Regulatory Updates Newsletter: June 2026

Welcome to the June 2026 Ed. of our Regulatory Newsletter.

This month saw regulators around the world advancing initiatives across AI governance, prudential regulation, financial innovation, and market resilience. 

Key developments include the RBI's proposed framework for model risk management, APRA's streamlined pathway for internal risk models, MAS's launch of a new Future of Finance Institute, and the FSB's draft AI sound practices for financial institutions. Regulators also introduced reforms covering stress testing, Basel 3.1 implementation, and stablecoin compliance, reflecting a continued focus on strengthening the financial system while supporting responsible innovation.

Let's dive in.

1. APRA Finalises New IRB Accreditation Pathway

Australia’s Prudential Regulation Authority announced a new, streamlined pathway for banks to gain approval to use Internal Ratings-Based (IRB) credit risk models. The final requirements build on a recent review of smaller banks, and are designed to make IRB accreditation more achievable and transparent. APRA noted that only 6 ADIs (including the four majors) currently use IRB, and that making the process more “flexible” will allow mid-sized institutions to better match capital to risk.

Implications

• Lowers entry barriers for banks seeking IRB status, potentially broadening the use of advanced risk models in Australia.

• Firms able to adopt IRB may reduce capital requirements (through refined risk-weighting), enhancing their competitiveness.

• Requires investment in data and validation capabilities; APRA will continue close oversight of any new model use.

2. RBI Proposes Comprehensive Model Risk Management Framework

The Reserve Bank of India released a draft Guidance on Regulatory Principles for Model Risk Management, 2026 to establish a comprehensive governance framework for analytical models used by regulated financial institutions, including Artificial Intelligence and Machine Learning. 

The consultation, open until 24 July 2026, applies to banks, NBFCs, cooperative banks, financial institutions, ARCs and credit information companies, covering internally developed as well as third-party models.

The draft requires every regulated entity to establish a Board-approved Model Risk Management Framework governing the entire model lifecycle, from development and validation to monitoring, modification and retirement. 

It introduces a risk-based classification of models, mandates independent validation before deployment, requires institutions to maintain a comprehensive model inventory, and formalizes governance through the three-lines-of-defence model.

Recognising the growing use of AI, the RBI also proposes additional safeguards for AI and ML systems. These include assessing explainability, bias, hallucinations, data drift, third-party dependencies and intellectual property risks. Financial institutions would be expected to conduct stress testing, adversarial testing and red-teaming of AI models, implement robust human oversight, maintain override and kill-switch mechanisms, and clearly inform customers whenever they are interacting with AI systems.

Implications

Financial institutions should begin reviewing their existing model governance frameworks against the proposed requirements, particularly around AI and ML models. 

The guidance significantly raises expectations for Board oversight, independent validation, model inventories and lifecycle management.Firms relying on third-party AI vendors remain fully accountable for model outcomes and will need stronger due diligence, documentation and ongoing monitoring. 

The proposal also signals that AI governance is becoming a core prudential expectation, making explainability, human oversight and continuous model monitoring central elements of future regulatory compliance.

3. MAS Launches “Future of Finance Institute” 

The Monetary Authority of Singapore (MAS) announced the formation of a Future of Finance Institute (FFI) to accelerate adoption of cutting-edge technologies in finance. The new institute will act as a “centre of excellence” to help industry move from experimentation to production. Initially focusing on artificial intelligence and tokenisation, the FFI will provide a fintech “innovation garage”, specialized sandboxes and playbooks (e.g. for programmable compliance), and updated toolkits for AI governance. The FFI’s board includes

MAS officials and fintech experts, and it will also coordinate regulatory and standards work needed to bring these innovations to market.

Implications

• Aims to fast-track deployment of generative AI and blockchain solutions by major banks, insurers and fintechs in Singapore.

• Sets Singapore further ahead as a global fintech hub; other regulators may follow suit with similar innovation institutes.

• Firms should engage with the FFI to trial use cases (while benefiting from regulatory “safe harbour” guidance).

4. FSB Consults on AI Sound Practices

The FSB issued a consultation on “Sound Practices for the Responsible Adoption of AI”. This global paper identifies 12 voluntary AI risk-management practices covering governance, model development, data, vendor oversight and cyber resilience in financial institutions. 

The FSB said the sound practices are “not intended to establish an international standard” but to guide firms’ AI strategies and help supervisors evaluate AI-related risks. The sound practices explicitly cover organisation-wide AI governance (practices 1–4) and lifecycle risk management (5–10), including third-party and cyber risks (11–12).

Implications

• Likely foreshadows future supervisory expectations on AI: banks and insurers should review these practices now.

• Encourages consistency across jurisdictions (G7, FSB members) in how firms manage AI risks, reducing regulatory fragmentation.

• Firms will need to integrate AI risk frameworks (e.g. explainability, bias testing) into their existing model risk processes.

5. EBA Proposes Simplified EU-Wide Stress Test

The European Banking Authority launched a consultation to simplify the next EU-wide stress test (scheduled 2027). Draft templates and methodology were published, aiming to halve the number of reported data points (even after adding new climate-risk and IFRS 18 elements). The package would integrate separate EBA stress-test and benchmarking collections into regular reporting, and apply more proportionate rules for small/non-complex banks. The goal is to reduce burdens on ~28,700 banks while still capturing key risk exposures.

Implications

• Banks should prepare for a lighter data-reporting regimen: fewer templates and more integrated climate scenarios.

• Greater alignment of reporting across EU, aiding cross-border consistency.

• Faster implementation of new capital and accounting rules (IFRS 18, FRTB) is embedded in the stress-test framework.

6. PRA Consults on Basel 3.1 Internal-Model Changes

The UK Prudential Regulation Authority published CP9/26, proposing adjustments to the market-risk internal model approach (IMA) under the UK’s Basel 3.1 rules. 

The consultation follows the PRA’s earlier decision to delay the IMA implementation to January 2028. The PRA found that only a few banks planned to use internal models for trading-book capital, and that current rules may place UK firms at a disadvantage. 

Proposed tweaks include clarifications on when banks may use IMA and tweaks to risk sensitivity, designed to maintain a level playing field.

Implications

• Aims to make the UK’s implementation of the Basel IMA more workable and competitive internationally.

• Banks considering internal models can count on a bespoke regime rather than the stricter Basel template.

• Supports the PRA’s dual objectives of resilience and UK financial centre attractiveness.

7. UK Launches Bond Market Consolidated Tape

The FCA and LSE launched the UK’s first consolidated tape for bond trading. 

This real-time data feed aggregates nearly all domestic corporate bond transactions into one stream. Prior to December 2025, under 5% of UK bond trades were reported in real time; since then that share has jumped to over 75%. FCA Director Simon Walls stated that the tape “gives investors a clear, reliable and comprehensive view of UK bond trading for the first time” and will boost the UK’s market competitiveness.

Implications

• Significantly improves transparency and liquidity in the UK corporate bond market. Wider use of the tape could narrow bid-ask spreads and increase trading volumes.

• The UK becomes the first major jurisdiction outside North America to launch a bond tape, setting a precedent for other markets.

• Paves the way for potential consolidated tapes in other asset classes (e.g. equities) in the UK.

Summary of Other Notable Updates

Jurisdiction	Regulator	Update	Source
UK	FCA	FCA ordered Euro Exchange Securities UK (EES) to stop all e-money/payment services due to major AML and governance breaches; interim managers were appointed by court.	FCA
Australia	APRA	APRA finalised a FAQ clarifying how deposits held at three CCP settlement providers count towards banks’ liquidity ratios. This addresses how client funds at centralised FX/commodities platforms are treated for LCR.	APRA
USA	FinCEN	FinCEN (with OCC, Fed, FDIC, NCUA) proposed a rule under the GENIUS Act requiring permitted stablecoin issuers to implement Bank Secrecy Act customer-ID programs. This would subject certain stablecoins to tailored AML/KYC obligations.	FinCEN
USA	SEC & CFTC	SEC and CFTC issued a joint request for comment on harmonising portfolio margin rules across securities, swaps, futures, etc. The agencies seek views on aligning cross-margining frameworks to improve liquidity and reduce fragmentation.	SEC
India	SEBI	SEBI released a consultation paper on draft circulars for trading software requirements at stock exchanges and IT provisions for Market Infrastructure Institutions (MIIs), inviting industry feedback.	SEBI
UK	FCA	FCA published a consultation on targeted amendments to listing rules for closed‑ended funds, aimed at strengthening shareholder rights and managing conflicts of interest (e.g. when investment managers change or shareholders are also managers).	FCA
Australia	APRA	Australia’s Council of Financial Regulators published its “Better Regulation Roadmap” with 50+ initiatives to reduce red tape (e.g. reporting simplification, digital regulatory tools). (Joint CFR press release)	APRA
United States	FinCEN	FinCEN proposed restricting Cambodia-based H-Pay Service PLC and other Huione Group successor entities from accessing the U.S. financial system, citing their role in laundering proceeds from ransomware and online scams through successor entities.	U.S. Treasury
Australia	Reserve Bank of Australia	The RBA launched a review of Australia's payments regulatory framework through an Issues Paper seeking feedback on emerging payment technologies, including digital wallets, stablecoins, Open Banking, BNPL and real-time payments. The review will also examine merchant fees, competition and future payment system reforms.	Reserve Bank of Australia

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