Navigating 2026 - A Focus On Financial Services Supervisory Priorities Across The EU In The Year Ahead

Welcome to Navigating 2026!

Dear clients and friends of the firm,

As we enter 2026, it has become increasingly clear that EU financial regulation is no longer evolving in isolation. Instead, it is increasingly evident that the global financial system is no longer adjusting to temporary disruption but is instead operating within a structurally altered geopolitical, economic and regulatory environment. The EU's financial markets are being shaped by a combination of geopolitical fragmentation, strategic competition between jurisdictions, macroeconomic recalibration and rapid technological change. These forces are affecting market sectors in the EU differently, even where they share a common and ever-expanding Single Rulebook as well as a uniform goal of improving competitiveness and resilience of the EU's Single Market.

These most recent developments come on top of challenging and unprecedented operating conditions that financial services firms and market participants have had to tackle in recent years, and which are likely to persist into 2026 and beyond. Some are specific to the EU (as analysed herein) and others are common across the globe (as assessed in standalone coverage equally available from our EU RegCORE)¹.

Below we set out how the 2026 outlook is crystallising across banking, capital markets, asset management, insurance and crypto-assets, and what this means in practice for regulated firms and market participants operating in or into the EU.

At a glance - what continues, what changes and the resulting key practical impacts:

Insurance

• What changes/continues in 2026: Climate/cat risk emphasis; Solvency II refinements; DORA.
• Who is affected: Insurers/reinsurers.
• Practical impact: Repricing and reinsurance strategy; ORSA interest rate sensitivity; ICT resilience.

Crypto-assets and digital finance

• What changes/continues in 2026: MiCAR authorisations; stablecoin reserves/redemptions; DORA alignment.
• Who is affected: CASPs; issuers.
• Practical impact: Authorisation scrutiny; reserve governance; incident reporting.

Banking

• What changes/continues in 2026: Supervisory consolidation; DORA embedded; resolvability tests.
• Who is affected: EU banks; third-country branches.
• Practical impact: Stronger expectations on capital/liquidity deployment, resolution playbooks, ICT risk.

Capital Markets

• What changes/continues in 2026: T+1 preparations; reforms due to MiFID II/MiFIR transparency/tape; CCP access policy.
• Who is affected: Trading venues; brokers; CCP/clearing clients.
• Practical impact: Funding/liquidity compression; best execution updates; clearing strategy shifts.

Asset Management

• What changes/continues in 2026: Liquidity/leverage oversight; delegation substance; retail outcomes; ESG recalibration.
• Who is affected: UCITS/AIFMs; distributors.
• Practical impact: LMT activation playbooks; oversight of third country delegates; anti greenwashing controls.

Banking: resilience, resolvability and strategic autonomy

For EU banks, 2026 is primarily a year of supervisory consolidation and operational embedding rather than headline legislative change. Much of the post-pandemic and post-banking-stress reform agenda, including where modified by various "simplification" reform efforts that are being rolled out, is now being enforced through supervision.

Key themes include:

• Capital, liquidity and resolvability: Supervisors are prioritising how banks deploy capital internally, manage intragroup liquidity, and operationalise resolution strategies. MREL/TLAC execution, valuation-in-resolution, and operational continuity remain priority areas. Supervisors expect end-to-end resolution playbooks, regular dry-runs, and evidence that valuation data and dependencies are pre-positioned.
• Risk governance and controls: Heightened expectations around risk management, internal controls and data aggregation persist, particularly for banks with complex cross border structures and material third-country dependencies. Data lineage, model risk and interest rate risk in the banking book continue to feature.
• Digital and operational resilience: 2026 sees DORA firmly embedded in supervisory practice, with particular scrutiny of ICT outsourcing, cloud concentration risk, third-party dependency mapping and incident reporting discipline. Supervisory expectations are intensifying around board accountability, testing regimes and sectorwide interoperability.
• Geopolitical and sanctions risk: Banks are expected to demonstrate credible frameworks for managing geopolitical shocks, sanctions escalation and abrupt market fragmentation, including playbooks for rapid re booking, client off boarding and compliance resourcing surges.
• Strategic recalibration: Continued pressure on profitability, alongside political sensitivity around bank consolidation, means that strategic decisions on footprint, booking models and product lines are increasingly being assessed through a prudential as well as political lens. Heightened scrutiny of third country branch operations and intra EU subsidiarisation choices continues.

The direction of travel is clear: EU banking supervision in 2026 is less about rewriting rules and more about demonstrable outcomes. Simplification offers promise but may take time to translate into real tangible relief.

Banking — Q1–Q2 2026 actions:

• Validate end-to-end resolution valuation data and playbooks through a supervised dry-run.
• Reconcile intragroup liquidity waivers and pre-positioning with booking model changes.
• Evidence DORA compliance: third-party register, concentration analysis, incident thresholds, testing schedule, board reporting.

Capital markets: market structure reform and fragmentation risk

Capital markets participants face a more structural transformation in 2026, driven by both regulatory reform and geopolitical divergence.

Key developments include:

• T+1 settlement: Preparations for the EU shift to T+1 are accelerating. Firms will need to pre-fund, compress post-trade processes, and adjust collateral and securities lending workflows. Cross-border execution and clearing across time zones heighten operational risk. Immediate priorities are to confirm cut-offs, secure FX funding windows, rehearse post-trade timelines, and align client documentation where settlement cycles differ.
• Market infrastructure resilience: CCP supervision, recovery and resolution planning, and third country CCP access remain politically sensitive and strategically significant.
• Clearing location policy and active account requirements are re shaping clearing strategies, netting efficiencies and client clearing business models.
• MiFID II/MiFIR recalibration: Transparency adjustments, the build-out of the Consolidated Tape, and commodity derivatives reforms will affect execution policies, SI quoting behaviour, and market data cost models. Firms should update best execution frameworks, data vendor contracts, and governance for use of the tape as it becomes operational.
• Cross-border access and equivalence: Ongoing uncertainty around equivalence decisions—particularly in relation to the UK and US—continues to fragment liquidity and complicate execution models, with knock on effects for best execution, reporting, capital usage and booking arrangements.
• Use of capital markets as a policy tool: Strategic objectives (energy transition, defence financing, technological sovereignty) are increasingly influencing how EU capital markets policy is framed
• under the banner of a new 'Savings and Investment Union' (SIU), including reforms to listing and trading venue environments, collateral and custody arrangements, securitisation treatment and incentives for retail participation.

In 2026, capital markets firms must navigate not only regulatory compliance, but also market fragmentation and political risk embedded in market structure decisions.

Capital Markets — Q1–Q2 2026 actions:

• Confirm T+1 cut-offs, prefunding, FX arrangements, and securities lending adjustments; run dress rehearsals across time zones.
• Update best execution policy and RTS 28/27 governance for consolidated tape usage and SI behaviours.
• Reassess CCP access and active-account obligations; document clearing location rationale.

Asset management: distribution, governance and systemic relevance

The asset management sector continues to be viewed by EU policymakers through a dual lens: as a growth engine for the Capital Markets Union / European Savings and Investment Union, and as a potential source of systemic risk.

Key themes include:

• Liquidity and leverage oversight: Enhanced scrutiny of liquidity management tools, stress testing and leverage—particularly for open ended funds and alternative investment vehicles—continues. Greater supervisory interest in swing pricing calibration, anti dilution mechanisms, and alignment between redemption terms and asset liquidity is evident.
• Delegation and substance: Ongoing supervisory focus on delegation models, governance arrangements and decision-making substance within the EU. Implementation of updated framework requirements is reinforcing expectations on senior manager accountability, data access and oversight of third country delegates.
• Retailisation and product governance: Continued pressure to improve retail investor outcomes, with implications for cost disclosures, inducements and distribution models. Product intervention risk remains elevated where complexity, fees or performance dispersion raise questions on suitability and value.
• Sustainability recalibration: A more pragmatic supervisory tone on ESG and sustainability disclosures is emerging, but expectations around governance, data traceability and anti greenwashing controls remain high. Asset managers are expected to demonstrate credible transition plans, stewardship discipline and consistency between marketing and portfolio construction.
• Geopolitical exposure: Asset managers are increasingly expected to evidence robust processes for managing sanctions risk, market access constraints and abrupt valuation dislocations, including enhanced valuation committees, side pocketing governance and contingency planning for service provider disruption.

For asset managers, 2026 is about credibility of governance and risk frameworks, not just regulatory formality.

Asset Management — Q1–Q2 2026 actions:

• Calibrate LMTs and swing pricing; align redemption terms to asset liquidity; enhance stress testing.
• Document delegation/substance oversight: MI packs, data access, decision logs, SM accountability.
• Implement anti-greenwashing controls: data lineage, marketing–portfolio consistency, stewardship records.

Insurance and reinsurance: resilience under strain

The insurance sector enters 2026 facing intensifying structural pressures, particularly from climate risk and macroeconomic volatility.

Key developments include:

• Climate and catastrophe risk: Supervisors are increasingly concerned about the availability and affordability of insurance in certain markets, as well as reinsurers' balance sheet resilience. Accumulation risk, peril modelling and adaptation finance are pushing carriers to revisit pricing, reinsurance purchasing and underwriting appetites.
• Solvency II evolution: Ongoing refinements to capital requirements, long term guarantee measures and reporting obligations continue to affect asset allocation and product design. Expect reinforced focus on interest rate sensitivity, illiquidity premia and the prudent person principle in the context of strategic asset shifts.
• Operational resilience: DORA applies with equal force to insurers, requiring enhanced focus on ICT risk, outsourcing and operational continuity. The supervisory bar on scenario testing, supply chain mapping and board oversight is rising, including alignment across insurance, asset management and bancassurance groups.
• Cross-border business models: Passporting, branches and freedom of services models remain under scrutiny, particularly for complex or systemically relevant players. Supervisors are testing governance effectiveness where underwriting, claims and investment functions are distributed across multiple jurisdictions.
• Public policy interaction: Insurance is increasingly intersecting with public policy objectives (climate adaptation, disaster recovery), raising questions around public private risk sharing, residual market mechanisms and the insurability of systemic perils.

In 2026, insurers must balance commercial viability with growing expectations that they act as shock absorbers of last resort.

Insurance — Q1–Q2 2026 actions:

• Update catastrophe accumulation and adaptation assumptions; align reinsurance purchase strategy.
• Refresh ORSA for rate sensitivity and illiquidity premia; check Prudent Person compliance for asset shifts.
• Complete DORA mapping/testing; align with group arrangements (bancassurance/AM where relevant).

Crypto-assets and digital finance: supervision replaces legislation

For crypto-asset service providers and issuers, 2026 marks the transition from legislative anticipation to supervisory reality.

Key themes include:

• MiCAR implementation: NCAs are testing authorisation filings, group-wide governance, safeguarding of client assets, and conflicts management. CASPs should maintain a complete policies-and-controls inventory mapped to MiCAR articles, board-approved risk appetite for custody/market integrity risks, and incident response SLAs aligned with DORA.
• Stablecoins and payments: Asset referenced tokens and e money tokens remain a focal point, particularly where they intersect with payments, banking and monetary policy. Expectations on reserve composition, redemption mechanics and disclosures are tightening.
• Operational and ICT risk: CASPs are squarely within the scope of EU operational resilience expectations, including outsourcing, third party risk and cybersecurity. Incident reporting, testing and board level accountability are moving to centre stage.
• Market integrity and enforcement: Increased focus on market abuse, market manipulation, insider controls and custody arrangements. Exchanges, custodians and brokers are expected to demonstrate surveillance capabilities commensurate with those in traditional markets.
• Geopolitical positioning: Divergence between EU, US and UK crypto frameworks is becoming more pronounced, increasing regulatory arbitrage risk but also compliance complexity. Cross border licensing strategies, travel rule compliance and AML/CFT controls remain pivotal.

The message for 2026 is clear: crypto is no longer treated as experimental—it is being supervised as part of the core financial system.

Crypto — Q1–Q2 2026 actions:

• Finalise MiCAR authorization dossiers; maintain a single source of truth for policies/controls by article.
• Implement reserve composition, custody segregation, and redemption mechanics for ART/EMT.
• Align incident reporting thresholds and SLAs with DORA; evidence market abuse surveillance capability.

What this means for financial services firms and market participants

For firms operating in or accessing the EU, 2026 demands disciplined execution on multiple fronts. Implementation timetables cluster across prudential, conduct, operational resilience, data, AI and market infrastructure reforms. Many regimes have extraterritorial effects and, in places, overlap or compete with requirements in third countries. The cumulative effect will shape how transactions are structured, executed, booked, custodied and documented, and where activities are situated within groups.

This environment is resource intensive. Talent constraints in both first and second lines will persist, particularly in cyber, data, model risk, AI governance and financial crime. Cost pressures will continue to weigh on TradFi incumbents, FinTechs, crypto asset service providers and issuers alike, encouraging selective consolidation, partnering and the re platforming of critical processes. Horizon scanning and regulatory change management must remain robust, with clear ownership, scenario planning and cross border mapping of equivalence, recognition and substituted compliance options where available.

In the absence of comprehensive equivalence in several areas, well governed third country strategies and documentation playbooks are essential.

None of this precludes opportunity. Institutions that approach 2026 with a strategic lens—re evaluating legal entity structures, market access routes, product sets and technology stacks—can position to benefit from deeper EU capital markets, growing retail participation, digital first operating models and the gradual normalisation of new regulatory perimeters. The "new normal" remains both demanding and investible. The task for the year is to navigate it confidently, protect the downside and be ready to seize the right openings across regions and asset classes.

Across all sectors, the defining feature of 2026 is not the volume of simplified and/or new rules, but the depth of supervisory expectation and the increasing use of financial regulation as a strategic and geopolitical instrument.

Firms that succeed will be those that:

• anticipate divergence rather than convergence,
• embed regulatory strategy into business strategy, and
• invest in governance, data and operational resilience as core capabilities rather than compliance overlays.

Looking ahead:

Firms should institute an enterprise-level regulatory critical path covering prudential, conduct, resilience, and data requirements. This should be owned by a single executive sponsor and reviewed quarterly by the board to navigate complexity, protect against downside risk, and maintain readiness to seize strategic opportunities.

We look forward to continuing this conversation with you and supporting you as you navigate the evolving EU and global financial services landscape.

The pressures highlighted above and resulting legislative, regulatory and/or supervisory responses are likely to also further change how financial market participants choose to structure, execute, book, custody and document their transactions as well as how and where they conduct their regulated and nonregulated activity. The demand for and emergence of novel financial intermediation methods may give rise to fresh benefits and opportunities but equally new ethical considerations and supervisory challenges.

Key considerations for financial services firms and market participants

Financial services firms and market participants operating throughout the EU's Single Market will need to stay more agile than ever before. They are expected to navigate an increasingly complex array of often overlapping and competing requirements within the EU. This complexity is heightened by the significant expansion of the EU's Single Rulebook on financial services, with certain new chapters having become effective in 2025, while others are scheduled to take effect between 2026 and 2027.

These new chapters of the Single Rulebook also extend to encompass new thematic areas. Many of them have extraterritorial impact and some may overlap and/or compete with rules and expectations in (non-EU) third countries. This specifically applies to EU reforms to existing rules and introduction of new comprehensive frameworks – ranging from (digital) operational resilience through to FinTech and generative artificial intelligence (GenAI) – along with rules on crypto-assets as well as the more fundamental move in the EU, UK and Switzerland to shorten settlement cycles to T+1 with an optimal transition date (currently at the time of writing) recommended as 11 October 2027.

The impact of the developments explored in this publication will be felt across all market sectors and asset classes of the EU's financial markets as well as for firms based beyond the EU's borders looking to access or otherwise engage with the EU's Single

Market. This also puts pressure on securing and retaining sufficient talent for various roles in business units and control functions. Cost and resourcing optimisation pressures are likely to continue for traditional financial (TradFi) services firms and other market participants as well as for FinTechs and crypto-asset service providers (CASPs) and issuers (CAIs).

Such pressures summarised above are also likely to be felt in multiple waves. Some may be easy to spot and some may be more sudden.

Differing priorities, agendas and paths that the EU and its global peers may continue to take, including as to the speed and depth of (de-)regulation, will all likely mean that firms, regardless of market sector and asset class, may have to step up their horizon scanning efforts on what applies to them when, where and how as well as how to comply with competing principles and obligations. Navigating issues around extraterritoriality and lack of conceptual or approved equivalence, in order to efficiently conduct their business, will likely become ever more important.

Ultimately for those stakeholders that perhaps do choose to use 2026 to adopt a (perhaps even more dedicated) strategic approach as to how they structure, operate and expand their activities across markets and asset classes, 2026, despite the uncertain and often difficult outlook, may still present a number of attractive opportunities on the horizon. However, all of this warrants financial services firms and market participants carefully navigating the new "new normal" and being poised to seize opportunities across regions and markets.

We trust that you find this multi-jurisdictional guide informative reading and look forward to continuing the conversation!

To read this article in full, please click here.

Footnote

1. Available here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.