Banking Regulations Update

New SFDR updates in under 90 seconds below! The EU Commission's Final Proposal is a hard reset of the Sustainable Finance Disclosure Regulation (SFDR). We put together the table below and this summary to let you know what the new articles say. If you advise clients, run funds, or sit in risk/compliance, these changes will shape your 2027–2028 strategy. Here are the new SFDR product categories: 1. Article 7 — Transition -For products backing companies/projects on a credible transition path. -70% of the portfolio must support the transition objective. -Partial Paris-Aligned Benchmark exclusions apply. -Product-level PAI disclosures required. -May use the word “impact” if criteria are met. 2. Article 8 — ESG Basics -Integrates ESG beyond risk management, but without transition or sustainability objectives. -Requires 70% alignment with the stated ESG strategy. -Limited exclusions. -No PAI requirement at product level. -Much narrower than today’s Article 8. 3. Article 9 — Sustainable Features -For products investing in already sustainable assets or pursuing a sustainability objective. -70% sustainable alignment required. -EU Taxonomy ≥15% counts as meeting the 70% test. -Full PAB exclusions, including strict fossil-fuel limits. -PAI disclosures + extra reporting for impact funds. 4. Article 9a — Mixed Products -For portfolios blending Article 7 and Article 9 approaches across asset classes. -Still must meet the 70% threshold using Article 9 criteria. -Not a new label—more a structural option for multi-asset strategies. 5. Article 6a — ESG-Uncategorised Products -Cannot use ESG wording in names. -Any sustainability statements must be minimal and secondary (<10% of strategy description). -Designed to eliminate ESG-lite positioning. What this all means: No grandfathering. No professional-investor opt-outs. The old Article 8/9 system will go away. Disclosures will be simpler, but product requirements will be sharper and more rule-based. Private markets will get clarity on ramp-up periods. The legislative process will take 12–18 months, followed by a transition period. We are helping investors navigate these new requirements and stay ahead of the curve. Get in touch for our full analysis on SFDR and to learn more! #sfdr #EU #sustainablefinance #investors

There are a 𝑙𝑜𝑡 of conversations happening around stablecoins right now — and the tone has changed. This isn’t just crypto people debating tech anymore. It’s turning up in 𝐛𝐚𝐧𝐤 𝐞𝐚𝐫𝐧𝐢𝐧𝐠𝐬 𝐜𝐚𝐥𝐥𝐬, 𝐩𝐨𝐥𝐢𝐜𝐲 𝐝𝐫𝐚𝐟𝐭𝐬, 𝐚𝐧𝐝 𝐫𝐞𝐠𝐮𝐥𝐚𝐭𝐨𝐫𝐲 𝐟𝐫𝐚𝐦𝐞𝐰𝐨𝐫𝐤𝐬. Take Bank of America’s CEO Brian Moynihan — his point was blunt: if stablecoins are allowed to pay yield, they could pull deposits out of banks and “take lending capacity out of the system.” And JPMorgan leadership (Jamie Dimon included) have raised the bigger structural concern: if stablecoins start behaving like deposits, we may be creating a parallel banking system — but without the same safeguards that sit behind traditional banking. Which is why this feels like a real shift: 𝐒𝐭𝐚𝐛𝐥𝐞𝐜𝐨𝐢𝐧𝐬 𝐚𝐫𝐞 𝐧𝐨 𝐥𝐨𝐧𝐠𝐞𝐫 𝐚 “𝐜𝐫𝐲𝐩𝐭𝐨 𝐭𝐨𝐩𝐢𝐜”. 𝐓𝐡𝐞𝐲’𝐯𝐞 𝐛𝐞𝐜𝐨𝐦𝐞 𝐚 𝐛𝐚𝐧𝐤𝐢𝐧𝐠 + 𝐩𝐨𝐥𝐢𝐜𝐲 𝐭𝐨𝐩𝐢𝐜. Here are the 6 stablecoin discussions shaping 2026 1) Yield / rewards (the real battleground) If stablecoins pay yield — directly or indirectly — they stop being “just payments”. They become a competing store of value. 2) Deposit outflows → lending capacity Banks fund lending through deposits. If a meaningful share migrates to stablecoins, credit tightens or becomes more expensive — SMEs get hit first. 3) Shadow banking risk Regulators worry stablecoins could recreate deposit-like intermediation outside the prudential perimeter — without the same capital, liquidity, or backstops. 4) Tokenised deposits vs stablecoins Two versions of digital money are competing quietly in the background: - bank-issued tokenised deposits (inside the system), vs - stablecoins issued by non-banks (reserve-backed, outside the system) 5) Reserve rules & redemption stress What counts as safe reserves? How fast can redemptions be met in a shock? This is where “payments innovation” meets “financial stability”. 6) Consumer protection & integrity Clear disclosures, governance, audits, AML/sanctions controls — all become non-negotiable if this scales. The interesting part is this: The industry isn’t debating whether stablecoins work. They clearly do. The debate is whether they remain a regulated payments layer… or evolve into a deposit alternative, forcing a redesign of credit intermediation and monetary plumbing. Where do you think this lands over the next 12 months? #Stablecoins #FinTech #DigitalPayments #Banking #Regulation #CryptoRegulation #Payments

🔴 Just In - the Senate Banking Committee has just released its 309-page draft of the "Clarity Act". After the "Genius Act" on stablecoins in 2025, this is the most anticipated crypto legislation of the year in the US. 👉 Amendments due tomorrow. Markup Thursday. Here's what actually matters : 🔵 BTC, ETH and any spot ETP approved before year-end are permanently treated as "non-securities". No ambiguity. No reversal. The regulatory overhang on institutional allocation disappears. 🔵 Staking is fully carved out - self-staking, liquid staking, custodial staking. Governance rights don't disqualify a token. A massive unlock for on-chain yield products. 🔵 Banks can now offer custody, staking, lending, market making and underwriting for digital assets. No prior approval required. TradFi infrastructure enters the game at scale. 🔵 Stablecoin yield on exchanges is banned. Activity-based rewards (staking, governance, loyalty) stay permitted. Existing programs will need to restructure. A direct hit on exchange business models. Circle and Coinbase will play this very differently. This is the most consequential piece of crypto legislation the US has ever drafted. And Europe is watching closely. MiCA 2 is coming. Two of its biggest open questions are the legal nature of tokens and the regulation of DeFi. The Clarity Act's answers - permanent non-security status for major tokens, staking carved out, banks fully authorised - will be hard for European regulators to ignore. We're tracking every detail at The Big Whale - including in our institutional briefings. 📌 Join us tomorrow morning with Grégory Raymond & Aleksandar Bukovski for our insights.

Understanding the Imperative: Basel III and Post-Crisis Reforms The financial crisis of 2008 was a stark reminder of the interconnectedness and vulnerabilities within the international financial system. The crisis exposed significant weaknesses in the global regulatory framework, particularly under Basel II, necessitating a more robust and resilient banking system. Understanding why Basel III and other post-crisis reforms were introduced is crucial for banking professionals who are navigating these regulatory environments. Although Basel II was a significant advancement over its predecessor, it became apparent during the financial crisis that it did not go far enough in preventing the build-up of systemic risk. Basel II was heavily reliant on internal risk assessments by banks, which proved to be overly optimistic and insufficient in the face of financial distress. The framework also lacked stringent requirements for liquidity and leverage, allowing banks to operate with high leverage while maintaining insufficient liquid assets. Basel III was developed to address these shortcomings and to significantly strengthen the global capital framework. Key enhancements introduced by Basel III include: 1. Higher Capital Requirements: stricter capital requirements, increasing both the quantity and quality of capital banks must hold. This includes a higher ratio of equity to risk-weighted assets, ensuring that banks have enough capital to absorb losses during periods of financial stress. 2. Countercyclical Buffers: To prevent excessive credit growth that can lead to asset bubbles, Basel III introduced countercyclical capital buffers, requiring banks to hold additional capital during periods of high credit growth, which can be reduced when conditions worsen. 3. Leverage Ratio: Unlike Basel II, Basel III introduced a non-risk-based leverage ratio to serve as a safeguard against excessive leverage on banks' balance sheets. This measure helps ensure that banks' expansion is matched by solid capital support. 4. Liquidity Requirements: Basel III established two key liquidity ratios - the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR). These ensure that financial institutions maintain sufficient high-quality liquid assets to withstand a 30-day stressed funding scenario and promote more stable funding structures. The implementation of Basel III and its ongoing updates reflect an ongoing commitment to fortifying the global banking system against future crises. These reforms have led to a more conservative banking environment where institutions must operate with higher levels of capital and stronger risk management practices. Understanding the rationale and requirements of Basel III is not just about regulation, but about appreciating the role of these reforms in fostering a more stable banking system. As the landscape continues to evolve, the insights gained from these reforms will be essential in guiding future regulatory changes.

Major #SFDR Overhaul: EU sustainable finance rules completely restructured The European Commission just proposed a fundamental redesign of the Sustainable Finance Disclosure Regulation (SFDR). Here's what's changing: THE TRANSFORMATION FROM: Complex disclosure-heavy framework TO: Streamlined 3-category product system Impact: 25-50% cost reduction for financial firms NEW PRODUCT CATEGORIES Article 9 - Sustainable: Already sustainable investments | 70% threshold | Strictest exclusions (no fossils, high-carbon) Article 7 - Transition: Companies transitioning to sustainability | 70% threshold | Moderate exclusions plus fossil expansion limits Article 8 - ESG Basics: Broader ESG integration | 70% threshold | Light exclusions (weapons/tobacco/violations) BEFORE vs AFTER: KEY CHANGES Scope Before: Financial market participants + advisers After: Only product manufacturers/managers Entity Disclosures Before: Principal adverse impacts + remuneration policies required After: Completely eliminated (€56M annual savings) Product Framework Before: Articles 8 & 9 as vague quasi-labels After: Clear categories with specific criteria "Sustainable Investment" Before: Complex definition causing confusion After: Definition deleted; embedded in category criteria Disclosure Length Before: Lengthy templates, no limits After: Maximum 2 pages pre-contractual Marketing Rules Before: Must not contradict disclosures After: ONLY categorised products can use sustainability terms in names MAJOR DELETIONS ⇢Entity-level principal adverse impact disclosures ⇢Remuneration policy requirements ⇢"Sustainable investment" definition ⇢Entire Delegated Regulation 2022/1288 repealed NEW ANTI-GREENWASHING MEASURES ⇢Only categorised products can use ESG terms in names ⇢"Impact" term reserved for specific strategies ⇢Member States prohibited from adding requirements KEY ADDITIONS ⇢Fast-track: 15%+ EU Taxonomy-aligned = automatic qualification ⇢Formal data & estimates documentation requirements ⇢Clear fund-of-funds framework TIMELINE ⇢General application: 18 months after entry into force ⇢Insurance/pension products: 30 months (12-month grace period) WHAT DOES THIS MEAN ⇢For Asset Managers: Lower compliance costs, clearer rules, predictable supervision ⇢For Investors: Better comparability, reduced greenwashing, easier product matching ⇢For Markets: Efficient capital allocation, stronger single market, competitive advantage The EU is choosing clarity and enforceability over comprehensive complexity. This fundamental restructuring bets that simpler rules with stronger enforcement better serve both market integrity and the sustainable transition. #sustainablefinance #sfdr #esg #regulation #assetmanagement #greenfinance #compliance #europeanunion

How do we safeguard Europe’s investment capacity – at a time of geopolitical tensions and immense transformation needs? Europe wants to invest: in transformation, in infrastructure, in security, in competitiveness. A key lever for this is a strong and diverse banking system. Regionally anchored, low-risk institutions finance #SMEs, municipalities and households every single day. This structure is not a relic – it is a European competitive advantage. To preserve it, we now need regulatory reform: simpler, more coherent, more proportional. Not less stability. But rules that enable diversity instead of unintentionally levelling it. Concretely, this means: 💡Consolidating capital buffers and removing gold-plating elements such as the Systemic Risk Buffer. 💡Establishing a genuine #EU regime for regional banks – with substantial relief in SREP, reporting, disclosure and governance requirements. 💡Making the CRR3 transitional arrangements permanent and avoiding competitive disadvantages compared to other jurisdictions. 💡Introducing a moratorium on new reporting requirements and consistently reducing redundant reporting obligations. 💡Ensuring coherence in sustainable finance rules – simplifications must be systematically reflected in CRR/CRD and SFDR, aligned with actual data availability. 💡Aligning the ECB’s €30 billion threshold with systemic relevance rather than a static balance sheet size. 💡And particularly important: advancing a dedicated Financial Services Omnibus. The proposal by Lars Klingbeil and Roland Lescure is the right approach. Such a simplification package could enable tangible regulatory improvements in the short term – even before lengthy legislative procedures are concluded. Europe needs speed. A comprehensive review of the financial regulatory framework with a clear focus on competitiveness would send a strong signal. Diversity in the European banking system is not a problem to be solved. It is a competitive advantage we should preserve.

CCAR (Comprehensive Capital Analysis and Review) and DFAST (Dodd-Frank Act Stress Testing) are regulatory frameworks used by the Federal Reserve to assess the capital adequacy and financial stability of large banks in the United States. ♥️♥️ Quants, or quantitative analysts, play a critical role in both processes by developing, validating, and applying mathematical models to assess risk and forecast financial outcomes. 😄😄😄 Overview of CCAR and DFAST 📚📚 CCAR: This is an annual exercise conducted by the Federal Reserve to evaluate the capital planning processes and capital adequacy of large bank holding companies. It ensures that institutions have robust capital planning processes and sufficient capital to continue operations during economic and financial stress. DFAST: Similar to CCAR, DFAST is a stress testing program that assesses the capital adequacy of financial institutions. It focuses on the potential impact of adverse economic conditions on a bank's capital and helps ensure that banks are prepared for economic downturns. Role of Quants in CCAR and DFAST ⬇️⬇️⬇️ 1. Model Development: Quants develop models that predict the impact of various macroeconomic scenarios on a bank's balance sheet, income statement, and capital ratios. These models incorporate factors like loan losses, interest rate changes, and operational risks. 2. Scenario Analysis: Quants perform scenario analysis to evaluate how different economic conditions, such as recessions or financial market disruptions, could affect a bank's financial position. They create stress scenarios that are used to test the resilience of the bank's capital. 3. Risk Quantification: Quants quantify various types of risks, including credit risk, market risk, and operational risk. They use statistical techniques to estimate potential losses under different scenarios. 4. Model Validation and Backtesting: Quants validate models to ensure they are accurate and reliable. This involves backtesting models against historical data to verify their predictive power and making adjustments as needed. 5. Regulatory Compliance: Quants help ensure that banks comply with regulatory requirements by providing the necessary documentation and evidence to support the models and methodologies used in stress testing. 6. Capital Planning: Quants contribute to capital planning by analyzing the results of stress tests to determine the adequacy of the bank's capital buffer. They provide insights into how much capital the bank needs to maintain under various stress scenarios. 7. Reporting and Communication: Quants prepare detailed reports and presentations for senior management and regulators. They explain the methodologies, assumptions, and results of stress tests and provide recommendations for improving capital resilience. #quantitativefinance #marketrisk #riskmanagement #quantmodeling #stresstesting

The Less is More report, published on 10 February 2025, offers a critical assessment of regulatory overcomplexity in EU financial services. Supported by banking associations and legal experts, it highlights how excessive rule-making, shifting regulatory power, and constant revisions have made compliance increasingly costly and uncertain. The report calls for simplification, stability, and stronger democratic oversight to restore efficiency without compromising financial stability. 📌 Key Issues in EU Financial Regulation 🔹 Regulatory Overload – The 2024 Banking Package expanded to over 1,000 pages, with 139 technical standards, up from 62 in 2019. The constant review cycles create instability, making long-term compliance planning difficult. 🔹 Shift in Rule-Making Power – Decision-making is moving from EU legislators (Parliament & Council) to regulatory bodies like the ECB, ESAs, and SRB, reducing democratic accountability. Many key financial rules are now shaped by technical standards (RTS/ITS) and soft law (guidelines, Q&As, recommendations) with limited oversight. 🔹 Soft Law Without Legal Basis – Supervisory bodies issue “guidelines” and “opinions” that are formally non-binding but enforced like law, creating uncertainty for financial institutions. Example: The ECB has published 30+ supervisory guides that lack a clear legal foundation but still dictate compliance. 🔹 Lack of Stability and Transparency – Frequent amendments and delegated acts make the EU’s financial regulatory framework unstable. Between 2019-2023, the Parliament’s ECON Committee reviewed 193 delegated acts, limiting its ability to scrutinize rules properly. ✅ Proposed Solutions: A Smarter Regulatory Approach The report does not advocate deregulation but rather a simpler, more predictable financial rulebook: 1️⃣ Reduce unnecessary complexity – Limit new financial laws, extend review cycles, and assess the real impact on competitiveness. 2️⃣ Increase transparency in rule-making – Ensure public consultation and impact assessments for technical standards and soft law. 3️⃣ Reform European Supervisory Authorities (ESAs) – Give them clearer mandates and limit unchecked use of guidelines. 4️⃣ Strengthen legislative oversight – Allow partial rejection of technical standards, instead of forcing an all-or-nothing approach. 🚀 The Impact: A More Efficient EU Financial System By restoring legislative authority, reducing compliance burdens, and improving regulatory clarity, these recommendations could make the EU’s financial sector more competitive and resilient. As new regulatory reviews begin in 2025, this report sets the stage for a more balanced and transparent financial system. #FinancialRegulation #RegulatoryCompliance #EUFinance #AML #FinancialMarkets

A POLICY AGENDA for Banque du Liban & #LEBANON GOVERNMENT. With a new BDL Governor appointed, here is my updated policy agenda to rebuild trust and confidence in Lebanon's banking & financial sector, revive its economy through policy and institutional reforms: 1. Reset Monetary policy to target inflation. Unify and float exchange rate accordingly. 2. Restructure BDL & its governance, appoint new team of Vice Governors, restrict powers of the Governor, ensure public reporting, monitoring and accountability. Must have a new reform minded, effective, BDL. Revise Money & Credit Code accordingly. 3. Ensure No Fiscal or Quasi-fiscal (subsidies etc.) financing by BDL. No more disastrous "financial engineering". 4. Public Debt Management should be responsibility of an independent agency to ensure transparency, disclosure of all public liabilities and debt sustainability. Create active secondary market for TBs and Bonds. 5. Appoint new boards and members & ensure independence of Banking Control Commission, Capital Market Authority & Special Investigations Committee. Each has a separate mandate and responsibility.  6. Abolish or adopt Swiss-style Banking Secrecy Law. This along with an effective SIC are critical to remove Lebanon from Financial Action Task Force (FATF) Grey List, adoption of international AML/CTF standards and ensure effective Ant-Corruption drive.  7. Setup an independent Bank Resolution Authority (BRA) and framework, similar to what many countries setup following the 2008 Global Financial Crisis. Bank restructuring cannot be the responsibility of BDL and BCC, responsible for the Mal-governance and collapse of the banking system. The BRA should start with a bank recapitalisation & M&A process as a priority, and allow for a partial bail-in of depositors. 8. All BDL assets (MEA, Casino, INTRA etc) should be audited & divested into a new, independent, sovereign, National Wealth Fund (professionally managed like Temasek in Singapore). BDL can be part-compensated by shares in the National Wealth Fund. 9. Separate the Insurance Control Commission from Ministry of Economy & Trade as an independent commission, to regulate and revive the insurance sector 10. Set up an independent Reconstruction Fund, with full transparency, disclosure & reporting, for donor/funder accountability 11. Complete the Forensic Audit of the BDL and its related assets. There must be Accountability for the banking collapse and biggest financial crisis in history 12. Undertake the restructuring of Public Debt based on fiscal reform to ensure a sustainable debt path. 12. Implement a Stolen Asset Recovery (StAR) programme to address Anti-Corruption, Money Laundering and recover Stolen Assets. 13. Negotiate and implement a new agreement with the International Monetary Fund based on comprehensive economic, financial and structural reforms, including the above items.  All the above, in addition to Judicial, Political & other reforms to ensure Rule of Law & Accountability.

Most conversations about banking reform start in the wrong place because they focus on products, pricing, or a single regulatory change in isolation. But banking doesn’t really work like that. It’s a system. And if you want to understand where banking is going next (especially in growth markets), you have to look at the architecture of that system, not just the individual pieces. Over the past while, we’ve been thinking deeply about what actually enables a banking system to become more competitive, more inclusive, and more useful in people’s everyday lives. It comes down to these interconnected shifts: Open banking and open finance → reducing information asymmetry and giving customers real control over their data Instant payments → lowering friction and making money move the way people expect it to Identity infrastructure → determining whether digital onboarding is accessible, reliable, and affordable Access to strategic foreign capital → enabling new entrants to scale with the right technology, talent, and risk capability Individually, each of these sounds like a policy discussion. Together, they define whether a market is truly open or just appears to be. The reality is that: Open banking without payments becomes a data exercise. Payments without openness can become closed loops in disguise. Identity systems, if poorly designed, quietly exclude the very people we’re trying to include. And capital, without open infrastructure, doesn’t change market structure - it just funds it. The common thread across all of this is portability, which is not only the ability to open an account somewhere else, but the ability to move your financial life (your data, your payments, your salary) with minimal friction. That’s what creates real competition, and that’s where the conversation needs to go next. Over the coming weeks, I’ll unpack each of these areas in more detail, drawing on what we’re seeing across markets like South Africa, the Philippines, Brazil, India, the UK, and beyond. The goal isn’t to advocate for less regulation but to ask a better question: What kind of financial system are we actually designing, and who does it work for?