to the point: financial regulation | 12/2025

·       The Council of the EU and European Parliament have agreed on a retail investment strategy that reshapes the obligations of investment firms, advisors, insurers and intermediaries by reinforcing investor protection and redefining how clients are classified and served, with particular emphasis on the revised rules on professional client status. Obliged entities must strengthen product governance by identifying and quantifying all costs and charges linked to investment products and assessing, against harmonised EU peer group standards and supervisory benchmarks, whether those costs are justified and proportionate. Products that fail this assessment cannot be offered to retail clients, directly affecting product design, approval and distribution. Transparency obligations are expanded through clearer, more standardised disclosures, including enhanced Key Information Documents that must eventually be provided in machine-readable form, increasing compliance, data and IT requirements. At the client-journey level, firms remain responsible for suitability based on clients' financial situation, needs and objectives, even though knowledge and experience assessments may be waived for recommendations involving diversified, non-complex and cost-efficient products. Conflict-of-interest management is tightened through stricter inducement rules, requiring firms to demonstrate that any fees or commissions provide a tangible benefit to the client and to disclose inducement costs separately and clearly, reinforcing the obligation to act honestly, fairly and professionally in the client's best interest. Crucially, obliged entities must update their client classification frameworks to reflect the revised two out of three criteria for professional client status, which lower certain thresholds and introduce alternative pathways based on education or training and ability to assess risk. Firms will need robust procedures to verify transaction history, portfolio size and professional experience or qualifications, while ensuring that ineligible combinations of criteria are not applied. This change expands the pool of clients who may be treated as professional, reducing some protection requirements, but it also increases supervisory and liability risk for firms if misclassification occurs, making accurate assessment, documentation and ongoing review of client status a key new compliance focus under the updated rules.

·      The European Banking Authority (EBA) has unveiled its Final Regulatory Technical Standards (RTS) setting out thresholds and prudential risk management requirements for central securities depositories (CSDs) and credit institutions providing banking-type ancillary services, clarifying when additional authorisation is required and how risks must be controlled. For non-banking CSDs that rely on banking CSDs or credit institutions for cash settlement, the RTS define clear quantitative thresholds below which such arrangements may continue without triggering new authorisation requirements, while making it explicit that exceeding or approaching those thresholds triggers progressively stricter prudential and risk management obligations. The introduction of dynamic thresholds means that as settlement volumes and exposures grow, obliged entities must strengthen governance, controls, liquidity and credit risk management in line with their increasing risk profile. Credit institutions providing these services are likewise required to align their risk frameworks and cooperation arrangements with the CSDs' activity levels.

·      The European Securities and Markets Authority (ESMA) has issued its Final Report finalising technical standards on derivatives transparency and the OTC derivatives consolidated tape, which significantly reshape the compliance and reporting obligations for obliged entities and persons active in derivatives markets under MiFIR. For trading venues, investment firms and other market participants dealing in exchange-traded and OTC derivatives, the new rules strengthen pre- and post-trade transparency requirements while recalibrating deferral regimes to better protect liquidity providers from undue market risk, requiring firms to reassess when and how transaction details must be made public. Obliged entities must adapt their systems and controls to the revised deferral framework – particularly for equity derivatives and single-name credit default swaps – and ensure alignment ahead of the go-live of the OTC derivatives consolidated tape, which will centralise and standardise access to post-trade information. The finalised standards also impose clearer and more detailed data quality requirements, specifying the exact fields that must be submitted to and disseminated by the OTC derivatives consolidated tape provider, thereby increasing firms' responsibility for the accuracy, completeness and timeliness of reported data. Although ESMA has applied a simplification and burden-reduction approach by consolidating amendments, setting a single application date and removing certain reporting obligations, obliged entities and responsible persons remain accountable for implementing updated IT systems, governance arrangements and internal controls to ensure consistent compliance, as supervisory scrutiny will focus on whether firms effectively deliver the intended transparency outcomes in practice.

·       ESMA has published its Final Report on Supervisory Expectations for the Management Body, setting out how obliged entities and persons under ESMA supervision, as well as those seeking authorisation, are expected to strengthen governance, oversight and accountability at board and senior management level (see the factsheet here). The 12 high-level principles translate into clear supervisory expectations that management bodies must effectively oversee business strategy, risk management, internal controls and compliance outcomes, while remaining fully responsible for the firm's regulatory obligations. For obliged entities, this means boards and directors must be actively engaged, demonstrate collective and individual competence, and ensure that decision-making, delegation and oversight arrangements are proportionate to the firm's nature, scale and complexity, yet robust enough to identify, manage and mitigate risks. The principles do not impose prescriptive rules but require management bodies to evidence that governance frameworks work in practice, that risks are understood and challenged, and that regulatory requirements are embedded in the firm's culture and operations. Board members and senior managers will face increased expectations of accountability, documentation and engagement with supervisors, as ESMA will assess not only formal structures but also outcomes and effectiveness. From 2026, these principles will be integrated into ESMA's supervisory priorities, meaning firms should expect closer supervisory dialogue and scrutiny of how management bodies implement and demonstrate effective oversight, making proactive alignment with the principles a key compliance and governance priority.

·       EBA has published its Final Regulatory Technical Standards on structural foreign exchange under the Capital Requirements Regulation (CRR), clarifying and harmonising how obliged entities and persons must identify, manage and calculate structural FX positions across the EU. For credit institutions, the RTS turn existing EBA Guidance into binding requirements, requiring firms to review and formalise their methodologies, governance and documentation for structural FX positions and the related exemption from own funds requirements. Institutions must apply clearer rules on how to compute the maximum open position, focus the calculation on credit risk own funds where this is the main driver of capital ratio sensitivity, and correctly exclude FX risk positions from capital requirements. The RTS also introduce explicit expectations for managing exposures in illiquid currencies, including those affected by EU restrictive measures, increasing the need for dedicated policies and controls. For obliged persons, especially senior management and risk function holders, the standards reinforce accountability for ensuring that structural FX treatment is supported by a sound risk management framework and can be clearly justified to supervisors as consistent, prudent and compliant with the CRR.

·       The European Central Bank (ECB) has published recommendations from its High-Level Task Force on Simplification, outlining proposals to simplify EU banking rules while maintaining system resilience, which will directly affect obliged entities and persons by reducing complexity in capital, leverage, macroprudential, resolution, governance and reporting frameworks. For banks, the proposals mean merging existing capital buffers into just two layers, streamlining the leverage ratio framework, enhancing loss-absorption capacity of Additional Tier 1 capital and expanding the small banks regime to include more institutions under proportionate, simplified rules, requiring firms to reassess capital planning, buffer management and internal governance accordingly.

·       EBA has published its final draft Amending Regulatory Technical Standards on the factors used to assess the appropriateness of real estate risk weights, clarifying how obliged entities and persons in the banking sector must apply the revised capital framework under the CRR. The amendments do not introduce new substantive risk assessment requirements for credit institutions, but ensure that existing practices for exposures secured by immovable property under the Standardised Approach remain aligned with the updated legal structure of the CRR. Obliged entities must therefore review and update their internal policies, capital calculations and regulatory references to ensure consistency with the revised CRR provisions, even though the underlying methodology and supervisory expectations remain unchanged. The alignment of legal references also extends to the Internal Ratings-Based approach, particularly regarding the assessment of minimum loss given default values for retail exposures secured by immovable property, requiring banks using IRB models to ensure that their documentation, governance and supervisory interactions reflect the new CRR framework. For obliged persons, including senior management and risk and capital adequacy function holders, the changes reinforce accountability for ensuring that capital requirements for real estate exposures are applied correctly and consistently with the updated regulation, with supervisors focusing on compliance with the revised legal references rather than on changes to risk sensitivity or capital outcomes.

·       The European Insurance and Occupational Pensions Authority (EIOPA) has published new and updated guidance on group supervision, related undertakings and the assessment of internal models, clarifying how insurers and insurance groups must apply the revised Solvency II framework in practice. For obliged entities, the new Guidelines on exclusions from group supervision make clear that excluding undertakings from group scope is only permissible in exceptional and well-justified circumstances, requiring groups to reassess their supervisory perimeter, strengthen documentation and be prepared to demonstrate to supervisors that any exclusion does not undermine policyholder protection. The revised Guidelines on the treatment of related undertakings require insurers to align their treatment of participations and own funds deductions with the updated Solvency II definitions, even though the framework has been simplified, meaning firms must review internal classifications, capital calculations and governance processes for consistency with the amended rules. The updated Opinion on internal models, particularly regarding dynamic volatility adjustments, increases expectations that firms using internal models apply enhanced prudency and reflect market volatility appropriately, with supervisors focusing on the robustness and conservatism of model design and ongoing performance.

·       The European Commission has decided to add Russia to the EU list of high-risk third countries for anti-money laundering and counter-terrorist financing. This decision fundamentally increases the compliance burden for obliged entities and relevant persons under the EU AML framework. Once the Delegated Regulation enters into force, banks, financial institutions and other obliged entities must treat any business relationship or transaction involving Russia as inherently higher risk and apply enhanced due diligence measures as required by the 4th Anti-Money Laundering Directive. In practical terms, this means deeper scrutiny of customers and beneficial owners, a clearer understanding of the purpose and nature of transactions linked to Russia, more intensive and ongoing monitoring of those relationships, and a greater readiness to question, restrict or refuse transactions where risks cannot be adequately mitigated. Obliged entities will also need to update their internal risk assessments, policies and controls to reflect Russia's high-risk status, ensure staff are aware of the change, and be prepared for increased supervisory attention from competent authorities. For individuals acting within obliged entities, this designation raises personal responsibility to apply heightened vigilance, document decisions carefully, and escalate concerns where red flags arise, as failures to comply with enhanced due diligence obligations may expose both institutions and responsible persons to regulatory sanctions and reputational damage.

·       In March 2024, the European Union adopted a new set of amendments to both the Markets in Financial Instruments Directive, commonly known as MiFID II, and the related Markets in Financial Instruments Regulation (MiFIR), as part of the Capital Markets Union agenda. The two instruments operate together and form the core of the EU framework governing trading venues, investment firms and market transparency. The latest amendments are designed to improve the availability and quality of market data, enhance market resilience during periods of stress, and simplify certain regulatory requirements that were widely viewed as inefficient in practice. While the MiFIR amendments apply directly across the EU, Member States had to transpose the revised MiFID II into national law by 29 September 2025. Hungary has adopted national measures aimed at implementing the amended directive.

Key changes under MiFID II

For firms operating in Hungary, the most relevant changes to the MiFID II concern best execution obligations, trading venue requirements, systematic internalisers, market data quality and commodity derivatives reporting.

One of the most important changes affects best execution reporting. Under the previous regime, investment firms and trading venues were required to publish detailed annual and quarterly reports under technical standards commonly known as RTS 27 and RTS 28. The amended MiFID II framework removes the underlying reporting obligations, while preserving the core duty for firms to take all sufficient steps to obtain the best possible result for clients. Hungarian investment firms will therefore continue to be expected to monitor execution quality and inform clients where their orders are executed, without being required to publish the detailed public reports that previously applied under RTS 27 and RTS 28.

The amendments also introduce changes to the treatment of systematic internalisers. Previously, firms had to apply detailed quantitative thresholds to determine whether they qualified as systematic internalisers. The revised rules replace this approach with a qualitative assessment for equity instruments. For non-equity instruments, firms may still choose to opt into the systematic internaliser regime, reflecting the different transparency framework applicable under MiFIR.

Trading venues are another area where the amendments have direct relevance. Regulated markets are now required to have at least three materially active members or users, aligning them with requirements that previously applied only to multilateral and organised trading facilities. In addition, regulated markets must maintain robust mechanisms to halt or constrain trading in emergency situations or where rapid price movements lead to disorderly trading. Regulated markets must also publicly disclose the principles governing these mechanisms.

Data quality and market transparency are central subjects of the reform. The MiFID II amendments complement changes to MiFIR that pave the way for a consolidated tape, intended to provide a centralised view of trading data across the EU. While the consolidated tape itself is established under MiFIR, MiFID II now requires Member States to ensure that investment firms and market operators have appropriate arrangements in place to meet enhanced data quality standards. In Hungary, this places greater emphasis on internal controls, systems and governance around transaction data, rather than introducing new reporting formats at the national level.

The amendments also address payment for order flow, a practice under which an investment firm receives a fee or other benefit for routing client orders to a particular trading venue or execution counterparty. The prohibition of payment for order flow is introduced through amendments to MiFIR, while MiFID II has been adjusted to ensure that best execution obligations and the sanctions framework fully align with that ban.

Commodity and energy markets receive particular attention in light of recent market volatility. Trading venues must publish weekly position reports and communicate them to both national authorities and the European Securities and Markets Authority, which will centralise publication. However, this and other aspects of the amended commodity derivatives regime have not yet been fully reflected in national legislation.

Implementation under Hungarian law

Hungary implemented the MiFID II amendments through the adoption of Act LXVII of 2025 on the Amendment of Certain Acts in Order to Improve the Competitiveness of Hungary. Chapters 15 and 23 of the amending act introduce changes aimed at transposing MiFID II by amending several provisions of the Act on the Capital Market and the Act on Investment Firms and Commodity Exchange Service Providers, and on the Rules Governing Their Activities, with effect from 29 September 2025.

Overall, the Hungarian implementation of the MiFID II amendments has largely been accomplished in line with the EU framework, while certain areas, for example those relating to commodity derivatives, remain incomplete.

·       The Polish Financial Supervision Authority (KNF) has issued guidelines allowing banks to pay out a maximum of 75 % of their 2025 profits as dividends in 2026, with a reduced limit of 50 % for banks with higher risk profiles. The policy also introduces additional restrictions for banks that are particularly sensitive to interest rate changes, aiming to ensure financial stability and protect the interests of depositors and financial market participants.

·       A new draft law on the functioning of the financial market and the protection of its participants has been adopted by the Council of Ministers. The law adapts Polish regulations to EU requirements in the areas of payment services, benchmark indices and forced restructuring. Among other changes, payment service providers will be required to offer instant euro transfers without additional fees, and banks will benefit from technical adjustments to the MREL capital requirement, streamlining restructuring procedures and reducing administrative burdens. The law aims to increase the safety and transparency of the financial market in Poland.