Looking Ahead: European Developments

AML/CTF

Following FATF’s publication of a revised version of its anti-money laundering (AML) and counter-terrorist financing (CTF) standards to better promote financial inclusion in February 2025, it also launched a consultation on updated draft guidance on AML and CTF measures and financial inclusion. The updated draft guidance reflects the revised standards, updating the concept of financial inclusion and its implications for financial sector integrity. It also includes additional guidance and best practice examples of the risk-based approach.

Notably the consultation looks at whether the guidance on assessing lower risk areas is sufficient to inform balanced risk assessments; whether further guidance and examples on tailoring measures to address financial inclusion in non-lower risk situations are required; and whether further guidance is needed on the risks of remote business relationships and transactions, and how to mitigate them.

That consultation closes on 4 April 2025.

FATF's second public consultation on revisions to its Recommendation 16 on payment transparency (and the related Interpretive Note and Glossary) to adapt them to changes in payment business models and messaging standards closes on 18 April 2025. According to FATF, Recommendation 16 and the related Interpretive Note need to be updated to ensure that the FATF Standards remain technology-neutral and follow the principle of ‘same activity, same risk, same rules’.

ARTIFICIAL INTELLIGENCE IN CAPITAL MARKETS

The International Organization of Securities Commissions' (IOSCO) consultation report on AI use cases, risks and challenges in capital markets closes for comments on 11 April 2025. IOSCO will use the feedback to inform its approach to developing tools that help regulators combat the risks of AI in the future.

IOSCO set out five key findings in its report:

  • Firms are increasingly using AI to support decision-making processes in applications and functions (e.g. robo-advice, algorithmic trading, investment research and sentiment analysis) and AI use cases are expanding to enhance surveillance and compliance functions, particularly in the AML / CTF area.
  • Firms are looking at using recent advancements in AI to improve communications and risk management functions, and to support internal operations and processes through task automation.
  • The risks most commonly flagged to IOSCO regarding the use of AI in the financial sector include risks from malicious uses of AI, AI model and data considerations, concentration risk, outsourcing risk and third-party dependency, and the interaction between humans and AI systems.
  • Industry practices are evolving, with some financial institutions incorporating AI into existing risk management and governance structures, and others setting up bespoke AI risk management and governance frameworks.
  • Regulatory responses also evolving – some regulators are applying existing regulatory frameworks to AI activities, while others are developing new regulatory frameworks to address AI-specific challenges.

BANK CRISIS MANAGEMENT AND DEPOSIT INSURANCE FRAMEWORK

Another round of trilogue negotiations between the European Parliament and the Council of the EU on the proposed bank crisis management and deposit insurance (CMDI) framework is planned for 28 April 2025. The importance of progress on the proposed CMDI framework was highlighted in the European Commission’s strategy for the Savings and Investments Union, published in March 2025.

More information:

Savings and Investments Union: Commission outlines its plans

Bank Resolution: Commission CMDI proposal published

BASEL III – PRUDENTIAL FRAMEWORK FOR MARKET RISK

The European Commission’s targeted consultation on the application of the EU’s prudential framework for market risk closes on 22 April 2025.

The fundamental review of the trading book (FRTB) introduced by Basel III aims to incorporate more sophisticated risk measurement techniques, allowing for closer alignment between capital charges and the actual risks banks face in their capital market activities.

The Commission already postponed the EU application date for the FRTB by 1 year to 1 January 2026 – this was to align implementation with other key jurisdictions (in particular the UK and US).

However, further delays in other key jurisdictions are now possible. In light of that, the Commission is looking for views on 3 possible options in anticipation of adopting a further delegated regulation by the end of June 2025:

  • Implementing the FRTB from 1 January 2026 as currently planned.
  • Postponing the application date a second time (to 1 January 2027).
  • Making temporary and targeted amendments to the market risk framework for up to 3 years.

CAPITAL REQUIREMENTS DIRECTIVE – 2025 BENCHMARKING EXERCISE

Commission Implementing Regulation (EU) 2025/379 enters into force on 1 April 2025. It amends Commission Implementing Regulation (EU) 2016/2070 regarding benchmark portfolios, reporting templates and reporting instructions for reporting referred to in Article 78(2) of the CRD IV Directive.

Under Article 78 of the CRD IV Directive, internal approaches used for calculating own funds requirements for market and credit risk are subject to an annual assessment by competent authorities. Commission Implementing Regulation (EU) 2016/2070 contains implementing technical standards (ITS) specifying the benchmarking portfolios and reporting instructions for institutions to be applied in the annual benchmarking exercises. The amendments relate to the 2025 benchmarking exercise.

CAPITAL REQUIREMENTS DIRECTIVE - ESG SCENARIO ANALYSIS

The European Banking Authority’s public consultation on its draft Guidelines on Environmental, Social and Governance (ESG) scenario analysis closes on 16 April 2025.

The draft Guidelines (reflecting a mandate under Article 87(a)5 of the Capital Requirements Directive) set out expectations for institutions when adopting forward-looking approaches and incorporating the use of scenario analysis as part of their management framework to test institutions’ financial and business model resilience to the negative impacts of ESG factors. They complement the EBA Guidelines on the management of ESG risks, published on 9 January 2025.

The draft Guidelines were developed in line with the EBA Roadmap on Sustainable Finance and as part of the planned EBA actions for the implementation of the EU banking package.

CAPITAL REQUIREMENTS REGULATION - PRUDENTIAL TREATMENT OF CRYPTO ASSET EXPOSURES

The European Banking Authority’s Consultation Paper on draft regulatory technical standards (RTS) specifying the technical elements necessary for institutions to calculate and aggregate crypto-asset exposures in relation to the prudential treatment of such exposures closes on 8 April 2025.

Under the recent amendments to the Capital Requirements Regulation, a transitional prudential framework was introduced for institutions holding crypto-assets exposures. The draft RTS further develop the relevant capital treatment for credit risk, counterparty credit risk, market risk and credit valuation adjustment risk for asset referenced tokens and other crypto-assets exposures and align, to the extent possible, the capital treatment with the elements specified in the Basel standard on prudential treatment of crypto-asset exposures.

DIGITAL OPERATIONAL RESILIENCE ACT (DORA)

Financial entities in-scope for DORA must submit their Registers of Information on all contractual arrangements on the use of ICT services provided by ICT third-party service providers to the Central Bank of Ireland via the CBI Portal between 1 and 4 April 2025.

For more information, see the Central Bank’s information page on Reporting Registers of Information and our recent insights here:

DORA Register of Information - Achieving a Key Milestone

National competent authorities (NCAs) such as the Central Bank must then submit (by 30 April 2025), to the European Supervisory Authorities (ESAs) the Registers of Information on ICT third-party arrangements they received from financial entities.

Commission Delegated Regulation (EU) 2025/420 supplementing DORA with RTS specifying the criteria for determining the composition of the joint examination team will come into force on 13 April 2025. The RTS aim to ensure a balanced participation of staff members from the ESAs and from the relevant NCAs, their designation, tasks and working arrangements.

EMIR

The European Banking Authority’s consultation (via a discussion paper) on fees to be paid by financial and non-financial counterparties requiring the validation of pro forma models under EMIR closes on 7 April 2025.

Under EMIR 3.0, the EBA is the central validator of pro forma models used by the industry to calculate initial margin in the EU. The EBA will charge counterparties an annual fee per each validated pro forma model to cover its costs.

ESMA’s two public consultations under EMIR 3.0 in relation to central counterparties (CCPs) also close on 7 April 2025. Those consultations relate to:

  • Draft RTS on the conditions for extensions of authorisation and the list of required documents and information for applications by CCPs for initial authorisations and extensions
  • Draft RTS on the conditions for validations of changes to CCP’s models and parameters and the list of required documents and information for applications for validations of such changes.

ESMA plans to submit the two sets of final draft RTS to the European Commission by 25 December 2025.

ESG - OMNIBUS SIMPLIFICATION PACKAGE

The European Parliament is expected to vote in its 1 April 2025 plenary session on expediting work on the proposed ‘stop the clock’ Directive which will delay CSRD application for large companies that have not yet started reporting, and for listed SMEs, by 2 years. It will also delay application of the CSDDD by 1 year. The Council of the EU agreed its position on 26 March 2025, paving the way for trilogue negotiations.

The target date for EU Member States to transpose the ‘stop the clock’ Directive is 31 December 2025 and there is a push for it to be agreed by Member States before end-June 2025. That will enable negotiations on the second Directive (more substantive amendments to CSRD and CSDDD) to progress in the background - those negotiations are expected to take longer.

More information:

Council Supports "Stop the Clock" Proposal

Omnibus Package: Proposed Amendments to CSRD and CSDDD

INSURANCE

EIOPA’s public consultation on revised guidelines on the methods for determining the market share of undertakings that can make use of limited reporting requirements under Solvency II closes for comments on 28 April 2025. Following the Solvency II review, EIOPA is reviewing those guidelines to ensure that they align with the amended regulatory framework (and may shorten / simplify them where possible).

LISTING ACT

ESMA plans to deliver technical advice to the European Commission by 30 April 2025 arising from its recent consultation under the Listing Act.

The consultation (arising from a request from the Commission for technical advice) closed on 13 February 2025 and sought feedback on the following:

Regarding the changes made by the Listing Act to the EU Market Abuse Regulation:

  • A non-exhaustive list of the protracted process and the relevant moment of disclosure of the relevant inside information (together with some principles to identify the moment of disclosure for protracted non-listed processes).
  • A non-exhaustive list of examples where there is a contrast between the inside information to be delayed and the latest public announcement by the issuer.
  • A methodology and preliminary results for identifying trading venues with a significant cross-border dimension, for the purposes of establishing a Cross Market Order Book Mechanism.

Regarding the changes made by the Listing Act to MiFID II:

  • A systematic review of the relevant provisions in Commission Delegated Regulation 2017/565 to ensure that a multilateral trading facility (MTF) (or a segment of it) to be registered as small and medium-sized enterprises growth market complies with the relevant revised MiFID II requirements.
  • Some conditions to meet the registration requirements for a segment of an MTF, as specified in the revised MiFID II.

For more information on the Listing Act, read our insights here:

Listing Act published in Official Journal: Update on changes to Prospectus and Market Abuse Regulations (debt securities)

EU Prospectus Regulation: Listing Act changes relevant to debt capital markets

EU Market Abuse Regulation: Listing Act changes relevant to debt capital markets

MARKETS IN CRYPTO ASSETS REGULATION (MICA)

The following Delegated Regulations come into force on 3 April 2025:

  • Delegated Regulation (EU) 2025/416 supplementing MiCA with RTS specifying the content and format of order book records for crypto-asset service providers (CASPs) operating a trading platform for crypto-assets.
  • Delegated Regulation (EU) 2025/417 supplementing MiCA with RTS specifying the manner in which CASPs operating a trading platform for crypto-assets are to present transparency data.

The following Delegated Regulations come into force on 13 April 2025:

  • Delegated Regulation (EU) 2025/415 with RTS specifying adjustment of own funds requirements and minimum features of stress testing programmes of issuers of asset-referenced tokens (ARTs) or of e-money tokens (EMTs).
  • Delegated Regulation (EU) 2025/418 with RTS specifying the minimum content of the governance arrangements on the remuneration policy of issuers of significant ARTs or EMTs.
  • Delegated Regulation (EU) 2025/419 with RTS specifying the procedure and timeframe for an issuer of ARTs or of EMTs to adjust the amount of its own funds.
  • Delegated Regulation (EU) 2025/421 with RTS specifying the data necessary for the classification of cryptoasset white papers and the practical arrangements to ensure that such data is machine-readable.

The following Delegated Regulations come into force on 20 April 2025:

  • Delegated Regulation (EU) 2025/300 with RTS on information to be exchanged between NCAs.
  • Delegated Regulation (EU) 2025/305 with RTS specifying the information to be included in an application for authorisation as a CASP.
  • Implementing Regulation (EU) 2025/306 with ITS on the standard forms, templates and procedures for the information to be included in the application for authorisation as a CASP.
  • Delegated Regulation (EU) 2025/413 with RTS on the detailed content of information necessary to carry out the assessment of a proposed acquisition of a qualifying holding in an issuer of an ART.
  • Delegated Regulation (EU) 2025/414 with RTS on the detailed content of information necessary to carry out the assessment of a proposed acquisition of a qualifying holding in a CASP.
  • Delegated Regulation (EU) 2025/422 with RTS on the content, methodologies and presentation of information in respect of sustainability indicators in relation to adverse impacts on the climate and other environment-related adverse impacts.

ESMA’s Guidelines on the maintenance of systems and security access protocols under MiCA apply from 27 April 2025. The purpose of the Guidelines is to give more clarity on the systems and security access protocols that apply to offerors and persons seeking admission to trading who are not subject to the same operational resilience standards under MiCA and DORA as their CASP and issuer counterparts. They provide a streamlined set of principles for in-scope entities to manage their ICT risks. NCAs must ‘comply or explain’ by 27 April 2025. Offerors and persons seeking admission to trading are not required to report whether they comply with the guidelines.

ESMA’s Guidelines on transfer services for crypto-assets under MiCA also apply from 27 April 2025. The guidelines apply to NCAs and CASPs that provide transfer services for cryptoassets on behalf of clients. While NCAs must ‘comply or explain’ by 27 April 2025, CASPs are not required to report on whether they comply with the guidelines.

ESMA’s Guidelines on reverse solicitation under MiCA also apply from 27 April 2025, covering situations in which a third-country firm is deemed to solicit clients established or situated in the EU and the supervision practices to detect and prevent circumvention of the reverse solicitation exemption. The guidelines aim to give clarity to NCAs and market participants, especially third-country firms, on the limited situations where the offer or provision of cryptoasset services to clients established or situated in the EU will be regarded as initiated at the own exclusive initiative of the relevant clients. NCAs must ‘comply or explain’ by 27 April 2025.

ESMA’s consultation on the criteria for the assessment of knowledge and competence of staff of CASPs who give information or advice on crypto-assets or crypto-asset services closes on 22 April 2025. ESMA is looking for input on areas such as the minimum requirements regarding knowledge and competence of staff providing information or advice on crypto-assets or crypto-asset services; and the organisational requirements of CASPs for the assessment, maintenance and updating of knowledge and competence of the staff providing information or advice.

MICA / PAYMENTS

The European Banking Authority had previously signposted its plans to formally respond to concerns raised by the European Commission on the interplay between MiCA and the revised Payment Services Directive (PSD2) by April 2025.

The Commission wrote to the EBA and ESMA in December 2024 regarding an overlap between cryptoasset services provided by CASPs under MiCA and payment services regulated under PSD2. The Commission had noted that EMTs have a dual nature as both cryptoassets regulated under MiCA and electronic money (or funds) within the meaning of PSD2. The Commission also noted diverging interpretations among Member States about the interplay between MiCA and PSD2.

While the treatment of EMTs is being discussed as part of the proposals to revise PSD2, the Commission would prefer a quick solution pending the PSD2 reforms being finalised - it asked the EBA (in co-ordination with ESMA) to consider issuing a ‘no action letter’ on the enforcement of the PSD2 requirements on authorisation as regards EMT services provided by CASPs that may be inadvertently covered by PSD2. The Commission wants the ‘no action letter’ to remain in effect until the changes to PSD2 come into force.

Where dual authorisation would be required, the Commission asked the EBA and ESMA to look at whether the PSD2 authorisation process could be streamlined to reduce the operational burden institutions would face.

MIFID II

The European Commission’s targeted consultation on the functioning of commodity derivatives, emission allowances markets and certain aspects of spot energy markets closes on 9 April 2025.

The Commission has been looking for feedback on issues such as data aspects relating to commodity derivatives, the ancillary activity exemption, position management and position reporting, position limits, circuit breakers and other elements arising from the September 2024 Draghi report on EU competitiveness.

Responses to this consultation will inform the content of the Commission’s report to the European Parliament and Council of the EU under MiFID II and potentially inform future policy decisions.

PAYMENTS

Decision (EU) 2025/222 of the European Central Bank (ECB) on access by non-bank payment service providers (PSPs) to ECB-operated payment systems and central bank accounts applies in EU Member States from 9 April 2025.

The Decision gives effect to a policy published by the ECB in July 2024 to help it adopt a harmonised approach to access by non-bank PSPs (such as payment institutions and e-money institutions) to all central bank operated payment systems (e.g. TARGET and retail payment systems operated by euro-area national central banks).

Among other matters, the Decision:

  • Sets out the conditions that a non-bank PSP must meet to qualify for access to Eurosystem central bank operated payment systems.
  • States that Eurosystem central banks will not offer safeguarding accounts to non-bank PSPs, since it is not a core function of central banks to act as a substitute for credit institutions in providing safeguarding services.
  • Specifies rules relating to the maximum balance on the account holder’s settlement account at the close of each business day.

SECURITISATION

ESMA will begin reviewing responses to its consultation on the revision of the disclosure framework for private securitisation in April 2025, following the end of the consultation period on 31 March 2025.

For more information on that consultation, read our recent insights here: Private Securitisations: ESMA proposes streamlined disclosure template

The Commission and industry stakeholders will also begin reviewing the recommendations made by the ESAs in their Article 44 Report on the functioning of the EU Securitisation Regulation, published on 31 March 2025. Recommendations that will be the subject of particular focus relate to jurisdictional scope (the ESAs recommended that the EU Securitisation Regulation apply where at least one party (sell-side or buy-side) is established in the EU), Article 5(1)(e) and what adjustments should be made to the requirements on the format in which information is provided, whether the definition of "sponsor" should be widened, and whether (in the context of the risk retention RTS) the terms "sole purpose" and / or "predominant source of revenue" should be clarified. The European Commission's legislative proposal to amend the EU Securitisation Regulation is currently planned for publication in mid-June 2025.

SETTLEMENT DISCIPLINE

ESMA’s consultation on a delegated regulation amending Delegated Regulation (EU) 2018/1229 (the RTS on settlement discipline) closes on 14 April 2025.

Under CSDR Refit, ESMA is mandated to prepare draft RTS on settlement discipline measures and tools to improve settlement efficiency.

For more information on ESMA’s proposed changes to the RTS on settlement discipline, read our recent insights here:

Settlement Discipline: ESMA consults on measures to increase settlement efficiency and prevent settlement fails

ESMA plans to publish its final report and submit the draft RTS to the European Commission by October 2025.

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