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On October 6, 2025, the European Commission published a letter addressed to the European Supervisory Authorities (ESAs), detailing its intention to deprioritise Level 2 acts in financial services legislation. During the period from 2019 to 2024, the Level 1 legislation adopted by the co-legislators has empowered the commission to adopt 430 Level 2 acts, with such a large number being a concern to stakeholders. In its aim to deliver more effective and efficient implementation of EU policies, the commission has elected to deprioritise 115 of the 430 Level 2 acts it has been empowered to adopt, deeming them “non-essential” for the effective functioning of Level 1 acts and for the achievement of EU policy objectives.
Certain “non-essential” financial regulations have been deprioritised until at least October 2027 as a measure to simplify and increase efficiency. In its letter, the commission stated:
- It will not adopt “non-essential” Level 2 acts before October 1, 2027.
- It will propose to amend or repeal empowerments for “non-essential” Level 2 acts where there is an obligation to act within a specific deadline.
This decision, which the commission communicated to the ESAs, will mean that the 115 Level 2 acts, including specific detailed technical rules and standards, will not be adopted for the next couple of years. However, following the October 1, 2027, date set by the commission, these Level 2 acts may be put back on the agenda.
The bigger picture
In EU law-making, Level 2 acts, also known as delegated acts or implementing acts, are detailed rules that supplement or implement Level 1 legislation, such as directives and regulations.
The European Commission has positioned this deprioritisation as part of its broader simplification agenda, which aims to simplify financial services regulation as a whole. The commission noted that the Level 2 acts could lead to compliance costs and regulatory complexity for stakeholders, while demanding significant resources from EU co-legislators to scrutinise them. The commission is, therefore, taking this action to deliver EU policies more effectively and efficiently, as outlined in its Communication on Simplification and Implementation.
As part of the commission’s aim to strengthen European competitiveness, its simpler and faster communication set out a new approach to boost prosperity and resilience, while unleashing new opportunities, innovation and growth. According to the commission, it has proposed unprecedented simplification measures aimed at radically reducing the regulatory burden and related costs for individuals, businesses, stakeholders and public administrations in the EU. These measures also focus on improving the implementation of EU policies and laws.
In comparison with the simplification agendas of other jurisdictions, the deprioritisation of 115 Level 2 acts, just over a quarter of all Level 2 acts for the period, does not appear to be without precedent or radical, and these could just again be reprioritised in October 2027. A radical change would be if the commission's deprioritisation resulted in the cancellation of the 115 identified non-essential acts, but that is not necessarily the plan at the moment.
Deregulation and simplification of the regulatory landscape are not unique to the European Commission; the “deregulation movement” in the United States aims to ease the burden of strict financial rules, and the UK’s “Leeds Reforms” aim to simplify regulation, broaden access to financial advice and boost the growth of the UK financial services industry. The US’s approach to deregulation by eliminating ten regulations for each new regulation can be described as radical.
To achieve its simplification goal, the commission aims to streamline rules and reduce the administrative burdens for businesses by 25 percent, and with regard to implementation, notes that shortcomings in implementing EU policies and laws can seriously affect the effectiveness of those policies. It is important to note that simplification is not synonymous with deregulation. Although the commission's objective to streamline processes and reduce the regulatory burden for financial entities is commendable, the approach adopted may not be sufficient. The decision to deprioritise a quarter of the 430 identified Level 2 acts does not result in the streamlining of rules or the reduction of the administrative burden for financial entities. Instead, it simply postpones that burden to a future date, when the entities will be responsible for dealing with it.
Examples of deprioritised Level 2 acts (full list can be found here)
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Level 1 Legislation |
Empowerment (Deprioritised Level 2 Act) |
Legal Basis of the Level 2 Act |
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AMLD - Directive (EU) 2024/1640 - 6th Anti-Money Laundering Directive |
Regulatory technical standards on general conditions for the functioning of anti-money laundering/counter-terrorism financing (AML/CTF) supervisory colleges in the financial sector. |
Article 49(14), AMLD |
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Implementing technical standards on the template to be used for the conclusion of cooperation agreements with supervisors in third countries. |
Article 51(4), AMLD |
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Delegated act on common additional categories of prominent public functions. |
Article 43(3), AMLR |
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Delegated act on categories of corporate entities with higher risks and lower BO thresholds. |
Article 52(2), AMLR |
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Regulatory technical standards on specifying the criteria for the use of data inputs in the risk-measurement model. |
Article 325bc(6), CRR |
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Regulatory technical standards on CIU Trading Book. |
Article 325j(7), CRR |
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Regulatory technical standards on assigning exposures to IRB exposure classes. |
Article 147(12), CRR |
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SFDR - Regulation 2019/2088 - Sustainable Finance Disclosure Regulation |
Revised regulatory technical standards on transparency of adverse impacts indicators (social, employee, human rights, anti‑corruption/bribery) at the entity level. |
Article 4(7), SFDR |
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Revised regulatory technical standards on transparency of sustainable investment for products with a sustainable investment objective. |
Article 9(5), SFDR |
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Revised regulatory technical standards on taxonomy-aligned investments for products promoting environmental characteristics. |
Article 8(4), SFDR |
Why should you care?
The deprioritisation of these 115 “non-essential” Level 2 acts can be seen as reducing the regulatory burden on financial entities, as it reduces the amount of non-essential acts that they need to adhere to or adopt in their business practices and reporting. However, it could be determined that the commission is simply reducing the “noise” around certain Level 1 legislation by shifting the burden to the future. If, by October 1, 2027, the European Commission has not amended or repealed the authorisations for “non-essential” Level 2 acts involving a specific deadline, financial entities will have to adhere to the 115 paused acts, as well as any other Level 2 acts empowered during the two-year period.
This then also leads to the question: will the deprioritisation make a significant difference for financial entities, or will it just create regulatory incompleteness? With only a quarter of the Level 2 acts being postponed, a significant number of them — 315, in fact — still need to be adopted and complied with. Combined with other existing EU regulations and potential new ones, this does not significantly reduce the regulatory burden on financial entities.
In fact, it could add to the burden, as Level 2 acts usually fill critical technical gaps, so their absence could lead to ambiguity on how to apply the Level 1 legislation. Firms that have been expecting the implementation of some of the now deprioritised Level 2 measures may face practical issues as a result, due to the Level 1 measures being insufficiently detailed to provide certainty on how to comply. Alternatively, the lack of Level 2 changes may lead to inconsistencies between different aspects of financial services obligations.
Moving forward, financial institutions should:
- Review all the Level 1 legislation identified in the annex to the commission’s letter that their business is subject to, to identify which ones have been affected by the deprioritisation.
- Review the complete list of the 115 deprioritised Level 2 acts identified in the annex to the commission’s letter and determine which were expected or planned that would affect their business, and rearrange accordingly.
- Ensure they have a complete understanding of the Level 1 legislation from which these Level 2 acts would derive, so that they can be as compliant as possible without further information being provided.
- Monitor the amendments/revisions of Level 1 legislation, which are likely to include amendments that either remove certain empowerments or require new standards.
- Set up a regulatory watch for the commission’s movements leading up to and after October 2027, when the paused Level 2 acts may be revived, as failure to prepare may lead to issues when the changes do arrive.
- Communicate internally to ensure that the business is aware of the shift in the regulatory horizon, reset expectations and prioritise other regulatory obligations with which they must comply.
Next steps
In its letter, the European Commission stated that it would not adopt non-essential Level 2 acts before October 1, 2027, and that it would propose to amend or repeal empowerments for “non-essential” Level 2 acts where there is an obligation to act within a specific deadline. The pause may give financial institutions some breathing room regarding the obligation to comply with further regulations; however, it does not mean that no further regulations will be introduced. The regulatory landscape will continue to evolve, and institutions should treat this deprioritisation as a planning and operational optimisation opportunity rather than a relief from obligations.
