Regulatory Updates Newsletter : April 2025

Welcome to the April edition of our regulatory newsletter, where we bring you the latest developments in AI risk, financial risk regulations, compliance, and financial crime across key jurisdictions. This month, we cover regulatory updates from the United States, United Kingdom, European Union, UAE, India, Nigeria, and Australia.

From benchmark reports on bank capital to new consultation papers and enforcement actions, we break down what’s happening and what it means for risk and compliance professionals.

Whether you’re focused on market risk models, alternative investments, stress testing, anti-money laundering, or the impact of new technologies, we’ve got you covered.

Let’s dive in!

EBA Report on FRTB Benchmarking and Credit Risk Variability (EU)

Source : European Banking Authority – Press Release on Annual Benchmarking Exercises (April 4, 2025) https://www.eba.europa.eu/eba-publishes-results-its-annual-market-and-credit-risk-benchmarking-exercises-0

The European Banking Authority (EBA) published its 2024 benchmarking reports covering internal models used by banks for market and credit risk, including both the Fundamental Review of the Trading Book (FRTB) and standard credit risk models. The exercise covered 117 banks from 16 countries and provides supervisors with insights into the variability of risk-weighted assets (RWAs) across institutions.

• The FRTB Standardised Approach (SA) results, collected for the second time, show improved consistency in capital requirements across firms using SA, a sign that banks are progressing in their FRTB readiness.

  
  

• The FRTB Internal Models Approach (IMA) results show persistent dispersion in RWAs across institutions, particularly in equity and credit spread risk classes. This suggests differences in modelling assumptions and risk factor eligibility, even though some convergence has been observed since the last exercise.

  
  

• On the credit risk side, the benchmarking revealed considerable variability in RWAs across banks using IRB models. Variations were especially high in exposures to institutions and corporates, driven by differing modelling practices, use of conservative overrides, and parameter assumptions (e.g. PD and LGD estimates).

  
  

  Implications: 

  This broad benchmarking effort reveals key supervisory concerns heading into final implementation phases of Basel III.

  
  

  • For FRTB SA banks: Continued alignment and documentation of their capital calculations is critical, as EU supervisors are increasingly scrutinizing even standardized submissions.

  • For FRTB IMA banks: The persistent dispersion in outputs points to future challenges in gaining or maintaining internal model approval. Firms using IMA must be ready to justify model performance and risk factor selection, particularly in risk classes with wide variability.

  • For IRB credit risk banks: Supervisors will likely follow up with targeted reviews of models showing outlier results. Risk and compliance teams must be prepared for increased model validation requirements, backtesting, and consistency checks as part of upcoming SREP cycles.

    
    

Overall, the EBA’s benchmarking exercise helps supervisors spot potential undercapitalization or aggressive modelling assumptions, and ensures that banks’ internal models are producing reliable and comparable capital figures across jurisdictions.

UK FCA Launches New AI and Digital Testing Service (UK)

UK FCA & HM Treasury Overhaul AIFM Regulations (UK)

U.S. Federal Reserve Seeks to Smooth Stress Test Capital Volatility (US)

United Arab Emirates: AML Overhaul and Crypto Regulation Intensify

Summary Table of Additional Updates

Stay informed with our regulatory updates and join us next month for the latest developments in risk management and compliance!

For any feedback or requests for coverage in future issues (e.g. additional countries or topics), please contact us at info@riskinfo.ai. We hope you found this newsletter insightful.

Best regards,

The RiskInfo.ai Team