On 2 October 2025, HM Treasury and the European Commission published a joint statement reaffirming the commitment of the United Kingdom and the European Union to sustained cooperation on financial regulation. The announcement, issued at the conclusion of the fourth meeting of the EU–UK Financial Regulatory Forum, framed regulatory dialogue as a pragmatic, interest-driven partnership that aims to preserve market stability, reduce unnecessary fragmentation, and support resilient capital flows across one of the world’s largest financial spaces. The statement is notable for its breadth — covering sustainable finance, capital markets, banking resilience, operational resilience, and supervisory coordination — and for the political context in which it appears: several years after Brexit, when both sides have repeatedly sought to balance sovereignty over rulemaking with the economic benefits of regulatory alignment. (GOV.UK)
Why this matters
Financial regulation sits at the intersection of economic policy, investor confidence and systemic risk. When two major regulatory blocs — the EU, which regulates a market of some 450 million people, and the UK, home to one of the world’s principal financial centres — agree to keep channels of communication open, businesses benefit from greater predictability and supervisors can coordinate more effectively on cross-border risk. The October 2025 joint statement emphasised precisely these pragmatic benefits: a shared interest in avoiding regulatory divergence that fragments markets, while upholding the capacity of each jurisdiction to safeguard consumers and financial stability. (GOV.UK)
The forum and its agenda
The EU–UK Financial Regulatory Forum is a technical and policy-level dialogue designed to enable regular exchange on regulatory developments, supervisory practice and risk outlooks. The October 2025 meeting — the Forum’s fourth — brought together officials from HM Treasury, the European Commission, and relevant supervisory bodies to discuss seven priority areas: banking and capital requirements, capital markets and market infrastructure, sustainable finance and green taxonomy issues, insurance and asset management, fintech and digital finance, operational resilience (including digital operational resilience), and anti-money laundering and countering the financing of terrorism (AML/CFT). The Forum is explicitly not a vehicle to harmonise laws automatically; rather it sets the space for sharing analysis, coordinating standards where feasible, and identifying frictions that could be reduced via technical or supervisory approaches. (GOV.UK)
From rhetoric to technical outcomes
The joint statement outlined several concrete lines of cooperation. First, both sides committed to ongoing information-sharing on implementation of international standards — such as Basel III reforms for banks — and to encouraging consistent adoption so that differences in timing or approach do not create regulatory arbitrage or systemic distortions. Second, the Forum reiterated its support for developing high-quality global sustainable finance standards and practical tools that enable comparability and prevent market fragmentation as jurisdictions move to channel capital to climate-aligned activities. Third, the Forum highlighted operational resilience, acknowledging the cross-border nature of cyber and technology risk in critical market infrastructure and the need to coordinate incident response frameworks and resilience testing. Each of these items signals a move from abstract goodwill to targeted, operational collaboration. (GOV.UK)
Political and economic context
The EU–UK regulatory relationship has been through several political cycles since the UK’s 2016 referendum. Initial years after Brexit saw tensions over equivalence and passporting, with the EU asserting the right to set its own standards and the UK pursuing a competitiveness agenda that sometimes tilted towards deregulation. Over time, both sides have recognised the economic costs of unnecessary fragmentation. For the UK, preserving a competitive City of London means maintaining access to continental capital and clearing services; for the EU, deep cross-border financial flows and market interdependence complicate unilateral approaches. This Forum therefore serves political purposes — signalling to markets that dialogue continues — while providing technocratic tools to manage the residual institutional separation between Brussels and London. (GOV.UK)
Industry reactions and market implications
Market participants typically welcome predictable, cooperative regulatory frameworks. Banks, asset managers and insurers operate cross-border infrastructures that rely on common understandings of capital, liquidity and conduct rules. The joint statement’s emphasis on the implementation of international standards reduces the prospect of misaligned capital requirements that could re-route trades, increase compliance costs, or fragment liquidity pools. For fintech and digital finance firms — a sector that depends on scale and interoperability — clearer coordination on data, APIs and cross-border testing is especially valuable. Legal and consulting firms also noted that the Forum’s focus could lower legal uncertainty by generating shared supervisory guidance and early warning on regulatory proposals that might otherwise diverge significantly. (Slaughter and May)
Sustainable finance: the new fault line?
Sustainable finance was a central pillar of the Forum’s agenda. Policymakers on both sides recognise the need for common taxonomies, disclosure standards and transition finance frameworks to avoid “green fragmentation” — a scenario where different labels, metrics and benchmarks produce incompatible markets and complicate capital allocation. The joint statement reiterated support for international convergence on sustainable finance taxonomies and expressed willingness to coordinate on disclosure regimes to keep compliance burdens manageable for issuers and asset managers operating in both jurisdictions. The aim is dual: to build investor confidence in green products while preserving competitive capital markets. Yet this area also has the potential to become politically charged, because differing national industrial strategies and political priorities can push supervisory approaches apart. The Forum’s role is therefore to prevent such divergence from hardening into permanent regulatory barriers. (Finance)
Banking, Basel and the mechanics of convergence
One of the load-bearing technical issues discussed at the Forum is the implementation of Basel III standards. Differences in timing, calibration, and national discretions can create distortions in capital costs and cross-border lending. The EU and UK — both members of the Basel Committee’s global consensus processes — used the Forum to reaffirm support for complete and consistent implementation of the Basel framework, and to exchange data and modelling approaches that inform supervisory judgements. Such transparency reduces the scope for unilateral measures that could disadvantage banks operating across the Channel, and it enables coordinated supervisory responses to emerging lending or liquidity risks. (GOV.UK)
Operational resilience and digital finance
Operational risk, particularly in the digital domain, is inherently cross-border. Cloud providers, market data feeds, and critical payments infrastructure span jurisdictions; cyber incidents can have cascading effects beyond national borders. The Forum’s attention to operational resilience — including testing regimes, incident reporting, and third-party risk management — recognises that national approaches to resilience are insufficient when infrastructure is transnational. Coordination on minimum expectations for resilience and crisis management protocols can materially reduce systemic vulnerabilities. Moreover, fintech innovation — from crypto-asset infrastructure to algorithmic trading — benefits from shared supervisory approaches that balance growth with containment of spillovers. (Finance)
Anti-money laundering and financial crime
AML/CFT oversight remains a priority. The EU and UK face overlapping threats from money laundering, terrorist financing and misuse of complex corporate structures. The Forum’s inclusion of AML/CFT underscores the recognition that cooperative enforcement and intelligence-sharing can close gaps that criminals exploit. While operational detail often remains confidential, the public messaging is clear: authorities will seek more effective cross-border coordination, exchange of supervisory findings, and alignment on beneficial ownership registries and suspicious activity reporting frameworks where feasible. Such work is painstaking, but it is essential for market integrity and for preserving trust in cross-border finance. (GOV.UK)
Where the limits lie
The Forum is not a treaty-making body. It cannot and will not strip legislative sovereignty from either side. The joint statement carefully carves out supervisory cooperation without committing to identical rulebooks. Differences in policy priorities — for example, the UK’s recent emphasis on cutting “duplicative” reporting versus the EU’s regulatory precaution in some sectors — mean that full convergence is politically unlikely. Instead, the Forum is a pragmatic instrument: it reduces frictions where mutual gains exist (market infrastructure, incident response, international standards) and creates a mechanism to manage divergence in politically sensitive areas. Stakeholders ought to read the Forum’s output as a risk-management device rather than a promise of regulatory harmonisation. (GOV.UK)
Case study: asset management and cross-border fund distribution
Consider asset management: funds domiciled in one jurisdiction but marketed in another depend on a web of rules around investor protections, disclosure and product approval. Post-Brexit, some cross-border fund flows encountered new frictions — from distribution passports to differing disclosure formats — that raised costs for managers and investors. The Forum’s practical exchanges around asset management aim to reduce these frictions by promoting compatible supervisory expectations, mutual recognition of certain oversight practices, and common templates for disclosures where possible. While not restoring pre-Brexit passporting, such measures can lower operational costs and keep capital fluid between the UK and EU funds markets. (GOV.UK)
What industry should expect next
In the months following the October 2025 Forum, market participants can reasonably expect a series of technical working groups to publish more detailed guidance or joint papers on discrete topics — for example, approaches to resilience testing, data exchange protocols, and taxonomy mapping for sustainable finance. Supervisors may also increase the cadence of secondments and data sharing to improve crisis preparedness. Regulatory proposals that nonetheless differ between the UK and EU will likely be accompanied by dialogues aimed at understanding the impact on cross-border activity, even if they are not altered. In short, the pattern will be iterative: meetings, technical products, and supervisory exchanges designed to keep frictions manageable. (GOV.UK)
Risks and unresolved tensions
Despite the constructive tone, several risks remain. Political shifts and domestic regulatory agendas could reopen fault lines — for example, if one side adopts substantially lighter rules to gain a perceived short-term competitive edge. Likewise, global shocks (rapid interest-rate moves, a sudden market liquidity event, or major cyber incidents) could test the depth and speed of cross-border coordination. Finally, sustainable finance remains a terrain where differing industrial policies or strategic priorities could lead to longer-term divergence. The Forum can mitigate, but not eliminate, these risks. (Atlantic Council)
What to watch
Readers following this story should look for (1) outputs from the Forum’s technical working groups (guidance papers or joint technical notes); (2) further public commitments on taxonomy alignment or bridging instruments for sustainable finance; (3) evidence of coordinated operational resilience testing or incident-response protocols; and (4) any signs that domestic legislative initiatives diverge sharply enough to elicit formal regulatory responses. Together, these developments will determine whether the Forum’s cooperation becomes a durable scaffold that preserves market integration in practice, even where law remains separate. (GOV.UK)
Treasury and EU reaffirm cooperation on financial regulation – Case Studies, Comments and Examples
The joint reaffirmation by HM Treasury and the European Commission in October 2025 to cooperate on financial regulation has stirred significant reactions across the financial community. The announcement came after the fourth EU–UK Financial Regulatory Forum, signalling a continued pragmatic approach to managing cross-border risks while sustaining market stability. Below are case studies, expert comments, and real-world examples illustrating why this cooperation matters.
Case Study 1: Cross-Border Banking and Basel III Implementation
After Brexit, UK-based banks such as Barclays and HSBC faced different timelines for Basel III reforms compared with their EU counterparts. This created uncertainty about capital requirements and lending capacity. For instance, in 2022–2023, UK banks temporarily held higher capital buffers than many EU institutions, affecting their ability to provide competitive lending terms for corporate borrowers in Europe.
The recent reaffirmation addresses this by aligning Basel III timelines more closely. This helps banks avoid regulatory arbitrage and ensures smoother credit flows across London, Frankfurt, and Paris.
Example: A pan-European corporate borrower can now secure syndicated loans without fearing pricing distortions caused by uneven regulatory burdens.
Comment: “For multinational banks, the devil is in the detail — synchronising Basel standards means fewer distortions in lending markets,” said Sarah Collins, a regulatory lawyer at Clifford Chance.
Case Study 2: Sustainable Finance Taxonomies
The EU and UK have developed separate green taxonomies — frameworks that classify sustainable economic activities. Initially, UK pension funds managing green investments struggled because EU investors used different metrics for reporting carbon intensity. This led to duplicative reporting costs and investor confusion.
Through the Forum, both sides agreed to map equivalences and exchange technical knowledge, reducing fragmentation.
Example: A London-based fund offering renewable energy bonds can now market them more easily in the EU without rewriting disclosures for EU standards.
Comment: “This is a win for investors and issuers. Without alignment, we risked green finance splintering into incompatible regional silos,” said Dr. Lars Meier, sustainability expert at the London School of Economics.
Case Study 3: Clearing Houses and Market Infrastructure
London’s dominance in euro-denominated derivatives clearing was under pressure post-Brexit. The EU had been pushing to repatriate clearing activity to European CCPs. However, businesses argued that fragmentation would increase costs and systemic risk.
The Forum’s reaffirmation of cooperation on market infrastructure means authorities will continue working to coordinate risk frameworks.
Example: A French investment bank clearing euro interest-rate swaps in London can now continue doing so with greater certainty, supported by shared supervisory standards.
Comment: “We may never return to the pre-Brexit passporting system, but supervisory coordination gives markets breathing room,” said Fiona Macdonald, Head of Derivatives at BNP Paribas.
Case Study 4: Operational Resilience and Cybersecurity
In 2024, a major cyberattack on a European payments processor caused temporary disruptions across the UK–EU transaction chain. Investigations revealed fragmented incident reporting systems delayed a coordinated response.
The Forum prioritised operational resilience, agreeing to share frameworks for incident reporting and resilience testing.
Example: A future cyber incident affecting cloud providers supporting both UK and EU banks could now trigger faster, coordinated supervisory responses.
Comment: “Cyber risk doesn’t respect borders. The fact that supervisors are aligning crisis playbooks is probably the most important outcome,” noted James Patel, CTO at a London fintech.
Case Study 5: Asset Management and Fund Distribution
After Brexit, UK-based asset managers lost automatic passporting rights, creating costs for distributing funds in the EU. Many firms relocated subsidiaries to Dublin or Luxembourg to maintain access.
The reaffirmed cooperation suggests regulators may reduce duplication in disclosure templates and supervisory filings, lowering costs for cross-border fund flows.
Example: A UK hedge fund marketing ESG products in Germany could benefit from simplified equivalence assessments, avoiding costly parallel compliance regimes.
Comment: “While we won’t see full passporting return, targeted alignment in disclosure will keep costs down for asset managers,” said Elizabeth Chan, senior partner at PwC.
Broader Industry Comments
- City of London Corporation: “This demonstrates that, despite political differences, regulators remain committed to practical cooperation that safeguards financial stability.”
- European Banking Federation: “The reaffirmation helps banks on both sides avoid duplication and ensures consistent application of global standards.”
- UK Finance (trade body): “Dialogue through the Forum reassures markets and investors that the UK and EU won’t let political divergence derail systemic resilience.”
Examples of Potential Risks
- Divergent Industrial Strategies: If the EU prioritises strict taxonomy rules while the UK adopts a more flexible approach to attract investment, green finance markets may still fragment.
- Competitive Deregulation: Pressure on the UK to loosen rules post-Brexit could strain cooperative commitments if Brussels perceives a regulatory “race to the bottom.”
- Geopolitical Shocks: A sudden global crisis, such as a liquidity crunch or cyberattack, could test whether the cooperation has teeth beyond rhetoric.
Conclusion
The reaffirmation of UK–EU cooperation on financial regulation is not a return to pre-Brexit unity but a pragmatic recognition of mutual interdependence. From banking capital standards to sustainable finance and operational resilience, the Forum is helping both sides avoid costly divergence while safeguarding market stability.
The case studies above show how this cooperation translates into real-world benefits: cheaper lending for corporates, smoother green investment flows, more resilient market infrastructure, and reduced compliance burdens. At the same time, the comments highlight a common theme: cooperation is fragile and must be actively maintained to withstand political shifts and economic shocks.