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3to2 - 10 Key Focus Areas For Financial Services Firms 2025_alev-takil-7ojyp-IXW7w-unsplash_50034

In this publication and podcast series, we explore some of the core focus areas for UK-regulated financial services firms in the year ahead.

In 2024, we saw disruption to the regulatory reform agenda as the unexpected timing of the general election impacted work and publication schedules. Now that the reform agenda is back on track and aligned to the new government’s plans for growth, we are likely to see improved progress on existing reforms as well as fresh initiatives in the pursuit of growth during 2025.

There is doubtless a strong focus on retail markets under the new government, but the UK’s competitiveness as a place to do business remains vital as improvements to the UK’s wholesale markets continue. ESG and AI continue to dominate across the sector as rapidly evolving areas that profoundly impact the regulatory landscape.

banking

Proposals reflect drive to enhance the competitiveness of the UK regulatory landscape.

By Rob Moulton, Kendall Burnett, Sarah Gadd, Charlie Bowden, and Charlotte Collins

On 26 November 2024, the PRA and the FCA published a joint Consultation Paper on changes to the remuneration rules (PRA CP16/24, FCA CP24/24). The changes are relevant to banks, building societies, and PRA-designated investment firms.

While the amendments to the rules on deferrals and retention had been previewed by both the…

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Guidance for the largest US financial institutions is intended to promote climate risk management consistent with general safety and soundness practices.

By Sarah E. Fortt, Betty M. Huber, Arthur S. Long, Pia Naib, Karmpreet (Preeti) Grewal, Austin J. Pierce, and Deric Behar

On October 30, 2023, the three US federal bank regulatory agencies — the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) (collectively, the Agencies) — jointly finalized Principles for Climate-Related Financial Risk Management for Large Financial Institutions (the Principles).

The Principles are intended to provide large financial institutions (i.e., those with $100 billion or more in total assets) with a high-level framework for understanding and managing exposures to climate-related financial risks, including physical[1] and transition[2] risks. Such “financial institutions” include national banks and federal thrifts, state member banks, FDIC-insured state nonmember banks and savings associations, bank holding companies, savings and loan holding companies, intermediate holding companies, branches, agencies and the combined US operations of non-US banking organizations, and any systemically important non-banks that may become supervised by the FRB.

The proposals would give the Bank of England wide-ranging powers to deal with acute failure scenarios, treating policyholder liabilities as loss-absorbing.

By Victoria Sander and Tim Scott

HM Treasury is proposing a new UK resolution regime for insurers that would appoint the Bank of England as resolution authority with sweeping powers to resolve insurers through transfer or bail-in, and to make resolution plans and assess resolvability in advance. The regime would share many similarities with the Banking Act 2009 (BA09).

After a lengthy “holistic” review and a spring banking crisis, US bank capital requirements finally face overhaul.

By Arthur S. Long, Pia Naib, Ja Hyeon Park, and Deric Behar

On July 10, 2023, US Federal Reserve Board (FRB) Vice Chair for Supervision Michael Barr delivered a speech that outlined his approach to regulatory reform after the FRB’s nine-month-long “holistic” review of capital standards in the wake of the spring 2023 US bank failures (for more information, see this Latham blog post).

Proposed changes will include strengthening capital standards for a broad range of US banks with assets over US$100 billion. The changes to capital requirements would come as a proposal to implement the final aspects of the Basel III capital accord (the so-called “Basel III Endgame”).

Governor Bowman calls for transparent supervisory expectations and attention to the consequences of regulatory reform on the broader financial system.

By Arthur S. Long, Pia Naib, Ja Hyeon Park, and Deric Behar

On June 25, 2023, US Federal Reserve Board (FRB) Governor Michelle W. Bowman gave a speech that outlined her views of the best path forward for regulatory reform in the wake of the spring 2023 US bank failures (for more information, see this Latham blog post). To achieve optimal supervisory results and preserve a dynamic banking sector, while minimizing unintended consequences, Governor Bowman cautioned against implementing higher capital requirements on banks based on incomplete information or erroneous assumptions. Instead, she recommended bolstering institutional risk management and the effectiveness of the FRB’s supervisory program.

Following this spring’s shocks to the banking system, US, UK, and European regulators are considering whether existing regulatory and crisis management measures require reform and enhancement.

By David Berman, Nicola Higgs, Markus E. Krüger, Arthur S. Long, Rob Moulton, Axel Schiemann, Pia Naib, Ja Hyeon Park, Deric Behar, and Charlotte Collins

The spring of 2023 saw more dislocation in the global financial sector than any time since the 2008-09 financial crisis.…

In contrast with the White House’s position, the Vice Chairman denied that loosened Dodd-Frank rules contributed to the recent bank failures.

By Arthur S. Long, Pia Naib, and Deric Behar

On April 12, 2023, Federal Deposit Insurance Corporation (FDIC) Vice Chairman Travis Hill delivered a speech at the Bipartisan Policy Center, “Recent Bank Failures and the Path Ahead.” In it, he addressed key themes and takeaways from the March 2023 bank failures that saw the FDIC appointed as receiver for a bank with over $200 billion in consolidated assets and another with over $110 billion in consolidated assets, as well the voluntary liquidation of another bank with over $10 billion in consolidated assets. Notably, his views indicate that the US banking agencies do not agree over the regulatory lessons to be drawn from the failures.

President Biden is calling for tougher standards and supervision for large regional banks in the wake of recent instability in the US banking sector.

By Arthur S. Long, Pia Naib, and Deric Behar

On March 30, 2023, the White House issued a Fact Sheet calling on the federal banking agencies, the Federal Reserve Board (FRB), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), in consultation with the Treasury Department, to safeguard the banking system by imposing stricter rules on certain financial institutions — mostly large regional banks with US$ 100-250 billion in assets.

Notably, the White House recommended that regulators reverse some of the deregulatory measures that the Trump Administration had enacted in 2018. The Fact Sheet argues that this weakening of safeguards and supervisory requirements under the Dodd-Frank Act led directly to recent banking industry failures and the resulting threat of contagion.

The decisive action will mitigate emerging liquidity and solvency risks, contain pressure on the banking system, and protect depositors.

By Arthur S. Long, Pia Naib, and Deric Behar

On March 12, 2023, the Board of Governors of the Federal Reserve System (Federal Reserve) took a unanimous emergency step to protect the safety and soundness of the financial system from contagion risk following the second largest bank insolvency in US history. The move aims to “reduce stress across the financial system, support financial stability and minimize any impact on businesses, households, taxpayers, and the broader economy.”