Risk & Compliance Report For the Week Ending: July 18, 2025

1. Executive Summary

This week was marked by a significant volume of policy announcements from UK authorities, collectively known as the "Leeds Reforms," aimed at bolstering the UK's financial services growth and competitiveness. Key themes include a significant overhaul of the regulatory framework through the revocation of retained EU law, substantial reforms to the Senior Managers & Certification Regime (SM&CR), and a strategic pivot on sustainable finance with the cancellation of the UK Green Taxonomy.

For firms, the immediate priorities are to analyse the impact of the SM&CR streamlining proposals, understand the new UK-specific approach to overseas recognition, and adjust sustainable finance strategies in light of the taxonomy decision. In the EU, the focus remains on implementing DORA and finalising the Solvency II review. Internationally, the Financial Stability Board (FSB) has signalled a renewed focus on non-bank financial intermediation (NBFI) and digital assets.

2. United Kingdom Developments

A. Overarching Regulatory Framework & Competitiveness

• The "Leeds Reforms" & Financial Services Growth Strategy: HM Treasury unveiled a comprehensive strategy to enhance the UK's competitiveness. This involves numerous consultations and policy shifts aimed at creating a more proportionate, predictable, and internationally competitive regulatory environment.

  • Risk & Compliance Consideration: Firms should view this as a directional shift in UK regulation, moving from a focus on pure risk mitigation to one that explicitly balances risk with growth and competitiveness. This may create opportunities for dialogue with regulators and influence future rule-making.

• Revocation of Retained EU Law (FSMA 2023 Commencement): The UK has formally revoked or set a timeline to revoke key pieces of retained EU law, including:

  • UK Taxonomy Regulation: Revoked with immediate effect (July 15, 202July 15ivalence Regimes: Revoked from November 28, 2022. 28 Capital Requirements Regulation (CRR): Multiple provisions were revoked as of January 1, 2022, and Compliance Consideration: This represents a significant divergence from the EU framework.

  • Sustainable Finance: The decision to scrap the UK Green Taxonomy requires firms to pivot their ESG strategy to focus on other UK-specific requirements, such as the UK Sustainability Reporting Standard (SRS) and transition plan disclosures. This may create interoperability challenges for firms operating across the UK and EU.

    • Cross-Border Business: The move from the EU Equivalence model to the UK's new Overseas Recognition Regimes (ORRs) is fundamental. Firms relying on existing equivalence decisions must immediately assess the new ORR guidance to understand how their access to the UK market will be determined going forward.

• PRA Policy on UK CRR Restatement (PS12/25): The PRA finalised rules on the definition of capital, ECAI mapping, and securitisation, which will be moved into the PRA Rulebook.

  • Implementation Date: January 1, 2022. Compliance Consideration: The early implementation of ECAI mapping rules ahead of the main Basel 3.1 package will necessitate that firms update their credit risk models and capital calculations sooner than anticipated. This may provide benefits by allowing the use of a broader range of rating scales.

B. Individual Accountability & Governance

• Reforming the SM&CR: The FCA, PRA, and HM Treasury have launched consultations to streamline the Senior Managers and Certification Regime (SM&CR).

  • Key Proposals: More flexibility for temporary senior manager appointments, reducing duplicate certifications, extending the validity of criminal record checks, and providing more precise guidance.

  • Consultation Deadline: October 7, 2023, & Compliance Consideration: These proposals are welcome and aim to reduce the administrative burden of the regime. Compliance and HR functions should immediately review the proposals against their current SM&CR processes to quantify the potential benefits and identify any operational challenges that may arise. Responding to the consultation is highly recommended, as a second phase of more fundamental reforms is anticipated.

C. Consumer Protection & Redress

• Modernising Redress (FCA/FOS CP25/22): A joint consultation proposes significant changes to the complaints and redress framework.

  • Key Proposals: Clearer expectations for proactive redress, a new "lead complaint" process to ensure consistency, and a formal referral mechanism from the FOS to the FCA on rule interpretation.

  • FOS Interest Rate Change: Separately, the FOS will change its standard interest on awards from 8% to the Bank of England Base Rate + 1% for new complaints from January 1. January 21st: Deadline: October 8 and October 28. Compliance Consideration: The proposals could significantly alter the compliance landscape. The lead complaint and referral mechanisms may give FOS decisions greater weight, leading to more consistent outcomes and increasing the importance of getting initial complaint handling right. Firms must review their provisions and complaint handling procedures in light of these proposals.

D. Digital Assets & Innovation

• Property (Digital Assets, etc) Bill: The Bill, which confirms that digital items can be legally treated as personal property, continues its passage through Parliament.

  • Risk & Compliance Consideration: This provides crucial legal certainty for the digital asset ecosystem. It solidifies the legal basis for taking security over cryptoassets, including them in wills, and enforcing property rights. Legal and compliance teams should monitor the Bill's final text and update legal agreements and risk frameworks accordingly.

• Wholesale Markets Digital Strategy: The HM Treasury has committed to a strategy to digitalise wholesale markets, including the removal of paper-based processes, the driving of automation, and the creation of a framework for DLT and tokenisation.

  • Risk & Compliance Consideration: This is a long-term strategic initiative. Firms should engage with the appointed "digital markets champion" and industry bodies to shape the future of market infrastructure. This will impact operational processes, technology investment, and post-trade activities.

E. Financial Crime

• National Risk Assessment (NRA) 2025: The NRA highlights increased risks stemming from the convergence of money laundering and sanctions evasion, as well as the emergence of new financial technologies (such as crypto and e-money) and informal value transfer systems.

  • Risk & Compliance Consideration: The NRA is a cornerstone document for compliance. Firms must review and update their enterprise-wide risk assessments to ensure they reflect the findings of the 2025 NRA, particularly regarding the emerging risks in AI and the heightened threat from sanctions evasion.

• FCA Amends PEP Guidance (FG25/3): The FCA clarified that non-executive board members of UK civil service departments should not automatically be treated as PEPs unless they meet the definition in another capacity.

  • Risk & Compliance Consideration: This is a minor but helpful clarification that may reduce the number of individuals subject to enhanced due diligence, allowing firms to refine their PEP screening and risk-rating methodologies.

3. European Union Developments

• ESAs Guide on DORA CTPP Oversight: The European Supervisory Authorities published a guide on the oversight framework for Critical ICT Third-Party Providers (CTPPs).

  • Risk & Compliance Consideration: While aimed at CTPPs, this is essential reading for all financial entities. It details how regulators will supervise their most critical technology suppliers. Firms must ensure their third-party risk management frameworks, contractual terms, and resilience testing plans are aligned with the expectations of this DORA oversight regime.

• Postponement of ESRS Requirements (Quick Fix Regulation): The European Commission has adopted a regulation to postpone specific sustainability disclosure requirements for "first wave" companies under the CSRD, particularly concerning the financial effects of sustainability risks.

  • Risk & Compliance Consideration: This provides temporary relief for firms grappling with complex new disclosure requirements. However, it is a postponement, not a cancellation. Firms should utilise the extra time to develop robust data collection and modelling capabilities to meet these requirements in future years.

• Solvency II Review: The European Commission is consulting on amendments to the Solvency II Delegated Regulation to align it with the recently agreed Solvency II Amending Directive.

  • Risk & Compliance Consideration: This is a critical development for all EU insurers. The changes will impact technical provisions, capital requirements, reporting, and group solvency calculations. Insurers must engage with the consultation and begin planning for implementation, which is set for January 2027.

4. International Developments

• FSB Priorities: The new FSB Chair has outlined key priorities, including enhancing surveillance, addressing risks in NBFI and private finance, assessing the role of stablecoins, and strengthening the FSB's effectiveness.

  • Risk & Compliance Consideration: This sets the global regulatory agenda. The focus on NBFI signals that asset managers, funds, and private credit providers will face increasing scrutiny and potential new policy measures in the coming years. The continued focus on stablecoins indicates that the "crypto winter" has not diminished regulatory concern in this area.

5. Key Dates & Deadlines

Date	Jurisdiction	Item	Relevance
August 29, 2025	August 29		Consultation closes: New regulated activity of "targeted support".	Firms are considering offering this new form of simplified advice.
Sep 5, 2	September 5	K	Consultation closes: PRA on Basel 3.1 market risk adjustments.	Banks with significant trading book activities.
Sep 9, 2	September 9	K	Consultation closes: HM Treasury on cross-cutting regulatory reforms.	All regulated firms.
Oct 7, 2	October 7	K	Consultation closes: SM&CR reform proposals.	All SM&CR firms.
Oct 8, 2	October 8	K	Consultation closes: Modernising the Redress System (FCA/FOS).	All firms with retail customers.
Oct October 825	UK	Consultation closes: HM Treasury review of the FOS.	All firms with retail customers.
Nov November 2825	UK	Revocation of EU Equivalence Regimes Takes Effect.	Firms relying on equivalence for cross-border business.
Jan 1, 2	January 1	K	Implementation of PRA rules on capital definition and ECAI mapping.	Banks, building societies, investment firms.
Jan 1January 16	UK	FOS interest rate change (Base Rate + 1%) applies to new cases.	All firms are subject to FOS jurisdiction.
JJanuary 1 2027	UK/EU	Main implementation of Basel 3.1 standards in the UK.	All banks.
January 30 2027	EU	Solvency II Amending Directive and revised Delegated Regulation apply.	All EU insurers.

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