August Global Regulatory Brief: Risk, capital and financial stability

The Global Regulatory Brief provides monthly insights on the latest risk and regulatory developments. This brief was written by Bloomberg’s Regulatory Affairs Specialists.

Recent periods of financial stress and the proliferation of risks across the financial system are fueling the development of regulatory initiatives to strengthen requirements and promote international best practice. The following policy developments represent a sample of wider regulatory and policy coverage available to Bloomberg Terminal customers. Run REGS <GO> to find out more or contact your Bloomberg representative to learn more:

• USA: Trump EO broadens 401k access to funds that include alternative assets
• India: RBI relaxes framework for bank and NBFC investments in AIFs
• South Africa: Prudential Authority issues roadmap for implementing revised Credit Risk framework
• New Zealand: RBNZ consult on capital requirements 

Trump EO broadens 401k access to funds that include alternative assets

On August 7, President Trump issued an executive order aimed at expanding 401(k) investors’ access to investment options that include alternative assets, such as private equity, real estate, and digital assets, with the intent of enhancing diversification and potentially improving retirement outcomes.

Key Directives: The executive order outlines the following actions for federal agencies.

• Department of Labor: The order directs the Secretary of Labor to revisit fiduciary guidance under Employee Retirement Income Security Act (ERISA) concerning the inclusion of alternative assets in defined‑contribution plans and to clarify fiduciary responsibilities related to these investments.
• Regulatory Coordination: The Secretary of Labor is instructed to coordinate with the Secretary of the Treasury, the SEC, and other relevant federal regulators to consider complementary regulatory changes.
• Securities and Exchange Commission: The SEC is specifically instructed to evaluate potential revisions to its rules and guidance to facilitate investor access to such investment fund structures in participant-directed defined‑contribution retirement savings plans.

Investor impact: The EO highlights that more than 90 million Americans participate in employer-sponsored defined-contribution plans, yet most are currently restricted from investing in investment funds that include alternative assets, which offer competitive returns and diversification benefits.

Broader context: The order builds on prior Trump administration actions, particularly regarding crypto and digital assets. It follows earlier reports indicating the administration’s consideration of expanded retail access to private markets, reflecting increased interest from private-market asset managers in broadening investor participation.

RBI relaxes framework for bank and NBFC investments in AIFs

The Reserve Bank of India has issued the final Investment in AIF Directions, 2025, replacing the earlier circulars dated December 2023 and March 2024. The revised framework introduces a more flexible, risk-based regime for investments by banks, financial institutions, and NBFCs in Alternative Investment Funds (AIFs), following extensive industry feedback and alignment with SEBI’s due diligence standards for AIF investments.

In more detail: The most notable relaxation is the withdrawal of the 30-day exit rule. Regulated Entities (REs) are no longer required to exit an AIF if it holds debt in a debtor company of the RE. Instead, provisioning is now required only if the RE’s exposure to the AIF scheme exceeds 5% and that scheme holds non-equity instruments of the RE’s own debtor company. Even then, the provisioning is capped at the lower of the RE’s indirect exposure via the AIF or its direct exposure to the debtor—significantly softening the earlier position.

• The final framework also introduces explicit investment caps—10% per RE and 20% collectively for all REs in any AIF scheme—providing clear regulatory thresholds where none existed previously. Subordinated units will continue to attract full capital deduction, preserving prudential safeguards. 
• In another relaxation, the Directions allow REs to choose between applying the old or new framework for legacy AIF commitments made before the effective date, and grandfather any investments previously approved by RBI under the 2016 Master Directions.

Next steps: The framework will come into effect from January 1, 2026, or from any earlier date as decided by a regulated entities of the Reserve Bank as per their internal policy.

South African Prudential Authority issues roadmap for implementing revised Credit Risk framework

The South African Prudential Authority (PA), within the SARB, has issued a proposed directive outlining a roadmap for implementing the revised credit risk framework in line with global Basel III standards. 

This consultation sets out a proposed implementation roadmap for two key components of the Basel III credit risk framework:

• The Standardised Approach to Counterparty Credit Risk (SA-CCR)
• Revisions to the Internal Ratings-Based (IRB) Approach

Key proposals: All banks must adopt the Standardised Approach by 1 January 2026. Use of the Foundation Internal Ratings-Based (F-IRB) and Advanced IRB (A-IRB) approaches will be permitted from 1 January 2027 and 1 January 2028, respectively—subject to regulatory approval. A minimum 12-month parallel run is required before full IRB adoption. The roadmap aims to improve consistency, model reliability, and capital comparability across banks. 

Next steps: Industry stakeholders are invited to submit comments by 30 September 2025.

The RBNZ invites feedback on review of capital requirements for deposit takers

The Reserve Bank of New Zealand (RBNZ) opened a consultation on New Zealand’s capital settings for deposit taking institutions. The Consultation Paper seeks feedback on options ‘calibrated to a higher risk appetite’ than previously and includes the following topics: 

• Analysis on how the context has changed since the prior decisions of 2019, including how New Zealand’s capital settings compare internationally
• Two policy options for different capital requirements for feedback
• A proposal to replace Additional Tier 1 capital with simpler forms of capital, and
• Proposals for more granular standardised risk weights.

In more detail: In 2019, the RBNZ had completed a multi-year review of New Zealand’s capital framework that resulted in a ‘significant’ increase in the quantity and quality of required capital. 

• The RBNZ explained that there have been changes in the legislative and broader environments since it last reviewed capital requirements. 
• It is in the process of moving to a new suite of prudential standards under the ‘Deposit Takers Act 2023’ (DTA). A ‘key reason’ for the change in risk appetite is that under the DTA the RBNZ will have more comprehensive tools for supervision and crisis management. 
• As well as this updated legislative framework, a new Financial Policy Remit was issued in 2024, which ‘places a greater focus on efficiency and competition’. 
• In addition: stakeholders had also expressed views that the bank’s bank capital requirements ‘may be unreasonably conservative’. In March, the RBNZ had announced the review of its capital settings. To inform the review, it commissioned an independent review which concluded that “New Zealand’s bank capital ratios are higher than the majority of global peers (particularly for CET1 capital)”. 

Next steps: Submissions for the consultation close on 3 October 2025 and final decisions are expected by the end of 2025. 

• Three independent experts have been engaged to strengthen the final decision making process, producing independent reports of their assessments. 
• The RBNZ will look to implement any changes under existing legislation and will work to incorporate the changes into new prudential standards being developed under the Deposit Takers Act 2023, which are due to come into force in late 2028. 
• Any resulting changes in capital ratios are ‘not expected to translate into significant changes for the economy’.