This week in our Risk and Capital Weekly Brief, the European Commission proposed freer movement of capital and liquidity across cross-border banking groups, while the European Central Bank reported that trade-policy uncertainty is prompting banks to tighten corporate lending.

Elsewhere, JPMorgan Chase argued that proposed US capital reforms would redistribute regulatory requirements unevenly across the largest banks. Indian banks continued preparations for expected credit loss implementation, while Australian market participants explored tokenised settlement and greater collateral mobility.

Read more on the week’s key developments:

1. European Commission proposes freer movement of bank capital and liquidity

The European Commission adopted a banking competitiveness strategy on 17 July setting out proposals to strengthen the role of group-wide supervisors in supporting movements of capital and liquidity across banking groups. The future measures would seek to reduce national barriers while retaining safeguards for local creditors, depositors and subsidiary-level resilience.

The Commission cited an estimate that easing restrictions on liquidity held in cross-border subsidiaries could make EUR 230 billion ($267 billion) of high-quality liquid assets available for more efficient group-wide use. The proposals are directly relevant to groups such as UniCredit, BNP Paribas and Santander. Santander has separately argued that a genuine Banking Union requires cross-border groups to manage capital and liquidity more holistically.

2. JP Morgan challenges distribution of proposed US capital reforms

Federal Reserve Vice Chair for Supervision Michelle Bowman used a 13 July speech to restate the rationale for comprehensive US capital proposals published in March. The proposals would revise risk-based capital requirements, recalibrate the global systemically important bank surcharge and change how stress-test results interact with banks’ capital requirements.

A day later, JP Morgan Chase chief executive officer Jamie Dimon called the proposals uneven. JP Morgan said its requirements would increase by approximately 4%, while those of peers would decline by an average of 4.8%, illustrating how a package expected to reduce aggregate capital requirements significantly. Goldman Sachs chief executive officer David Solomon took a more supportive position, arguing that requirements should align more closely with underlying risk.

3. Trade tensions prompt tighter euro-area corporate lending

European Central Bank analysis published on 15 July found that trade-policy uncertainty is changing how banks treat internationally exposed companies. A net 11% of banks reported tightening credit standards in 2025 because of trade-policy changes and related uncertainty, with a similar effect expected during 2026. Banks with greater exposure to affected industries, including the automotive sector, tightened the most.

Trade risks are also weakening demand: a net 6% of banks reported lower corporate loan demand in 2025, while a net 3% expected a further decline in 2026. The findings suggest trade policy is becoming an increasingly important driver of corporate credit decisions, particularly for banks with internationally exposed portfolios, providing a useful lens through which to assess future credit-quality disclosures from ING, UniCredit and Commerzbank.

4. Bank of England backs outcome-based capital reform

Bank of England Governor Andrew Bailey said on 14 July that capital requirements should be calibrated against clearly defined financial-stability outcomes rather than framed simply as a choice between more or less regulation. He said the Bank remained open to simplifying requirements where anomalies or unintended consequences constrain healthy banks' ability to finance economic growth.

The debate is also visible in banks' liquidity strategy as quantitative tightening reduces reserve balances. Barclays analyst Moyeen Islam has argued for longer-term repo facilities, warning that reliance on shorter-term central-bank funding can weigh on leverage and funding-stability metrics. Together, the comments reinforce the growing focus on how capital, reserves and liquidity interact as excess central-bank liquidity continues to decline.

5. EU approves $2.3 billion capital injection into Hungary's development bank

The European Commission approved Hungary's EUR 2 billion ($2.3 billion) capital injection into state-owned Magyar Fejlesztési Bank (MFB) on 13 July under European Union state-aid rules. Financed through the Recovery and Resilience Facility, the capital is intended to expand financing for areas including infrastructure, agriculture, environmental protection, education, tourism and regional development.

Hungary committed to restricting MFB's activities to identified market failures and to safeguards preventing the lender from crowding out private banks or offering financing on artificially favourable terms. The conditions illustrate the Commission's attempt to expand development finance without distorting competition in commercial banking.

6. Swedbank closes historical investigations with $50 million settlement

Swedbank agreed on 16 July to pay $50 million to the New York State Department of Financial Services for failing to disclose information to the authority on two occasions in 2016 and 2018. The settlement concludes investigations in Sweden, Estonia and the United States into historical anti-money-laundering, counterterrorist-financing and disclosure shortcomings covering 2007 to 2019.

The charge will be recognised in the third quarter, but Swedbank enters the post-investigation period with a Common Equity Tier 1 ratio of 17.4% and a credit impairment ratio of 0.06%. Closing the investigations removes a long-running source of legal and operational uncertainty, allowing management to refocus on capital deployment, profitability and business execution rather than remediation.

7. US agencies commit to notifying banks within 72 hours after supervisory-data breaches

The Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency issued joint procedures on 16 July for handling highly sensitive information during bank examinations. Options include reviewing information on bank premises rather than transferring it to regulatory systems and limiting the amount of sensitive data collected or retained.

The agencies also committed to notifying affected banks of a potential or confirmed material breach involving confidential supervisory information as soon as practicable and no later than 72 hours after discovery, unless legal restrictions apply. The procedures acknowledge that supervisory information has become an operational risk in its own right, extending banks' cyber-resilience responsibilities beyond customer and internal data.

8. Australian market explores tokenised settlement and collateral mobility

The Australian Securities and Investments Commission published findings from its Financial Markets and Innovation roundtable on 17 July. Participants, including ASX, Commonwealth Bank of Australia, Goldman Sachs, Macquarie Group and Westpac, prioritised modernising fixed-income infrastructure, reducing friction in over-the-counter settlement and improving domestic and offshore clearing connections.

Participants discussed tokenising Austraclear as one of the more developed industry proposals, alongside plans to extend post-trade processing windows by 2027 and improve collateral mobility. These were industry proposals raised at the roundtable rather than measures adopted by ASIC, but they point to growing industry interest in reducing settlement frictions and making collateral more readily deployable across financial markets.

9. Indian banks prepare for expected credit loss transition

Reserve Bank of India Governor Sanjay Malhotra's 14 July meeting with bank chief executives reportedly included implementation of the expected credit loss (ECL) framework, alongside geopolitical risks and governance of artificial intelligence. The ECL framework is due to take effect on 1 April 2027 and require banks to recognise credit deterioration and build provisions on a forward-looking basis rather than relying primarily on incurred losses.

Bank of India said in June that it plans to begin a parallel ECL run by the end of September, providing an early institutional benchmark for model readiness. For Indian banks, the transition will be judged less by accounting compliance than by the quality of underlying credit data and the robustness of provisioning models.

10. Danske Bank raises earnings outlook as capital ratios ease

Danske Bank increased its 2026 net profit outlook to DKK 23 billion ($3.52 billion) to DKK 25 billion ($3.82 billion) after first-half net profit rose 6% to DKK 11.9 billion ($1.82 billion). Loan impairment charges remained low at DKK 265 million ($40.5 million), reflecting continued resilience in credit quality as the bank expanded lending and generated stronger earnings.

Its Common Equity Tier 1 ratio nevertheless declined to 17.0% from 18.7% a year earlier, while its total capital ratio fell to 20.5% from 22.4%. The bank remains strongly capitalised, but the decline illustrates how excess capital accumulated in recent years is gradually being absorbed by lending growth, investment and shareholder distributions.

The Risk and Capital Weekly Brief Weekly is a weekly roundup of developments in risk and capital management highlighting institutional practices shaping resilience.