Regulatory Updates Newsletter : December 2025
- Staff Correspondent
- Dec 31
- 9 min read
Welcome to the December 2025 edition of our regulatory newsletter, as authorities worldwide continued to recalibrate oversight frameworks amid rapid technological change and evolving financial risks. This month saw governments move decisively to coordinate artificial intelligence policy at the national level, most notably through a U.S. Executive Order establishing a unified federal AI framework and addressing fragmentation across state rules. At the same time, regulators advanced AI-specific oversight in selected sectors and reinforced safeguards around financial crime, with major updates to AML/CFT regimes in jurisdictions such as the UAE and the EU.
Supervisory focus also turned toward system-wide resilience and market integration. The Bank of England launched a cross-sector exploratory exercise to assess risks in private equity and private credit, while European authorities advanced proposals to centralize supervision of cross-border capital markets and crypto-asset activity. In banking regulation, India enacted comprehensive legislative reforms to strengthen governance, depositor protection, and supervisory powers. Across regions, regulators also signalled a renewed push to streamline regulation and reduce unnecessary burdens, alongside continued attention to cybersecurity, payments infrastructure, and cross-border cooperation.
Dive in for official updates and practical insights shaping the regulatory landscape as 2025 draws to a close.
Federal Reserve Board Enables Bank Innovation
The Federal Reserve Board announced a new policy statement to promote fintech innovation by supervised banks. It formally withdrew a restrictive 2023 policy statement that had barred the Federal Reserve–supervised banks from activities beyond those allowed for other charter banks. The new Fed statement creates a pathway for state-member banks (both insured and uninsured) to engage in “certain innovative activities.” According to Vice Chair Michelle Bowman, this change aims to keep banking safe and sound and “modern, efficient, and effective” by allowing new technologies and products.
Summary: The Fed’s action explicitly acknowledges evolving financial technologies. The 2023 policy (now rescinded) had imposed technology-neutral rules tying state-member banks to the same activities as nationally-chartered banks, potentially hindering innovative services. The revised statement removes that barrier and outlines a process (Section 9(13) of the Federal Reserve Act) for banks to obtain approval for new activities. Details will be formalized in a Federal Register notice and board memoranda, but the thrust is clear: banks may propose nontraditional services (likely including fintech and crypto-related offerings) to the Fed for review. This is part of a broader “responsible innovation” agenda that also includes publishing redacted large-bank supervisory manuals.
Implications:
Opportunity for fintech expansion: Banks can more readily partner with or become fintechs without breaching regulations, potentially fostering services like embedded finance, digital platforms or climate-friendly loans.
Supervisory guidance forthcoming: Implementation will depend on forthcoming guidance (Fed reviews, application processes). Bank compliance teams should prepare for new ‘safe harbor’-style applications.
Safety vs. speed tradeoffs: While promoting innovation, the Fed will still oversee risks; banks should expect ongoing supervisory scrutiny of technology projects.
Level playing field questions: By opening doors for Fed-supervised banks, regulators may revisit whether similar flexibility should apply to banks under other regulators (OCC, FDIC) to avoid arbitrage.
EU Capital Markets Integration Proposal
ESMA welcomed the European Commission’s legislative package to deepen EU capital markets and cut fragmentation. The package (announced Dec. 2025) aims to consolidate supervision of cross-border financial activities at the EU level. Notably, it proposes moving oversight of certain market infrastructures and crypto-asset service providers (CASPs) from national regulators to ESMA. ESMA’s statement praises this “ambitious proposal” to establish an integrated EU capital markets union and says it aligns with prior ESMA recommendations on market supervision.
Summary: The Commission’s draft law would standardize rules across member states to facilitate cross-border finance. Key features: a central EU “passport” regime for investments, unified frameworks for debt markets, and a new supervisory role for ESMA. In particular, entities like clearing houses, trading venues, and crypto exchanges operating EU-wide would be directly regulated by ESMA rather than each national authority. The aim is to eliminate duplicate requirements and allow easier expansion across borders. The proposal also includes enhanced governance for market infrastructure (governance codes for CCPs/CSDs). ESMA emphasises that this will reduce costs and improve competitiveness of EU markets while maintaining strong investor protection.
Implications:
Greater ESMA authority: Investment firms and crypto-asset service providers working cross-border in the EU will face a single supervisor (ESMA) instead of multiple national rules.
Harmonized rulebook: Financial institutions should prepare for new EU-wide regulations (e.g. on trading obligations, settlement). Harmonization may require changes to existing cross-border business models.
Crypto oversight: Crypto firms in the EU will see more consistent oversight and potentially stricter requirements, as ESMA will apply Basel-like standards to systemic crypto providers.
Industry coordination: The new regime is intended to stimulate pan-EU offerings (e.g. easier issuance of bonds or funds across borders) and could enable a larger savings-investment union. Firms should monitor legislative progress and plan compliance changes.
U.S. Executive Order on AI Governance
The White House issued an Executive Order “Ensuring a National Policy Framework for Artificial Intelligence” (Dec 11, 2025). It mandates a federal coordination of AI policy to prevent a patchwork of state regulations. The EO directs federal agencies to promote innovation while protecting rights and privacy, and it instructs the Justice Department to form an “AI Litigation Task Force” to challenge what it calls “burdensome” or ideologically driven state AI laws. It declares that states should not impede AI development “through novel, burdensome, or restrictive mandates,” and it orders review and potential preemption of conflicting state rules. The Order also vows to prevent “compelled speech or enforced silence” in AI systems, reflecting concerns about content and “censorship” issues.
Summary: The EO effectively centralizes AI oversight at the federal level. It rescinds certain Biden-era guidance and emphasizes voluntary, national standards. Key elements include a unified testing framework for AI systems, requiring labs to register safety-tested models, and a new process for reviewing major AI regulations (e.g. by OMB). The AI Task Force will litigate against conflicting state AI laws and ensure uniformity. The document frames this approach as both enabling U.S. innovation and safeguarding First Amendment-style rights in AI.
Implications:
Regulatory harmonization: Tech companies can plan under one federal regime rather than diverse state rules, but some state AI initiatives (on e.g. bias or transparency) may be overturned or delayed.
Innovation support: By highlighting “responsible innovation,” the EO signals encouragement for AI R&D and deployment, potentially accelerating industry momentum.
Legal challenges: The newly-created task force suggests legal battles ahead over state tech laws (e.g. California’s or Illinois’ AI bills).
Privacy and trust: Although not explicit on privacy, coordinating AI rules may affect data governance; the focus on speech may spur debate over AI and disinformation.
UK- Bank of England Explores Private Markets Risk
The Bank of England’s Financial Policy Committee (FPC) announced a new “system-wide exploratory scenario” focusing on private markets. This industry‐wide exercise will assess how stress in private equity (PE) and private credit (PC) could spill over to the broader financial system. As highlighted by Deputy Governor Dave Ramsden, the aim is to identify and measure linkages (e.g. between banks, insurers, pension funds, and private funds) that could transmit shocks if private markets underperform. FPC noted that private markets have grown rapidly, and that coordinated analysis can reveal risks that bilateral supervision might miss.
Summary: The stress-test-like exercise will run in spring 2026, engaging major banks, insurers and other firms active in PE/PC financing. The BoE will provide hypothetical scenarios (such as sharp drawdowns in asset values) and ask participants to report expected losses, liquidity needs and margin impacts. Unlike formal stress tests, this is exploratory and non-binding – no capital action will be taken on firms based on results. However, data collected will inform FPC’s future policy. The announcement signals that regulators are scrutinizing “shadow banking” channels and alternative finance, in line with global concerns about vulnerabilities outside traditional banks.
Implications:
Enhanced monitoring: UK financial firms exposed to private funds should expect increased data collection. They may need to model how private market downturns would affect their balance sheets.
Possible policy response: If large systemic risks emerge (e.g. heavy bank lending into volatile PE deals), FPC could later propose capital or liquidity adjustments for those exposures.
Market awareness: Even without immediate regulation, this initiative will raise industry awareness of interconnections (e.g. how insurer support of private credit vehicles could affect insurer solvency).
Long-term strategy: Over time, the UK may integrate such private market risks into its macroprudential toolkit (as some other regulators have begun doing), possibly leading to new guidelines for exposures to private funds.
India Strengthens Banking Laws
India’s Parliament passed the Banking Laws (Amendment) Act, 2025, making wide-ranging changes to banking governance and supervision. According to the official PIB release, the amendments update multiple laws (Banking Regulation Act, RBI Act, RBI’s cooperative bank law). Highlights include: allowing banks to nominate up to 4 nominees for accounts (modernizing deposit insurance rules); raising the threshold for “substantial interest” in a bank from ₹500,000 to ₹20,000,000, thereby changing the definition of controlling stakes; and harmonizing definitions and powers across cooperative and commercial banks. The reforms also grant authorities stronger tools for governance: for example, audit or compliance functions in banks can be directly reviewed by central bank regulators. The stated goals are to enhance depositor security, reduce fraud, and accelerate resolution of weak banks.
Summary: The Act consolidates several past amendments and introduces new provisions to tighten oversight. It mandates better corporate governance (e.g. minimum director qualifications, stronger audit), simplifies cross-border banking permissions, and enforces depositor protection enhancements. It also explicitly brings digital modes (like mobile banking) within central regulations. The amendment aligns cooperative banks’ norms more closely with commercial banks, and allows the RBI to set uniform risk and supervisory requirements. Government statements emphasize greater transparency, quicker action on failing lenders, and raising standards of bank management.
Implications:
Higher compliance burden: All Indian banks (including small urban co-ops) must review their shareholding disclosures and governance structures to meet the new “substantial interest” norms. Large shareholders will face more scrutiny.
Improved depositor safeguards: The expanded nomination rules and deposit protection measures mean banks must update account procedures. This could lower risk of disputes during bank failures.
Faster resolution potential: With strengthened RBI powers (faster amalgamations, closures), weak banks may be resolved more swiftly, reducing market uncertainty.
Unified regulatory framework: Harmonization across bank types may encourage consolidation (commercial banks taking over small co-ops) and raise industry-wide standards.
UAE Enacts New AML/CFT Law
The UAE President promulgated Federal Decree-Law No. (10) of 2025 (in force Dec. 2025), overhauling the country’s anti-money laundering (AML) and counter-terrorist financing (CFT) framework. The law supersedes the 2018 AML law and expands its scope. Notable changes (from the text) include: broader definitions of money laundering and terrorist financing (explicitly including digital systems and virtual assets); greater preventive powers (new order-and-freeze powers for authorities); and enlarged supervisory roles for an AML Commission and sectoral supervisors. The law also criminalizes proliferation financing and strengthens cooperation with international conventions.
Summary: The 2025 AML/CFT law significantly tightens UAE regulations. Financial institutions and designated non-financial businesses (like real estate agents, lawyers) face stricter due diligence obligations. The law creates a national AML committee and requires all entities to report suspicious transactions promptly. It specifically extends AML obligations to virtual asset service providers and crypto activities, aligning UAE law with FATF standards. Fines and penalties for violations are increased. The decree emphasizes information sharing between UAE authorities and foreign partners, aiming to make the UAE a more robust hub against illicit finance.
Implications:
Compliance upgrades: Banks, crypto exchanges, and other obligated firms must review and likely enhance AML/CFT controls (e.g. customer checks, transaction monitoring). Virtual asset firms especially will see new responsibilities.
New enforcement powers: Authorities now have unilateral freezing and investigation powers, so firms should expect more regulatory inspections and possible punitive measures for non-compliance.
International collaboration: UAE’s alignment with global AML standards may lead to more data-sharing agreements. Businesses operating across borders should prepare for tighter scrutiny from UAE banks and regulators.
Strategic positioning: By modernizing its AML laws, the UAE signals to international partners a commitment to clean finance; this may influence FATF evaluations and cross-border banking relations.
Summary of Other Notable Updates
Jurisdiction | Regulator | Update | Source |
USA | Financial Crimes Enforcement Network (FinCEN Treasury) | FinCEN announced a multi-layered operation targeting over 100 money-services businesses (MSBs) on the U.S.–Mexico border for AML compliance. The operation led to multiple investigation notices, IRS referrals, and outreach letters, aiming to curb money laundering in nonbank financial channels. | |
UK | FCA | The FCA announced that it will give payment firms greater flexibility to raise or lower contactless transaction limits in the future. After March 2026, firms can set their own contactless limits (subject to consumer transparency), allowing rapid response to fraud or security concerns. | |
EU | European Commission | The European Commission updated the EU’s AML/CFT list: adding Bolivia and British Virgin Islands, and removing Burkina Faso, Mali, Mozambique, Nigeria, South Africa, and Tanzania. This affects EU banks’ due diligence, as jurisdictions on the list trigger enhanced checks. | |
Australia | Council of Financial Regulators (CFR) | Australia’s inter-agency CFR pledged to publish a regulatory reform roadmap by year-end, with 50+ commitments to reduce red tape. Initiatives include streamlining data collections, simplifying licensing, and enhancing proportionate frameworks for small banks. | |
South Africa | SARB | The South African Reserve Bank outlined its Payments Ecosystem Modernisation (PEM) program (Dec. 1–2 industry dialogue). Key steps: converting PayInc (BankservAfrica) into a national payments utility to include nonbanks, developing faster payment rails and multilateral RTGS systems, and introducing an activity-based regulatory regime for fintechs. These reforms aim to boost financial inclusion, competition, and resilience across South Africa’s payment system. | |
USA | FinCEN | FinCEN convened global banks and law enforcement at a “FinCEN Exchange” to combat Chinese money laundering networks. The Dec. 19 event highlighted $7.1 billion of suspicious China-linked transactions (Dec. 2018–2025) and urged financial firms to enhance suspicious-activity reporting on these networks. |
Stay informed with our regulatory updates and join us next month for the latest developments in risk management and compliance!
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The RiskInfo.ai Team
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