Banking Regulation 2026

Introduction

2026 is set to be another dynamic and demanding year for the global banking industry. Political tensions and trade frictions between major economies keep conditions uncertain worldwide. At the same time we see that regulatory development continues across jurisdictions. Notably the finalisation of the implementation phases of Basel III, which purports to create a largely harmonised baseline for capital adequacy, liquidity and risk management. Supervisory attention also shifts towards sustainability and climate integration. The European Banking Authority (EBA) Guidelines on the management of environmental, social and governance (ESG) risks will start to apply in early 2026, embedding ESG within the credit and risk assessment process, internal capital adequacy assessment process (ICAAP) and supervisory review and evaluation process (SREP).

Additionally, the rise of neobanks and rapid advancements in artificial intelligence (AI) and blockchain technology (DLT) are reshaping traditional banking models, expanding the reach of open finance, and increasing the need for robust operational resilience. In the UK, the post-Brexit regulatory landscape continues to evolve as authorities pursue a distinctive approach balancing international alignment with domestic priorities, including the implementation of Basel 3.1 reforms and the development of a proportionate regime for digital assets and stablecoins. In the USA, regional banks face challenges navigating the Basel III endgame proposals and state-level digital asset frameworks. In Switzerland, banks are adapting to FINMA’s implementation of Basel III while leveraging their traditional strengths in wealth management and private banking. And in Asia-Pacific markets, including Singapore, Hong Kong, Australia and Japan, we see that institutions are integrating open-banking regimes, stablecoin licensing frameworks, and AI-driven innovations while managing trade-related headwinds.

Emerging Trends and Regulations

Digital transformation remains a top priority for banks. AI has become increasingly dominant, playing a pivotal role in reshaping banking processes. The EBA has reported that 92% of EU banks are deploying AI, probably reaching close to 100% in 2026. In the UK this was already 94% in 2024 according to the Bank of England, and UK banks’ investments in AI doubled in 2025. In the USA, large banks are piloting generative AI assistants for customer service and risk analytics but multiple research studies show that just about 50% of US banks have live AI use cases. In Asia-Pacific, about 90% of banks are at least beta testing generative AI applications, such as chatbots, risk models or underwriting solutions.

The digital transformation of the banking sector is being further shaped by the emergence of neobanks, which are increasingly obtaining full banking licences across multiple jurisdictions. This development is drawing neobank supervision into established frameworks for prudential regulation, AML laws, data protection and operational resilience. However, the regulatory perimeter around digital capabilities has tightened: digital operational resilience is now a formal requirement in many markets including the UK, USA and EU, and expectations for third-party risk management and incident response are significantly higher than a couple of years ago. Data protection, cybersecurity and AI accountability will further converge in 2026 as part of the ongoing compliance requirements for banks across the world. Pressures are increasing across EU banking markets as institutions seek scale efficiencies and enhanced competitive positioning.

Cross-border M&A activity is thus expected to accelerate in 2026, driven by the need to spread technology investments across larger customer bases, achieve cost synergies, and build the capital strength required to compete with global players and agile fintech challengers. For banks, consolidation presents both strategic opportunities and integration risks, requiring careful due diligence on technology platforms, cultural alignment, and regulatory approvals across multiple jurisdictions.

As we move towards 2026, open banking is expanding beyond banking into open finance, broadening the scope of data sharing across financial products and services. Regulatory frameworks are evolving globally: in the EU, the proposed Financial Data Access Regulation (FiDA) introduces a unified legal framework for data access and sharing, with implementation expected in late 2026 or 2027. In the USA, open banking initiatives are advancing through the Consumer Financial Protection Bureau’s rulemaking, while in Asia-Pacific, jurisdictions including Singapore and Australia are implementing their own open banking and data portability regimes. Open finance is clearly no longer a Europe-only story. At the same time, the UK is striving to maintain its leading position in the open banking market, with the authorities consulting on expanding the existing framework to encompass even broader open finance initiatives.

Cryptocurrency, tokenised assets and DLT continue to evolve, presenting both opportunities and challenges for banks. Of particular interest in 2026 is the continued rise of stablecoins pegged to major currencies such as the US dollar or the euro. Regulatory approaches vary by jurisdiction: in the EU, the Markets in Crypto-Assets Regulation (MiCAR) has established uniform rules for market stability and investor protection, with jurisdictions like the Netherlands, Malta and Germany among the first to issue MiCAR licences after the 30 December 2024 implementation deadline. In the USA, momentum is building behind legislative proposals such as the GENIUS Act and state-level frameworks. In the UK, HM Treasury and the Bank of England are advancing a phased regulatory regime for fiat-referenced stablecoins as part of a broader framework for crypto assets, with consultation on wider crypto regulation ongoing. Hong Kong’s licensing framework for stablecoin issuers continues to advance too.

In Switzerland, banks are navigating the evolving regulatory landscape shaped by the Swiss Financial Services Act (FinSA) and Financial Institutions Act (FinIA), while maintaining their traditional strengths in wealth management and private banking, which continue to generate substantial fee-based revenues and support resilience amid margin pressures.

Monetary Policy Prospects

Overall, the consensus across the major advanced economies is a move toward lower policy rates in 2026, with a potential hold in Japan and China. Generally, the global monetary policy in 2026 is expected to be influenced by diverging economic growth, uncertainty from trade policy, and the potential for renewed inflation. After an extended cycle of monetary tightening to combat inflation, central banks have subsequently reduced interest rates. Headline (goods and services) inflation has fallen from post‑pandemic peaks, yet services inflation and wage pressures remain sticky in many advanced economies. Energy and food prices remain vulnerable to geopolitical and climate-related shocks. After selective rate cuts in 2024 and 2025, some jurisdictions may continue gradual easing as inflation converges to target, while others may hold policy at restrictive levels for longer. According to the IMF’s July 2025 World Economic Outlook, global headline inflation is projected to decline to 3.6% in 2026, although tariffs are expected to remain historically high, and persistent uncertainty surrounding trade policy will continue to weigh on investment and economic activity.

The trade frictions, particularly from the USA, create significant uncertainty for central banks trying to forecast inflation trends and the overall economic outlook. Multiple sources report that US regional banks face earnings pressure from higher rates and slower credit growth. Larger institutions seem to leverage diversified revenue streams to maintain profitability, pointing towards evidence that larger US banks have a more favourable 2026 outlook compared with regional banks. In Asia-Pacific, several economies face weaker banking sector outlooks due to lingering trade tensions, prompting tighter credit standards and a slowdown in loan growth in export-dependent markets.

The Bank of England continues to assess inflation risks as high even as the overall price outlook eases in the UK. Anticipated rate cuts in late 2025 and early 2026 are expected to compress net interest margins, especially for banks that rely heavily on traditional lending income. At the same time, the post‑Brexit regulatory landscape continues to diverge from the EU: new UK‑specific prudential rules, the expiration of EU‑equivalence arrangements and a refreshed operational‑resilience framework are reshaping supervision and compliance requirements. In 2026, the UK leverage‑ratio calculation continues to grant an exemption for qualifying central bank deposits, preserving a major competitive advantage for UK fintech banks, which tend to benefit most from this treatment.

Full Implementation of Basel III Framework

The Basel III framework developed by the Basel Committee on Banking Supervision (BCBS) remains the anchor of global bank prudential standards. While core elements on capital quality, the leverage ratio, and liquidity are already embedded worldwide, jurisdictions are now implementing the “final” Basel III reforms.

The final reforms focus on constraining model variability and improving risk sensitivity through the 72.5% output floor (limiting the benefit from internal models), revised credit risk approaches, a new standardised measurement approach for operational risk, revised market risk rules based on the Fundamental Review of the Trading Book (FRTB), and an updated Credit Valuation Adjustment (CVA) framework. Implementation is not uniform, and timing and scope differ by jurisdiction.

In the EU, the CRR3/CRD6 package implements the final Basel reforms from 2025, with extensive phase-ins. Notably, the EU postponed certain market risk framework elements to 1 January 2026, creating potential regulatory arbitrage risks. The output floor is being phased in over several years (ramping up to 72.5% by the end of the decade), and the EU retains certain regional adjustments (including aspects of the CVA exemption, SME and infrastructure calibrations, and proportionality measures). FRTB moves from reporting to binding capital requirements under CRR3. EU G‑SIIs remain subject to a leverage ratio buffer.

The UK is implementing Basel 3.1 via the PRA’s rulemaking, broadly aligned in substance with the BCBS outcomes but on a UK-specific timetable and with transitions designed to smooth RWA and capital impacts. On 17 January 2025, the PRA decided to postpone the UK implementation of the Basel 3.1 reforms to 1 January 2027. The PRA’s package covers the output floor, revised credit and operational risk frameworks, FRTB-based market risk, and an updated CVA regime, with staged application dates and multi‑year phase‑ins.

US regulators, namely the Fed, OCC and FDIC, plan to publish the final BASEL III rule package in early  2026, with a three‑year phased rollout that meets full Basel III endgame requirements. This includes the output floor, a risk‑sensitive standardised credit risk framework, a binding FRTB‑style market risk regime, and a new operational risk formula. The updated rule also clarifies data technology expectations and softens several of the more contentious provisions that drew market pushback during the earlier 2024 comment period.

Other leading jurisdictions (eg, Switzerland, Japan and Singapore) are advancing broadly consistent implementations on their own schedules. Switzerland’s implementation through FINMA ordinances reflects the jurisdiction’s commitment to maintaining alignment with international standards while preserving the competitiveness of its banking sector, with particular attention to the calibration of requirements for systemically important banks including UBS and the cantonal banks. Given these divergences, cross‑border groups should plan for jurisdiction‑specific calibrations, monitor transitional reliefs, and model RWA/output floor effects early to manage capital, product pricing, and disclosure impacts.

Geopolitical Tension

Geopolitical risk remains a defining feature of the 2026 landscape, with differentiated regional impacts. Ongoing conflicts, including the war between Russia and Ukraine, tensions in the Middle East, trade frictions and export controls continue to disrupt supply chains and alter patterns of trade finance and investment. These dynamics, together with evolving tariff regimes and trade defence measures, are impacting the global economy. Weaker trade flows are prompting tighter credit standards in affected sectors and contributing to slower loan growth in jurisdictions heavily reliant on global supply chains, with several APAC economies facing particularly acute pressures. Banks with exposure to affected regions must navigate increased credit risk, operational disruptions and complex compliance obligations. Additionally, operational and market risks are elevated. State‑linked and criminal cyber activity targeting financial and political institutions as part of geopolitical tension remains a concern, with ransomware and DDoS campaigns periodically disrupting services.

Moreover, the USA, EU and UK have expanded and iterated their Russia‑related measures, increased enforcement against circumvention through third countries, and intensified expectations on banks’ controls. In parallel, the use of secondary sanction‑type tools has grown, heightening risk for foreign financial institutions that facilitate restricted activity. Banks must navigate differing ownership/control tests and licensing frameworks across jurisdictions, as well as tightened due diligence expectations on end‑use, transshipment and re‑exports.

Financial Crime

Financial crime risk remains high in the EU and globally. The EU’s new anti-money laundering framework, comprising a directly applicable AML Regulation (AMLR), a sixth AML Directive (AMLD6) and a Regulation establishing the new Anti-Money Laundering Authority (AMLA), will phase in from 2026, with many requirements applying from 2027. AMLA will directly supervise selected high-risk institutions, and the package introduces tighter rules on beneficial ownership, cash payments and transactions involving high-risk third countries. Internationally, authorities have stepped up enforcement against sanctions evasion and trade-based money laundering, and the FATF “travel rule” for crypto transfers is increasingly being adopted in jurisdictions. Beneficial ownership reporting regimes and information-sharing tools are expanding, though access and privacy constraints differ across jurisdictions. In the UK, the Economic Crime and Corporate Transparency Act 2023 has strengthened corporate transparency requirements and expanded enforcement powers, while the FCA and PRA continue to intensify scrutiny of financial crime controls, sanctions compliance, and the effectiveness of banks’ transaction monitoring and suspicious activity reporting. Practical priorities for banks include strengthening product governance and disclosures, enhancing sanctions screening and transaction monitoring controls (including trade finance due diligence), upgrading model governance for credit- and fraud-risk analytics, and ensuring timely remediation and redress where outcomes fall short.

Technological Advancements and Changing Customer Expectations

Banks globally are accelerating AI adoption across underwriting, collections, AML/fraud detection, operations and customer service. In the USA, large banks are piloting generative AI assistants for customer service and risk analytics, though fragmented data architectures remain a hurdle to full-scale deployment. In Europe and Asia, similar initiatives are underway, with early productivity gains balanced by governance, privacy and resilience requirements. Generative AI is being embedded as a tool for staff and as a conversational layer for customers, while traditional machine-learning models continue to drive decision-making and automation at scale. This shift promises productivity and service gains, but raises governance, fairness and resilience challenges, particularly around data quality, explainability, and model drift.

The EU AI Act begins phased application from 2025 to 2026. However, obligations for high‑risk AI systems (eg, creditworthiness assessment) could be postponed (potentially by a year) to give firms more time to develop the necessary compliance frameworks and to allow regulators to finalise technical standards. UK authorities are pursuing a principles‑based approach anchored in existing model risk, data protection and operational resilience rules, while US supervisors emphasise model risk management, fair lending compliance and explainability. Data protection and cross-border transfer regimes (eg, GDPR, China’s PIPL and sectoral privacy rules) increasingly shape AI data pipelines. Operational resilience expectations are also rising, including oversight of critical third‑party providers and concentration risk in cloud AI stacks.

Conclusion

In 2026, the global banking sector faces a landscape that is as complex but that is also full of opportunity. The finalisation of Basel III reforms, the expansion of open finance, and the maturation of crypto-asset regulation are creating a more harmonised yet demanding prudential and conduct environment. At the same time, digital transformation – driven by AI, blockchain and evolving customer expectations – is reshaping business models and competitive dynamics. Geopolitical tensions, monetary policy uncertainty and heightened financial crime risks add further layers of complexity that require active management and robust governance. For banks, success in this environment will depend on strategic agility: the ability to invest in technology and talent while maintaining rigorous risk controls. Global operating banks have to navigate further divergent regulatory regimes. Those institutions that can integrate regulatory change as a catalyst for modernisation, embed ESG and operational resilience into core strategy, and harness data and AI responsibly may well be best positioned to thrive in the year ahead and beyond.