and of the Council on settlement finality and repealing Directive 98/26/EC and amending Directive 2002/47/EC on financial collateral arrangements. Each draft report contains draft European Parliament legislative resolutions setting out suggested amendments to the legislative proposals, with the justifications for those amendments set out in explanatory statements.Our earlier podcast on the MISP can be found here.

On 11 June 2026, the European Banking Authority (EBA) published the draft methodology, templates and template guidance for the 2027 EU-wide stress test.As in previous EU-wide EBA stress test exercises, the 2027 one provides a common analytical framework to assess the resilience of EU banks and the wider banking system under a common adverse macro-financial scenario, testing their capital adequacy under stress. The results will feed into the Supervisory Review and Evaluation Process.A total of 63 banks from the EU and Norway, including 47 from the euro area, will participate, covering 75% of the EU banking sector.The draft methodological note describes the common methodology that defines how banks should calculate the stress impact of the common scenarios and, at the same time, sets constraints for their bottom-up calculations. It also provides banks with guidance and support for performing the EU-wide stress test. However, it does not cover the quality assurance process or possible supervisory measures that should be put in place following the outcome of the stress test. Annex I of the methodological note contains a preliminary list of institutions included in the sample. The draft template guidance provides technical guidance to participating banks for populating the set of templates for the 2027 EU-wide stress test.Notably, the draft methodology cuts required data points by 55% compared with the previous EBA EU-wide stress test, mainly by drawing on regular supervisory reporting. This includes a simplification of stress test definitions and the elimination of previous stress test datapoints or templates which would overlap with supervisory reporting. Another key change is the introduction of climate risk into the EU-wide stress test. For the first time, transition and physical risks are incorporated alongside macro-financial shocks. At this stage, climate risks will be assessed through a dedicated module and will not affect the core stress test results.The EBA plans to hold a series of workshops with the industry to help them in their preparations.

On 11 June 2026, a letter was published from Nikhil Rathi, Chief Executive of the Financial Conduct Authority (FCA), to Baroness Noakes DBE of the House of Lords Financial Services Regulation Committee, in which Mr Rathi: (i) sets out the conclusions from the FCA’s lessons learned exercise in relation to its consultation on publicising more enforcement investigations (CP24/2); and (ii) provides an update on enforcement operations and publicity since the introduction of Policy Statement 25/5 in June 2025, in which the FCA finalised revisions to its Enforcement Guide, including its amended investigation publicity policy (PS25/5).Conclusions from the FCA’s lessons learned exerciseIn the letter, the FCA acknowledges that: its consultation proposals came as a surprise to much of industry and explains that the spread of the strong negative reaction had not been anticipated; it could have flushed out some of the concerns regarding the proposals in advance if it had engaged more before the consultation, which would have both helped the FCA shape its approach, and helped it identify sooner the information which stakeholders felt would have helped to inform their feedback on the proposals; and how the FCA framed the proposals in the original consultation gave the impression of a fundamental change in approach, whereas the number of additional proactive announcements under the proposals would have been relatively modest. The FCA accepts that it would have been helpful to have provided that analysis in the original consultation. The FCA states that the reaction to CP24/2 has reinforced its commitment to be as predictable as it can be when consulting on policy changes and that this is an explicit commitment in its current five year strategy.Developments since the publication of PS25/5In terms of developments since the publication of PS25/5, in the letter the FCA notes that: Between 3 June 2025 and 30 April 2026, it opened 33 enforcement operations. Five have been announced on a named basis and two on an anonymised basis. Of the five named announcements, two were based on exceptional circumstances, and three the FCA confirmed reactively. This includes the FCA’s investigation into The Claims Protection Agency Limited, which it determined met the ‘exceptional circumstances’ test. For further information on this case please see our briefing here. The two operations that the FCA has announced anonymously under its revised policy are into firms in the home and travel insurance markets and stemmed from earlier supervisory multi-firm work. Had the public interest test been in place, these may have been candidates for a named announcement given the impact on consumers and market integrity. In one operation, the FCA’s recent decision to announce on a named basis is the subject of an ongoing legal challenge. The FCA also highlights that in January 2026, it published the first edition of Enforcement Watch, which provided a thematic overview of the suspected misconduct it is investigating in operations opened between 3 June and 31 December 2025. See our briefing on this publication here. The FCA’s next edition will be published in July.In the FCA’s view, the operations that it has confirmed reactively, and the information that it has disseminated about ongoing enforcement operations on an anonymised basis, are examples of how the changes that it implemented to its publicity policy in June 2025 have increased transparency.

On 10 June 2026, the Financial Stability Board (FSB) published a consultation report on sound practices for responsible adoption of artificial intelligence (AI).In the consultation report the FSB identifies certain sound practices to help all types of financial institutions navigate the benefits and risks as they adopt AI. The 12 sound practices cover organisation-wide governance as well as management of different stages of AI development and deployment (or AI lifecycle).Sound practices 1 to 4 emphasise the importance of organisation-wide AI governance, in informing the financial institution in its decision on whether and how to adopt an AI technology and at what scale. These sound practices highlight: The pivotal role the board and senior management play in setting the overall approach and providing oversight so that AI adoption is aligned with the financial institution’s business model, risk appetite, and strategy. The importance of establishing clear governance frameworks, policies, procedures, and processes to identify, assess, monitor, and manage AI-related risks. The importance of defining clear responsibilities and accountabilities throughout the organisation. How financial institutions benefit from continuous learning and adaptation, enabling them to develop the resources, skills, knowledge, and capabilities required to sustain value creation and effective risk management over time. Sound practices 5 to 10 focus on managing specific AI use cases at or throughout different stages of an AI lifecycle so that use case deployments are supported by proportionate guardrails. This involves: Effectively and systematically assessing the materiality and risks of AI use cases at inception and thereafter. Selecting appropriate AI models or systems by considering objectives, operational, and technical needs, as well as materiality and risk of AI use cases. Maintaining appropriate data governance so that the data for training, testing, and using AI is accurate, complete, reliable, and secure. Understanding differences in the explainability of various types of AI and, if appropriate and feasible, adopt more explainable AI or consider compensating controls. Evaluating the performance of AI use cases proportionately to their materiality and risk, including through performance assessment, testing, and ongoing monitoring. Implementing appropriate and effective human oversight that is relevant to the materiality, risk, autonomy, complexity, and explainability of different AI use cases. Sound practices 11 and 12 highlight the importance of managing: AI-related cyber and information and communication technology (ICT) risks including by incorporating AI cyber and ICT risk scenarios into tests and exercises, sharing relevant information with key stakeholders, and where appropriate, using AI tools in cyber and ICT risk management. Risks from AI third-party use with a focus on performance, transparency, data quality, supply chain and concentration risks, and business continuity. Next stepsThe deadline for comments on the consultation report is 22 July 2026.

On 9 June 2026, The Money Laundering and Terrorist Financing (Amendment) Regulations 2026 were made. An explanatory memorandum has also been published.These Regulations make targeted amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. In particular it: Refines customer due diligence, enhanced due diligence and additional due diligence requirements, including for unusually complex or unusually large transactions, high risk jurisdictions and pooled client accounts and cryptoasset correspondent relationships. Updates currency thresholds from euros to sterling. Strengthens the regime for cryptoasset businesses in aligning it with the new financial services regulatory regime for cryptoassets established under the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026. Reforms the Trust Registration Service requirements to close identified gaps, while introducing a de minimis exemption for low-value, low-risk trusts. Brings the sale of “off-the-shelf” firms within the scope of regulated trust or company service provider activity. Clarifies that a firm is excluded from the definition of an “insurance undertaking” to the extent it is carrying out or effecting a contract of reinsurance. Enhances information-sharing and cooperation between AML/CTF supervisors and other public bodies.

On 10 June 2026, the Financial Conduct Authority (FCA) issued its first Emerging Technology Horizon Scan 2026.The document sets out three plausible ways emerging technologies could combine to create new outcomes for consumers, firms and markets. It also highlights early signals of new risks these technologies may enable.Key trendsAccording to the document key trends include: Technological convergence is accelerating. As emerging technologies combine, they are changing the way financial systems operate and serve consumers, creating new opportunities and risks Personalised intelligence could help consumers navigate their financial lives. If AI becomes the main interface between consumers and firms, AI agents, digital twins and edge computing could change how people budget, save and make financial choices. This may empower consumers, but also raises questions about autonomy, digital exclusion and consumer protection Synthetic crime is evolving fast and will affect how financial crime is tackled. Advances in AI are simultaneously improving firms’ ability to detect vulnerabilities while expanding attack surfaces. In parallel, synthetic media is becoming harder to tell apart from real content. AI may manipulate not only what we see and hear (for example, audio and video deepfakes) but also how we judge what is true. This could expose consumers and firms to new forms of fraud and deception Programmable finance could support growth by reshaping financial infrastructure and enabling new markets. Distributed ledger technologies, tokenisation, Central Bank Digital Currencies, stablecoins and smart contracts are moving from pilots to national strategies. This is creating connected financial systems that could make services faster and more efficient, while changing the underlying ‘plumbing’ of the global financial system.  Case studiesThe report also includes case studies covering: Machine learning for credit risk management. Scaling relationship management with AI. Operational efficiency with AI adoption. Aligning skills and capabilities to AI strategy. Documentation of AI use cases. Learning from the AI ecosystem through public-private sector collaboration. How an adaptive AI strategy delivered industry leadership. Project Noor. Developmental testing. Financial institutions’ management of third-party AI risks.

In this latest edition of Regulation Around the World, we focus on the global transformation of the settlement of securities transactions, as many jurisdictions begin to shift from a standard settlement timeline of two business days after trade to just one. In this issue, we examine these developments, exploring the regulatory frameworks, cross-border challenges and technological innovations that are reshaping the post-trade landscape. In a number of jurisdictions we cover the following questions: What is the current regulatory and market settlement cycle, and what changes are planned? In respect of asset classes other than crypto assets or tokenized securities, what challenges or risks have been identified with transitioning to T+1 or instantaneous settlement? How does the jurisdiction address (or propose to address) cross-border settlement mismatches when counterparties operate on different settlement cycles (such as T+1 vs T+2)? What regulatory or operational measures exist to mitigate cross-border liquidity and FX timing pressures created by shorter settlement cycles? To what extent does the jurisdiction permit or envisage 24/7 trading in securities or other financial instruments, and what regulatory or operational challenges have been identified in connection with continuous trading cycles? What is the regulatory treatment of blockchain-based or tokenized asset settlement? How do regulators approach cross-border legal recognition of blockchain-based settlement finality across multiple jurisdictions? Read the full update here.  

On 9 June 2026, Lord Stockwood moved that the Financial Services and Markets Bill be read a second time in the House of Lords. After debate, the motion was agreed to. Lord Stockwood also moved that the bill be committed to a Grand Committee, and that the Grand Committee consider the bill in the following order: Clause 1 Schedule 1, Clauses 2 to 13 Schedule 2, Clauses 14 to 31 Schedule 3, Clauses 32 to 53, and this motion was also agreed to. Hansard published consideration of these matters.

On 9 June 2026, the Financial Conduct Authority (FCA) published a consultation paper (CP26/18) in relation to proposed changes to the mortgage rules aimed at helping more people to access mortgages.BackgroundIn June 2025, the FCA published a Discussion Paper (DP25/2) on the future of the mortgage market. In December 2025, the FCA also set out its response (FS25/6) to the feedback it received and action it proposed to take as part of our longer-term plan to modernise mortgage rules, which has informed the proposals in this consultation.SummaryCP26/18 proposes a range of changes that would impact the mortgage market, including: Interest-only mortgages – The FCA is proposing three key changes to its existing interest-only framework, in particular: (i) adapting requirements for where a credible repayment strategy is needed; (ii) adding further examples of credible repayment strategy options, and (iii) clarifying expectations of the review requirement and providing examples of trigger points for when to carry out a review. Retirement interest-only mortgages – The FCA is proposing to remove current sections of its existing guidance, which would mean affordability for joint retirement interest-only mortgage applications are assessed in the same way as for standard joint mortgages i.e. firms would not be obliged to always consider a sole borrower’s ability to afford the mortgage if the joint borrower passes away. Variable and irregular income – The FCA is proposing to expand its guidance to include examples of evidence for assessing affordability for customers with variable or irregular income. In particular, to clarify that lenders may agree payment schedules at a frequency other than monthly, including quarterly or other regular frequencies. Credit-impaired or recently recovered – The FCA proposes to be explicit that the definition of ‘credit-impaired customer’ applies only in: (a) the Mortgage Conduct of Business Sourcebook (MCOB) 11.6.16R (additional steps where a credit-impaired borrower uses a mortgage for debt consolidation), MCOB 4.7A.22 G (for the example given when advising in relation to credit-impaired) and (b) SUP 16.12 reporting. As a result, the intention is that firms would be free to set credit risk appetite and target markets but should not treat the glossary definition as a factual indicator of unaffordability. Foreign currency loans – The FCA are proposing to differentiate standards and protections for loans denominated in a foreign currency from those where all or part of the income is in a currency other than sterling. The FCA sets out that the intention of this change is to move away from prescriptive, Mortgage Credit Directive derived rules and towards a more proportionate, outcomes-focused framework consistent with the Consumer Duty. Bridging loans – The FCA are proposing to amend its Handbook definition of bridging loans which are regulated mortgage contracts to include terms of up to 24 months and also set out that they don’t consider that these proposals in relation to regulated bridging loans overlap or conflict with the statutory exemptions for some types of bridging loans in FSMA 2000 (Regulated Activities) Order 2001. In addition, the FCA are proposing to amend its rules regarding bridging loan extensions, with the total combined term, including the original term and any extensions, capped at 24 months. Next stepsThe FCA sets out that welcomes feedback on the proposals in CP26/18 by 28 July 2026 and will aim to publish a policy statement in the second half of 2026.The FCA also sets out that it is continuing with policy development across the remaining three themes of the Mortgage Rule Review: enhancing later life lending, enabling innovation and protecting consumers in vulnerable circumstances.

On 9 June 2026, the European Parliament issued a press release stating that its negotiators had reached a provisional agreement with Council of the EU negotiators on proposals introducing the concept of small mid-cap enterprises (SMCs) and extending to them various exemptions that so far have been available to small and medium enterprises (SMEs).The press release adds that SMCs are defined in principle as companies with fewer than 1,000 employees; and either up to €200 million in turnover or up to €172 million in total assets (the European Commission proposed 750 employees, €150 million in turnover and €129 million in total assets). The new category will be added to certain EU directives and regulations including the Markets in Financial Instruments Directive II and the Prospectus Regulation.Next stepsThe provisional agreement needs to be formally adopted by both the European Parliament and Council of the EU. The draft legislation then needs to be published in the EU Official Journal.