EU Regulatory Perspectives: Financial Services Policy Agenda 2024-2029

This report by Bloomberg’s EU Regulatory team examines key trends and priorities in several key areas of EU regulatory policy, and presents some of the data Bloomberg uses to inform future policy in these areas.

Markets and trade

Game Status: Over the past decade, several initiatives under the umbrella of the Capital Markets Union (CMU) have transformed the regulatory landscape. Despite the significant changes brought about by MiFID and EMIR, full integration of EU capital markets remains elusive.

The focus will now be on addressing these shortcomings through a modernized CMU strategy. Ensuring that markets function effectively and efficiently to scale up operations, increasing the availability of finance for European businesses and ensuring the flow of capital to the real EU economy are now more pressing priorities that need to be addressed.

Key political priorities

MiFID/R reorganization: The implementation of the revised Markets in Financial Instruments Regulation and Directive (MiFID/R) is crucial. With a significant overhaul of transparency regimes, especially in OTC markets, and a new framework facilitating the development of pan-European consolidated tapes providing a single source of market data, MiFIR is expected to significantly improve market transparency and efficiency over the next few years.
Improving post-trade efficiency: The European Union is considering shortening the settlement period for securities. Currently, a transaction in transferable securities concluded on trading platforms must be settled no later than the second business day. Based on ESMA’s advice, the European Commission is working on a legislative proposal to shorten this to one business day, following the US move to T+1 earlier this year and in line with other major jurisdictions. The EU will also implement rules to simplify cross-border services and increase the efficiency of settlement under a new regime for central securities depositories.

Waiting for something: Transparency and data quality are essential for a well-functioning market. Effective implementation of MiFID/R Level 2 measures will be key, particularly in relation to identifiers and market data. Developing a CTP that truly enhances market functionality and integration is also key. Achieving true capital market integration in Europe requires a regulatory framework that supports seamless access to data and market operations.

Digital Finance

Game Status: Technological innovation is transforming business operations, particularly in financial services, and data is becoming a central part of EU finances. According to Bloomberg Intelligence, the generative AI market could reach €1.4 trillion by 2032.

The rise of AI and its impact create both opportunities and challenges for the regulatory landscape. AI-powered analytics and automation are improving decision-making, risk management, and customer engagement. However, these advances also bring with them regulatory complexities, such as ensuring data privacy, cybersecurity, and ethical use of AI. The evolving digital finance ecosystem requires regulators to adapt quickly to maintain market integrity while supporting innovation.

Key political priorities

Artificial Intelligence Regulation: The first comprehensive EU act on AI aims to categorise AI applications by risk and establish detailed rules for large baseline models and generative AI.
Operational Resistance (DORA): Ensuring digital and operational resilience in the financial sector remains a top priority, driven by new requirements around risk management, incident reporting and outsourcing of external services.

Waiting for something: Regulations should support innovation while providing transparency and protection for consumers. The AI Act is expected to bring much-needed transparency and information on how and when AI is involved in decision-making. An international framework that harmonizes regulations, protects users and future-proofs the financial sector will also be beneficial. Balancing regulatory oversight with the need to encourage technological progress is crucial for the growth and stability of the financial sector.

Sustainable finance

Game Status: The sustainable finance agenda has gained significant momentum, driven by both the public and private sectors. The EU is leading the regulatory agenda on ESG (environmental, social and governance) initiatives and intends to deepen it further by finalising and reviewing some of its flagship legislation.

Key priorities will focus on reducing regulatory complexity and ensuring international consistency, while other non-EU jurisdictions will step up efforts to develop sustainable finance policy frameworks.

Key political priorities

EU taxonomy: In the coming years, the scope of companies required to report under the EU taxonomy will be expanded under the Corporate Sustainability Reporting Directive (CSRD). Strengthening interoperability between EU and other regional taxonomies through international initiatives such as the International Platform on Sustainable Finance (IPSF) will remain a priority.
Sustainable Finance Disclosure Regulation (SFDR): The planned review of the SFDR will aim to increase the coherence of the EU financial framework for sustainable finance and clarify key concepts and definitions.
Corporate Sustainability Reporting Directive (CSRD): Implementing the CSRD through the completion of the European Sustainability Reporting Standards (ESRS) will improve data quality and availability.

Waiting for something: Regulation can be a force for good, providing much-needed clarity to the sector. To be effective, sustainable finance regulation needs to be consistent and accessible. Transparency and interoperability will be key to ensuring that policies can deliver on their intended objectives and that market participants can effectively implement their sustainability strategies. For example, aligning reporting requirements under the SFDR with the European Sustainability Reporting Standards (ESRS) and promoting global regulatory coordination on taxonomies and disclosures are key steps. Access to high-quality ESG data through the CSRD will enable investors to make informed decisions and support the transition to a low-carbon economy.

Risk, capital and financial stability

Game Status: Since the global financial crisis in 2008, EU policymakers have been tasked with developing safeguards against a wide range of risks to financial stability, while ensuring that the European banking sector remains internationally competitive. This delicate balancing act is symbolised by the EU’s recent decision to delay the Basel III requirements on market risks until January 2026, while continuing the rest of the Basel III regime from January 2025.

As activity in the market and non-bank finance sector continues to grow, policymakers are becoming increasingly sensitive to the need for greater transparency regarding both the volume and quality of non-bank lending, as well as for more detailed data on links with the traditional financial sector.

Key political priorities

Implementing Basel III: Finalise and implement the remaining Basel III capital standards to enhance financial stability and promote European competitiveness.
Non-bank financial institutions (NBFI): Develop a regulatory framework for non-bank financial institutions to ensure comprehensive supervision and risk management.
Investment fund system: The reform of the AIFMD and UCITS framework for EU investment funds aims to reduce risks to financial stability and promote the harmonisation of liquidity risk management.

Waiting for something: In times of elevated interest rates and global economic instability, the importance of protecting the stability of the financial system in order to achieve effective risk management is becoming much less academic. The EU’s decision to delay FRTB to better align with the US is a reminder of how fragmentation in international timelines can quickly lead to competitiveness concerns. As a wide and diverse range of nonbank financial intermediaries increasingly embed themselves in the financial ecosystem, policymakers and regulators should continue to push for greater transparency to mitigate risks. Nevertheless, policymakers should also recognize the important role that nonbank finance plays in the development of capital markets.

Application

Europe needs to unlock new investment to achieve its competitiveness goals. Fully functioning capital markets are essential to this goal, but a new approach is needed. As the future shape of the CMU is developed by the new EU leadership, it is essential that all financial sector participants contribute to achieving this goal.

As a pillar of European financial markets, Bloomberg plays a key role in providing much-needed, transparent, high-quality data to financial entities across Europe, helping the EU to achieve these ambitious goals.