Domestic

CBI publishes revised Fitness and Probity Guidance

On 24 November 2025, the Central Bank of Ireland (CBI) published Guidance on the Standards of Fitness and Probity 2025 (revised guidance) alongside a feedback statement following its April 2025 consultation.

The Fitness and Probity Standards have been updated to a new November 2025 version, which consolidates the previous Fitness and Probity Standards 2023 and the Fitness and Probity Standards for Credit Unions 2024 into one set of Fitness and Probity Standards. The CBI stated “[a]t this time, we are introducing a small number of essential changes” and the CBI will instead conduct a more substantive review of the Pre-Controlled Functions list with a view to proposing further changes to coincide with its planned review of the Senior Executive Accountability Regime in 2027.

European

EBA consults on draft guidelines on the authorisation application process for third country branches

On 3 November 2025, the European Banking Authority (EBA) launched a consultation on draft guidelines on the authorisation application process for third-country branches (TCBs) in accordance with Article 48(c)(8) of the Capital Requirements Directive (CRD) 4 (as inserted by CRD 6).

​The draft guidelines cover:

• the information and documentation required to be provided in an application (including standard forms and templates)
• procedural aspects
• assessment methodology, including conditions for granting authorisation
• conditions under which competent authorities may rely on information that has already been provided in the process of any prior third country branch authorisation application

The consultation period closes on 3 February 2026.

EBA publishes final guidelines on environmental scenario analysis

On 5 November 2025, the EBA published its final guidelines on environmental scenario analysis (the guidelines) in accordance with Article 87(a)(5) of CRD 4 (as amended by CRD 6).

The guidelines complement the EBA’s guidelines on the management of environmental, social and governance risks by specifying supervisory expectations regarding how credit institutions should conduct environmental scenario analysis.

The guidelines aim to strengthen credit institutions’ ability to use forward-looking approaches to the assessment and management of environmental risks and are built around two complementary pillars:

• integration of environmental risks into institutions’ existing stress-testing frameworks, enabling them to assess the short-term financial impacts of environmental risks and ensure that capital and liquidity levels remain adequate
• resilience analysis, looking further ahead to evaluate the medium- to long-term implications of environmental risks and opportunities for banks’ business models, strategies and risk profiles

The guidelines will apply from 1 January 2027.

European Commission launches consultation on the application of the prudential market risk framework for banks

On 6 November 2025, the Commission launched a consultation on the application of the prudential market risk framework for EU credit institutions under Basel III, which is referred to as the ‘fundamental review of the trading book’ (FRTB).

The Commission is seeking feedback on potential policy options that would introduce targeted amendments to Capital Requirements Regulation (CRR) to offset the negative capital impacts for EU banks in the context of the on-going uncertainty around the FRTB implementation timeline and final rules in the US and UK. The Commission is empowered to introduce such targeted measures for a three-year period only, through delegated acts.

Stakeholders are invited to comment on the potential use of the empowerment in Article 461(a) of CRR to introduce two policy options:

• Temporary targeted amendments to the market risk framework that would address aspects of the framework on which other jurisdictions have already deviated or indicated that they would plan to deviate in their final FRTB implementation. They target elements where it is deemed that the FRTB calibration could be enhanced or revisited, while keeping its primary objective to provide a more robust and risk‑sensitive prudential framework for the capitalisation of market risk by banks.
• A multiplier for the overall market risk capital requirements that banks negatively impacted by the new rules (i.e. banks facing an increase in capital requirements for market risk) would be allowed to use to significantly limit their market risk capital requirements increases for three years. The banks applying this multiplier would be required to calculate their own funds requirements for market risk using the relevant FRTB approaches (i.e. that they have opted for or they have been granted permission to use). They would apply the multiplier to their capital requirements for market risk, in accordance with the provisions laid down in the delegated act, after the application of the output floor, with the objective to limit for a temporary period the capital impacts from the application of the new market risk rules.

The consultation period closes on 6 January 2026.

The EBA consults on draft guidelines on supervisory independence

On 12 November 2025, the EBA launched a consultation on draft guidelines on supervisory independence of competent authorities to reflect the introduction of new requirements in CRD 4 to manage supervisory independence, including arrangements to prevent and manage conflicts of interest.

The draft guidelines:

• specify certain aspects concerning the appointment of the members of the competent authorities’ management body
• clarify the calculation of the 14-year limit for the term of office of members of the competent authorities’ management body
• harmonise the arrangements that competent authorities must have in place to prevent conflicts of interest of their members of staff and of the members of their governance bodies, including declarations of interest, limitations on trading of financial instruments, arrangements for the sale or disposal of those instruments and cooling-off restrictions

The consultation closes on 23 January 2026.

SREP results 2025 published by ECB

On 18 November 2025, the European Central Bank (ECB) published the aggregated results of the 2025 Supervisory Review and Evaluation Process (SREP).

The ECB outlined the following points regarding the SREP results for 2025:

• banks maintained robust capital and liquidity positions and strong profitability in the second quarter of 2025
• the weighted average Common Equity Tier 1, the highest quality of a bank’s capital, stood at 16.1% of banks’ risk-weighted assets. The leverage ratio stood at 5.9%. The total capital ratio was 20.2%
• liquidity buffers remained well above the 100% minimum requirement, with the aggregate liquidity coverage ratio at 158% in the second quarter of 2025. Banks retained good access to retail and wholesale funding, with an average net stable funding ratio broadly stable at 127%
• profitability continued to be strong, supported by net interest income and net fees and commissions. The aggregated annualised return on equity stood at 9.5% in the fourth quarter of 2024 and improved further to 10.1% in the second quarter of 2025
• asset quality across the sector remained robust, with the non-performing loan (NPL) ratio at 1.9% in the second quarter of 2025. NPL ratios for commercial real estate loans and loans to small and medium-sized enterprises remain above average (at 4.6% and 4.9% respectively) while some countries with historically low NPL ratios are now experiencing a moderate increase in NPL stocks
• stage 2 loans and advances (i.e. loans for which credit risk has significantly increased since initial recognition) marginally increased from 9.5% in the second quarter of 2024 to 9.6% in the second quarter of 2025
• the currently good level of resilience in the euro area banking sector is the result of several factors, including effective regulation, sound supervision and improvements in banks’ risk management, but also extraordinary fiscal and monetary responses to recent macroeconomic shocks

ECB supervisory priorities 2026-2028

On 18 November 2025, the ECB published its supervisory priorities for 2026 to 2028, which includes two overarching priorities to strengthen banks that reflect the changing risk landscape and the outcome of SREP.

Firstly, resilience to geopolitical risks and macro-financial uncertainties:

• ensure prudent risk-taking and sound credit standards to address credit risk
• ensure adequate capitalisation and consistent implementation of CRR 3
• ensure prudent management of climate and nature-related risks

Secondly, operational resilience and fostering robust information and communication technology (ICT) capabilities:

• implement robust and resilient operational risk management frameworks
• remedy deficiencies in risk reporting capabilities and related information systems
• focus on banks’ digital and artificial intelligence-related strategies, governance and risk management (medium to long-term priority)

SREP methodology documents published

On 18 November 2025, the ECB published updated methodologies relating to SREP and explained the following:

• ECB banking supervision has been responding to the changing external environment with a comprehensive reform to increase its efficiency, effectiveness and risk focus. These objectives are applied to all supervisory activities, with SREP at its core. In line with this, the final SREP decisions or SREP letters were submitted to banks by end-October 2025, more than one month earlier than in previous cycles. These decisions are now shorter and focus on key quantitative and qualitative requirements, the main outcomes of the SREP and key supervisory concerns.
• In 2026, a more transparent and simplified methodology for calculating the Pillar 2 requirement (P2R) will take effect.

The revised methodology to assess banks’ internal capital adequacy assessment process evaluates, among other things, a bank's internal processes to ensure it has sufficient capital to cover material risks and maintain adequate risk management practices.

EBA AI Act mapping exercise for the EU banking and payments sectors

On 21 November 2025, the EBA published a letter and information document outlining the outcome of its AI Act mapping exercise and the implications of the AI Act on the EU banking and payments sectors. The purpose of the mapping exercise was to assess and promote a common understanding on the potential regulatory and supervisory implications of the AI Act for the EU banking and payments sectors.

Below are some of the high-level key findings:

• no significant contradictions have been found between the AI Act and EU banking and payment legislation
• the AI Act is complementary to EU banking and payment sector legislation, which already provides a comprehensive framework to manage risks. Some efforts may be required by banks and other financial institutions, to integrate the two frameworks effectively
• applying the AI Act may involve balancing the goals of protection of fundamental rights, health and safety with the ones of other sectoral laws
• the co-existence of multiple authorities (prudential/conduct authorities and Market Surveillance Authorities) supervising financial entities’ compliance highlights the importance of supervisory cooperation to ensure effective implementation of the AI Act
• the EBA has not identified any immediate need to introduce any new or review existing EBA guidelines. Instead, the EBA will follow up with actions to contribute to common supervisory approach to supervisory cooperation and implementation of sectoral requirements alongside AI Act requirements

Provisional political agreement reached on the Payment Services Regulation and the Third Payment Services Directive

On 27 November 2025, the European Parliament and the Council of the EU announced that they have reached an agreement on the proposals for a third Payment Services Directive (PSD3) and a Payment Services Regulation (PSR).

PSR aims to harmonise payment services and strengthen fraud prevention across the EU, applying to payment services provided by banks, post-office giro and payment institutions, as well as technical service providers supporting payment services, and in some cases electronic communications providers and online platforms. PSD3 seeks to ensure fair competition among payment service providers, by addressing authorisation and supervisory powers, and to improve access to cash, particularly in remote areas.

Once PSD3 and PSR are finalised, the agreed texts will need to be formally adopted by the European Parliament and the Council of the EU before they can be signed into law and published in the Official Journal of the EU.

Date published: 22 December 2025

This publication provides an overview of certain legal and regulatory developments that may be of interest to certain entities. It does not purport to provide analysis of law or legal advice and is strictly for information purposes only.