The European Union introduced temporary relief from selected capital and operational requirements under the Fundamental Review of the Trading Book (FRTB) from 1 January 2027 through 31 December 2029. The measures include monitoring-only profit-and-loss attribution tests, weekly instead of daily calculations for some risk measures and a bank-specific multiplier capped at one that can limit the capital impact for eligible institutions as other jurisdictions delay implementation.

Capital and resolution requirements also shifted elsewhere. Canada lowered selected corporate, bank and property-development risk weights, Singapore proposed minimum loss-absorbing-capacity requirements for systemically important financial institutions and UniCredit secured regulatory approval that it estimates will lift its Common Equity Tier 1 (CET1) ratio by 52 basis points.

Read more on the week’s key developments:

1. EU temporary FRTB relief enters into force

Commission Delegated Regulation (EU) 2026/1221 was published on 11 September and entered into force on 12 September. It applies from 1 January 2027 through 31 December 2029, allowing monitoring-only profit-and-loss attribution tests, weekly instead of daily calculations for expected shortfall and stress-scenario risk measures and a bank-specific multiplier of no more than one for eligible institutions’ market-risk own-funds requirements.

The relief addresses uneven Basel implementation across jurisdictions and can preserve CET1 headroom for affected trading desks. Institutions using the multiplier must continue reporting and disclosing the corresponding requirements under the previous Basel 2.5 framework. Banks therefore gain near-term capital and operational relief but must retain the systems, data and risk capabilities needed for the full framework after 2029.

2. Canada lowers selected credit risk weights

The Office of the Superintendent of Financial Institutions published its final 2027 Capital Adequacy Requirements guideline on 10 September. It cuts the standardised risk weight for corporate small and medium-sized enterprise (SME) exposures to 75% from 85%, for unrated non-investment-grade corporates to 135% from 150% and for exposures to Canadian domestic systemically important banks and certain provincially regulated institutions to 15% from 20%. The rules take effect on 1 November 2026 or 1 January 2027, depending on institutions’ financial year-ends.

The framework also lowers the base risk weight for low-rise residential development lending to 130% from 150%. Qualifying commercial projects receive a 110% risk weight, while residential projects with at least 75% pre-sales receive 90%. The reductions lower the capital required against affected business, interbank and development exposures. Notification and capital-benefit reversal provisions retain safeguards around synthetic securitisations used to transfer credit risk.

3. Singapore introduces loss-absorbing-capacity bill

Singapore introduced the Financial Services and Markets (Amendment) Bill 2026 for its first reading on 8 September. The Bill would allow the Monetary Authority of Singapore (MAS) to impose minimum loss-absorbing-capacity requirements on systemically important financial institutions. Institution-level calibration, eligible instruments and commencement timing have yet to be set.

If enacted at material levels, the framework could increase the resources available to absorb losses and recapitalise a failing institution during resolution, reducing potential reliance on public support. Affected institutions may need to issue or retain more eligible instruments, with the effect on issuance costs and funding spreads depending on MAS’s eventual calibration.

4. UniCredit gains estimated 52-basis-point CET1 benefit

UniCredit said on 8 September that the European Central Bank had approved its use of the Danish Compromise in calculating consolidated capital ratios. From third-quarter 2026 reporting, the group’s insurance holdings can be risk-weighted instead of deducted from regulatory capital. UniCredit estimates that the change will add approximately 52 basis points to its CET1 ratio, based on its position at the end of the second quarter.

The estimated uplift comes from a change in regulatory treatment, without a reduction in the underlying insurance holdings or an equity raise. It increases UniCredit’s capital-allocation flexibility from the third quarter, subject to supervisory requirements and the bank’s allocation decisions. The size of the benefit also shows how the treatment of insurance holdings can materially affect a banking group’s consolidated capital position.

5. US regulators propose common third-party risk guidance

The Federal Reserve, Federal Deposit Insurance Corporation, National Credit Union Administration and Office of the Comptroller of the Currency proposed common third-party risk guidance on 11 September. The principles-based and non-binding framework would replace the 2023 interagency guidance and related resources, with oversight tailored to the assessed risk of each relationship. Comments are due 60 days after publication in the Federal Register.

The proposal covers risk identification and assessment, due diligence, contracting, ongoing monitoring, termination, residual-risk acceptance and governance. It responds to concerns that the 2023 guidance encouraged broad, checklist-driven processes by allowing institutions to concentrate resources on relationships presenting the greatest likelihood or magnitude of harm. Banks and credit unions would retain responsibility for regulatory compliance when activities are performed by third parties.

6. ESMA says resilient markets continue to mask vulnerabilities

The European Securities and Markets Authority’s 10 September risk monitor said EU markets remained resilient, but stretched technology valuations, geopolitical tensions, persistent inflation and weaker growth increased the risk of abrupt corrections. It also reported rising sovereign yields, wider spreads, elevated volatility, private-credit exposures to the US market and higher refinancing risk as short-term debt issuance moderated.

An abrupt repricing could create collateral, margin, liquidity and refinancing pressure for banks and market participants. Stable EU credit indicators and functioning central counterparties temper the warning, while less transparent private-credit exposures and growing links between crypto-assets and the wider financial system could complicate the transmission of a correction. Risk would rise if valuation compression coincides with concentrated exposures or refinancing needs.

7. UK high-LTV and high-LTI mortgage lending rises

The Bank of England’s second-quarter mortgage release showed that lending above 90% loan-to-value (LTV) rose to 8.4%, its highest share since the second quarter of 2008. Lending above 75% LTV reached 47.5%, its highest since the fourth quarter of 2007, while high loan-to-income (LTI) lending increased to 46%. Gross mortgage advances rose 11.1% from the previous quarter and 31.7% from a year earlier.

Leverage is increasing in the flow of new lending while arrears indicators for the existing mortgage stock have improved. Arrears balances fell 1.9% quarter on quarter and 7.3% year on year, remaining at 1.1% of outstanding balances. Higher leverage makes recent borrowers more sensitive to house-price, income and interest-rate shocks, but the data do not indicate broad deterioration in current repayment performance.

8. HKMA reinforces private-market distribution controls

In a 9 September circular, the Hong Kong Monetary Authority (HKMA) reminded registered institutions that products with private-credit or private-equity exposure can contain assets that are illiquid, difficult to value and subject to limited regulatory oversight. It set expectations around product due diligence, risk ratings, balanced disclosure, suitability, liquidity and valuation assessments, monitoring and staff training.

The circular covers publicly and privately offered funds and other products with direct or indirect private-market exposure. Complex-product suitability requirements can apply even without solicitation or recommendation, although existing exemptions remain for institutional and qualifying corporate professional investors. Banks will need to demonstrate credible target-market, valuation and liquidity controls as private-market products reach a broader wealth-management client base.

9. FATF updates gaming and gambling risk indicators

On 9 September, the Financial Action Task Force (FATF) published updated financial-crime risk analysis and indicators based on questionnaire responses from 80 jurisdictions, written comments from 29 jurisdictions and consultation with industry bodies, researchers and private-sector stakeholders. Indicators include deposits followed by withdrawals with minimal or no play, structured small deposits, coordinated betting, illegal or offshore operators, linked payment channels and opaque beneficial ownership.

FATF found that money laundering through gambling is an established risk across many jurisdictions, while reported terrorist-financing typologies are more limited and proliferation-financing risks remain very limited. For banks, payment providers and digital wallets, the analysis broadens anti-money laundering monitoring beyond traditional casinos to merchant, wallet and cross-border transaction chains. The indicators can inform risk-based monitoring but do not constitute a new binding rule.

10. US agencies double extended examination-cycle threshold

On 10 September, the Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency issued an interim final rule raising the asset threshold from $3 billion to $6 billion for certain community banks eligible for an 18-month on-site examination cycle. Eligibility remains conditional on institutions being well managed and well capitalised, with off-site monitoring continuing between examinations. The change also applies to qualifying US branches and agencies of foreign banks.

The rule reduces the frequency of on-site examinations for qualifying institutions without changing their capital requirements. Its eligibility criteria limit the immediate prudential risk, although longer examination intervals increase the importance of timely off-site data and monitoring between scheduled reviews.