The approaching end of the year is the perfect time for a brief recapitulation of the current state of banking regulation and an overview of what lies ahead in this area in the coming year. In recent years, several legislative documents have been issued that will influence banking regulation, with their validity yet to come into effect.
One of the most anticipated updates to the legislative framework was the publication of CRR 3 and CRD 6 on June 19 of this year. In addition to incorporating the final components of the Basel III reforms into EU law, these documents also introduce strengthened supervision and new sustainability/ESG requirements.
The implementation timeline for this regulation is as follows:
The EBA has been entrusted to issue approximately 140 mandates across a wide range of technical areas related to CRR 3 and CRD 6. An overview of these documents, along with their planned release dates, was provided by the EBA in its roadmap published at the end of 2023. The roadmap divides the mandates into four phases. In 2025, it is expected that documents falling under Phase 1, if not already issued, will be released, along with most documents from Phase 2, at least in a consultation form. A complete list of planned documents for 2025 can be found in the EBA Work Programme 2025 (EBA/REP/2024/20).
On December 30, the MiCA regulation (European Markets in Crypto-Assets Regulation) will come fully into effect. This regulation establishes uniform rules for issuers of crypto-assets and providers of services related to these assets, thereby enhancing investor protection and contributing to financial stability. In the area of crypto-asset regulation, 2025 is expected to see a legislative proposal from the Commission introducing specific prudential treatment for exposures to crypto-assets, taking into account international standards from the BCBS. The Commission is expected to present this proposal to the Parliament and the Council by June 30, 2025. Among other things, the proposal will include specific capital requirements for crypto-assets, an aggregate limit on exposures to crypto-assets, as well as leverage ratio and liquidity requirements for such exposures.
An important regulation coming into effect at the beginning of 2025 is DORA (effective on January 17), which establishes a unified framework to ensure the digital resilience of financial institutions. For example, all entities covered by DORA will be required to maintain a comprehensive register of their contractual agreements with third-party ICT service providers. In light of this regulation, the EBA also plans to revise its outsourcing guidelines (GL) in 2025.
In the field of AML/CFT, the newly established AMLA (Authority for Anti-Money Laundering and Countering the Financing of Terrorism) will begin operations in 2025. AMLA is a key component of the comprehensive AML/CFT legislative package. The new authority's tasks will include ensuring that all bodies involved in combating financial crime can effectively cooperate both domestically and internationally while using consistent supervisory procedures and risk detection methods. AMLA will directly supervise a select number of financial groups, although it remains unclear which entities will be included. In 2025, AMLA is expected to draft RTS to specify the assessment of the risk profiles of institutions under its direct supervision.
The final topic we would like to highlight is regulation related to ESG. As mentioned earlier, CRR 3 and CRD 6 also include requirements in this area. Banks will be required, among other things, to systematically identify and manage ESG risks as part of their risk management processes and disclose the extent of their exposure to such risks. Additionally, banks must develop transition plans and integrate these plans into their strategy, including their business model and governance, covering short-, medium-, and long-term time horizons.
In 2025, supervisory authorities plan to release the final version of GL on ESG risk management (EBA) and update any related regulations as needed. Furthermore, ESMA intends to publish documents addressing greenwashing and ESG ratings.
Another regulation coming into effect at the end of December 2024 is the regulation on European green bonds, which introduces requirements for the European Green Bond, the bond offered as environmentally sustainable, and the sustainability-linked bond. In 2025, these three new types of sustainable bonds will be available on EU markets. The standards aim to ensure transparency and better comparability of green/sustainable products, but they are voluntary (issuers can continue to issue sustainable bonds in accordance with international standards).
In conclusion, and for the sake of completeness, we provide the changes in ESG reporting requirements for the years 2024 and 2025:
Given the scope of reporting obligations, it is positive news that the European Commission plans to create a consolidated ESG reporting framework in 2025, aimed at simplifying overlapping requirements.
Therefore, we do not expect any dramatic changes in regulation in the coming year, but rather a continuous progression along the established regulatory path.
In connection with the new banking regulation, we cordially invite you to our seminars (in Czech):
Additionally, when implementing selected new regulations, we can offer collaboration in the following forms: