"2026: Three Regulatory Strategies for Banking in an Increasingly Fragmented World"
As is customary each year, regulatory bodies at both the global and European levels have published their annual work programs. These documents set out the various regulatory initiatives they plan to introduce in 2026, as well as those rolled over from previous years. These programs reveal that banking regulatory activity will remain intense, albeit marked by notable divergences in the approaches and objectives pursued across different geographic regions.
On the prudential front, the process of implementing Basel III is proving to be a rather asymmetric affair. Europe is leading the way, while the United States and the United Kingdom are looking to soften or delay certain requirements. In the digital sphere, the pace of regulatory activity remains frenetic, although priorities differ by jurisdiction. The European Union (EU) is moving forward with the rollout of rules such as those governing artificial intelligence (AI) and cryptoassets. The United Kingdom, by contrast, is positioning itself as a digital assets hub, while the United States is seeking to attract investment through deregulation. The gap is even more glaring when it comes to sustainability. The EU is engaged in regulatory simplification with the aim of becoming more competitive without shunning its sustainability objectives, whereas the ESG agenda in the United States has stalled. This divergence increases operational complexity and may end up weakening the effectiveness of international regulatory standards.
Europe is leading the way, while the United States and the United Kingdom are looking to soften or delay certain requirements
The work programs of global standard-setting bodies (the Financial Stability Board and the Basel Committee on Banking Supervision) remain broadly unchanged compared to prior years. They will continue to target the regulation of non-bank financial institutions (NBFIs), promoting cross-border payments, regulating cryptoassets and stablecoins, developing resolution principles, and completing full implementation of the Basel III framework.
Across institutions and jurisdictions, there is a clear shift toward implementing and simplifying existing rules. Accordingly, 2026 is expected to follow the trend seen in previous years, with the authorities focusing primarily on applying and enforcing current regulation rather than developing significant new regulatory initiatives.
A geographic breakdown reveals distinct strategic approaches. Europe stands out for pursuing a competitiveness-driven strategy which, from a regulatory standpoint, centers on simplifying its frameworks in the digital, sustainability, and financial domains. To succeed in this endeavor, the EU is proposing a raft of packages (known as “omnibus” packages) to streamline existing regulations and ease administrative burdens and compliance requirements in response to overlapping regulatory initiatives. Meanwhile, the United Kingdom has embraced a renewed mandate to promote international competitiveness, attract investment, and support economic growth, adopting an approach increasingly aligned with the United States and more distant from the EU. It is busy leveraging its post-Brexit autonomy to develop a more agile framework, particularly in digital regulation, capital markets, and ESG matters, where it has chosen not to adopt a green taxonomy. Last but not least, the United States is pursuing a banking deregulation strategy. This entails relaxing certain rules with the overriding objective of fostering economic growth and enhancing overall banking sector profitability. Deregulation has also extended to ESG, which has lost priority under the current mandate. In tandem, an initial cryptoasset framework is being developed with a view to supporting the sector’s growth.
In a world where regions are striving to enhance competitiveness, the US regulatory approach seeks to create a more flexible, growth-oriented environment for banking activity, with a focus on technological resilience and recalibrating capital requirements for large banks.
The EU is proposing a raft of packages to streamline existing regulations and ease administrative burdens and compliance requirements
There is concern that such flexibility could provide US banks with a comparative advantage and potentially trigger a “race to the bottom” in prudential standards. This could encourage excessive risk-taking and erode the post-2008 safeguards put in place to protect financial stability. While the European Union is focused on simplification, and the United Kingdom is leveraging its autonomy to design a more agile and less prescriptive ecosystem to attract technological investment, these diverging strategies may generate global regulatory tensions due to differences in the application of international standards.