At the end of each month, the SAFE Regulatory Radar highlights a selection of important news and developments on financial regulation at the national and EU level.
Carbon border adjustment mechanism: new European guidance
The European Commission published new guidance on the Carbon Border Adjustment Mechanism (CBAM). The guidance support the implementation of the definitive CBAM regime applicable since 1 January 2026, following regulatory changes in October 2025. The goal of CBAM is to price carbon emissions of products imported from non-EU countries in equivalence to the EU’s mandatory carbon market, the EU European Trading System (EU ETS). In order to be effective, CBAM relies on credible calculation and verification of accumulated emissions by operators and authorized declarants and verifiers during the compliance process. The calculation is based on actual emissions data or on default values for product categories by the Commission. Calculations on actual data are the non-EU installation operator monitors and calculates the emissions, and an accredited third-party verifier verifies them; the authorized declarant then uses those data for its declaration. A first publication on 14 August included four general and six-sector specific guidance documents:
Guidance No 1 introduces general concepts, roles and responsibilities. No. 2 provides a roadmap through the CBAM process for non-EU operators. No.3 highlights the monitoring and reporting obligations for producers of CBAM goods and explains how emissions are calculated. No. 4 explains the free allocation adjustment, which reduces the number of CBAM certificates to be surrendered to reflect remaining free allocation under the EU ETS. No.5a-f give sector-specific overviews for the production process and value chains for cement, hydrogen, fertilizer, iron and steel, aluminum, and electricity sectors
A second publication on 24 August provided guidance to verifiers and to National Accreditation Bodies (NABs) which accredit and supervise said verifiers. The publication of guidelines on CBAM is an important step in setting up the EU-wide carbon border adjustment process. Accredited CBAM verifiers can start to register in September 2026 and start with the verification process. First verification can be issued in January 2027 and first CBAM certificates can be purchased in February 2027.
Capital Requirements Regulation: draft standards on operational risk management framework
The European Banking Authority EBA has published draft Regulatory Technical Standards on the operational risk management framework. The framework applies to all CRR institutions and sets out a proportionate framework built around three components.
- Governance: Defines the responsibilities of the management body, the senior management, and the internal control functions. The roles are assigned along three lines of defense.
- Operational risk management processes: Defines the policies, processes and procedures used to identify, assess, monitor, control, mitigate and report operational risk.
- Operational risk assessment system: Lays out the methods, data, taxonomy, indicators and analyses that support the assessment of the institution’s operational risk profile.
The key change is a focus on proportionality with a hard cut-off. Smaller institutions with a business indicator below EUR 750 million will face lighter requirements. This focus reflects the ongoing push for greater simplification and stronger proportionality in European Banking Supervision.
Proportionality of requirements by business indicator threshold
| Area | Business indicator < EUR 750 million | Business indicator ≥ EUR 750 million |
|---|---|---|
| Review of the effectiveness of the framework | At least every two years | At least annually |
| Operational risk appetite | The business indicator, or its relevant components, may be used as the only proxy | Translated into quantitative limits, with exposures monitored against them |
| Operational risk data | Reduced set, including relevant and material loss data below EUR 20,000 | Extended set, including, near misses, scenario analysis and stress testing results, and key risk and control indicators |
| Operational risk taxonomy | Recommended to be consistent with operational risk taxonomy (for losses of any amount) | Required to be consistent with operational risk taxonomy (for losses below EUR 20,000) |
| Reporting of the operational risk profile to the management body | At least annually | At least quarterly |
Source: EBA Consultation Paper on RTS on the operational risk management framework
EBA has launched a consultation process requesting responses until 31 December 2026. The EBA will then finalize the RTS and submit them to the European Commission for endorsement.
Updates
- European Supervisory Authorities (ESAs) published a final report on draft Regulatory Technical Standards to simplify the bilateral margin framework for counterparties that are subject to initial margin requirements and that are below the €8 billion threshold for exchanging initial margin foreseen by the European Market Infrastructure Regulation (EMIR).
- EBA published the ESG risk dashboard, showing continued stability in banks’ transition and physical climate risk indicators across the EU/EEA in second half of 2025. The results also indicate gradual improvements in the availability and quality of climate-related data, particularly for energy efficiency assessments of mortgage portfolios, supporting more robust climate risk monitoring in the banking sector.
- European Supervisory Authorities (ESAs) issued a statement calling for enhanced governance and consistent supervision to mitigate ICT risks from frontier AI models in the EU financial sector. The ESAs outline measures to help financial entities strengthen their operational resilience against cyber risks linked to frontier AI models. They emphasise the need for prevention, detection and management of these risks.
- The International Sustainability Standards Board (ISSB) has announced the opening of an ISSB office in Geneva, Switzerland during 2027 to enhance the ISSB´s multi-location model. The ISSB´s Frankfurt office will continue to act as a hub for the ISSB´s EU engagement.
Public consultations
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Vincent Lindner and Claudia Schaffranka are Heads of the SAFE Policy Center.
