within Employment and HR, Privacy and Environment topic(s) in European Union
On 21 October 2025, the European Commission (the EC) published its 2026 Annual Work Programme (AWP) including annexes detailing legislative updates as well as a separate 'strategic communication' on "Europe's Independence Moment". The EC's AWP continues to prioritise digital operational resilience, consumer protection and financial innovation alongside sustainable finance, risk assessment, securitisation, financial conglomerates, innovation facilitation and external credit assessment institutions. While ongoing geopolitical tensions and the EU's simplification plans shape the 2026 agenda, the AWP intensifies efforts on supervisory convergence and driving regulatory consistency across the financial sector, focusing on completing the Savings and Investment Union (SIU) and advancing the digital finance and payments agenda.
This Client Alert explores the legal and regulatory implications of the EC's 2026 AWP for financial markets. It summarises headline priorities and strategic objectives, followed by a detailed analysis of anticipated changes and their practical implications for market participants. This Client Alert guides readers from high-level themes to specific sectoral impacts, providing a structured understanding of these developments.
This Client Alert should also be read in conjunction with our thematic deep dives on the reforms and developments addressed herein, as well as EU RegCORE's standalone assessments of all relevant 2026 AWPs issued by the European Supervisory Authorities (EBA, ESMA and EIOPA), the Banking Union authorities (ECB-SSM and SRB) and the EU Anti-Money Laundering Authority (AMLA). Readers may also wish to consult PwC's Risk Network publications and PwC Legal's "Navigating 2026", a comprehensive playbook that provides an annual outlook from EU RegCORE on the forthcoming regulatory policymaking agenda, supervisory cycle and cross-cutting themes and trends for 2026 and beyond.
The EC's 2026 AWP, its annexes and the strategic communication on "Europe's Independence Moment" collectively signal a concerted push to complete the EU's SIU plans by 2028, modernise the retail and capital markets rulebook and hard wire "digital sovereignty" through horizontal acts (Cloud and AI, Quantum, Advanced Materials) and simplification. For financial services, the most immediate touchpoints are:
Regulated firms should expect incremental but material changes across disclosure, product governance, data access and portability, prudential treatment of securitisation, payments conduct and fraud controls, ICT governance linkages to DORA and potential adjustments to capital markets infrastructures as open finance and payments reforms advance. These changes translate into tangible compliance and strategic planning impacts over 2025-2026 for firms operating in the EU, particularly in the following areas:
Capital markets and prudential reforms
Retail investor protections and disclosure reforms
Horizontal "simplification" and better regulation
SIU, competitiveness and simplification
The EC signals an intent to "complete the Savings and Investment Union", including initiatives such as:
The programme embeds a "simplification drive" (cutting administrative burdens, especially for SMEs and "small mid‑caps"), systematic use of proportionality and streamlined reporting. For financial services, this will interact with disclosure, supervisory reporting and documentation requirements under sectoral rulebooks.
Banking sector competitiveness
The AWP promises "a comprehensive analysis on competitiveness in our banking sector". Firms can expect supervisory and regulatory refinements aimed at efficiency, scale and market integration (complementing ongoing CRR/CRD reforms and CMU measures) and potential re‑examination of obstacles to cross‑border consolidation and secondary market functioning.
Notable items the EC chose to de prioritise
Given the EC's stated intention to withdraw the enhanced cooperation FTT proposal, contingency planning for an EU level financial transaction tax can be de emphasised unless the initiative is revived in a different form.
The EC's dual focus on completing the SIU and embedding digital sovereignty, despite simplification promises, will still elevate compliance standards across several domains. These changes also present opportunities in data driven services and capital markets intermediation for early movers. Proportionality and simplification should be interpreted as a move towards fewer, clearer reports and processes, not a relaxation of controls. Early execution in open finance and payments will likely be a competitive differentiator and mature, DORA aligned governance will be crucial to absorb forthcoming horizontal digital legislation without costly rework.
Across the sector, simplification and proportionality may offer opportunities to streamline reporting and compliance processes and firms should actively map current obligations to identify candidates for standardisation or removal as omnibus measures progress. At the same time, the better regulation agenda will be paired with firmer enforcement, increasing the premium on demonstrable effectiveness of control frameworks.
The digital sovereignty strand, anchored in the Cloud and AI Development Act, necessitates careful assessment of cloud strategies, data residency, AI use cases and third party risk management, coordinated with DORA. For firms serving SMEs and small mid caps or supporting their access to capital markets, the facilitation measures envisaged under the SIU umbrella may create new pathways and mitigations that warrant early engagement with issuers, advisers and market infrastructure providers.
The legislative pipeline from 2025 will continue through trilogues into 2026 and several high impact files -- notably the payments package, retail investor reforms and open finance -- are already well advanced. The 2026 AWP adds new legislative initiatives, including the Cloud and AI Development Act and updates to capital markets and sets hard deadlines for evaluations and simplification deliverables. Application dates are likely to be phased, with transitional regimes. Firms should therefore plan for layered compliance programmes rather than a single implementation event. This includes notably the following
Firms will want to also consider the below as part of their planning:
The 2026 AWP, together with annexes and pending proposals, points to material change in the EU financial services landscape over the next 12-18 months. The agenda concentrates on completing the SIU, modernising retail protections and disclosures, advancing digital payments and open finance and easing compliance burdens. Regulated firms should update horizon scanning and implementation plans now -- particularly for PSD3/PSR, open finance, retail investor measures, securitisation and shareholder rights -- while positioning to use the simplification track to streamline reporting and controls.
In execution terms, many firms may want to review how they map pending files to business lines and concrete obligations, assign accountable owners and track milestones across payments, data access, retail investor rules, securitisation and shareholder rights. Conducting targeted gap assessments for open finance data-access duties and PSD3/PSR fraud and transparency standards will help sharpen investment priorities. Retail manufacturers and distributors should prepare for revised PRIIPs KID production and broader disclosure changes and recalibrate product governance and distributor oversight. Securitisation participants should run capital scenarios under the proposed CRR changes and reassess STS eligibility and process controls. Some firms may want to stand up an internal working group to track the 2026 initiatives on shareholder rights and EuVECA, feeding outputs into corporate governance and capital raising strategies. In parallel, a number of firms may want to consider how the make use of the simplification drive by inventorying reporting requirements and flagging items for standardisation or relief.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.