4 regulatory priorities to drive financial institutions' focus in 2025

EY expects policymakers to prioritise country-specific approaches.

The current global political landscape will push policies in new directions that will directly impact the role of the finance industry, according to an EY report.

Against this background, EY expects policymakers to prioritise country-specific approaches to issues including financial stability, digital assets, artificial intelligence (AI) and data governance.

“We may also see countries adopt different standards on innovation or technology, for example concerning AI regulation or if the US takes a more open stance on crypto tokens,” EY said.

Moreover, regulators will focus on two areas this year, namely third-party and non-financial risk. The Basel Committee calls for a more rigorous approach to “critical third parties” and financial regulators are preparing to extend their oversight to technology suppliers.

There will also be an increasing focus on non-bank financial institutions. Regulators are concerned that risk in these firms' concentrations could spill over into the regulated sector and destabilise systemically important institutions.

Additionally, regulators’ focus on ensuring financial resilience and good consumer outcomes will increase. “They are likely to require firms to ensure their products and services meet the needs of low-income households,” EY added.

Further, supervisors will likely double their focus on timely remediation of known weaknesses and put greater pressure on boards to ensure effective oversight of firms’ risk management.

“Regulators are becoming more specific about the issues they want to be addressed and are demanding that firms show they can monitor and respond quickly,” EY said.