28/10/2025
Insights Blog

The European Commission’s 2026 Work Programme, which was published on 21 October 2025 (the “Work Programme”), sets out an ambitious and pragmatic legislative agenda for next year. With a clear focus on competitiveness, simplification, and strategic consolidation, the Work Programme signals a shift in priorities for financial services and investment funds.

While the Commission continues to champion the digital and sustainability transitions, the Work Programme notably deprioritises certain legislative reviews, including the long-anticipated review of Commission Directive 2007/16/EC (the “Eligible Assets Directive”, or “EAD”).

Despite earlier momentum, the review of the EAD, which governs the types of assets UCITS funds may invest in, has been pushed down the legislative agenda. This follows ESMA’s delivery of technical advice on 26 June 2025, which proposed a more rigorous look-through approach and tighter definitions for certain eligible assets. Given the evolution of financial markets, investment strategies, and digitalisation, the Commission initiated a review in June 2023 to modernise the EAD and ensure UCITS remain competitive while protecting investors. However, the Commission has opted not to include a legislative proposal on EAD in its 2026 priorities, focusing instead on higher-impact reforms and avoiding regulatory fragmentation.

For more on ESMA’s technical advice, see our previous update: ESMA issues advice on Eligible Assets Update – Arthur Cox LLP

This deprioritisation suggests that the Commission is taking a wait-and-see approach, possibly pending further market feedback. While the EAD has not been listed as a 2026 priority for the Commission, we understand that a consultation may issue in the second half of the year.

 

Key Financial Services Initiatives

The Work Programme includes several initiatives relevant to financial services:

  • Taxation Omnibus Proposal: A wide-ranging legislative package aimed at simplifying EU tax rules, including measures relevant to cross-border fund structures and withholding tax relief mechanisms.
  • European Innovation Act & Quantum Act: These legislative proposals support capital markets and venture financing, with potential implications for fund strategies focused on emerging technologies.
  • Circular Economy Act: Expected to influence ESG fund disclosures and investment criteria, particularly around sustainable product standards and supply chain transparency.

 

Simplification and Strategic Consolidation

A defining theme of the Work Programme is simplification. This complements the Commission’s broader simplification agenda, notably through the six omnibus legislative packages designed to streamline EU rules and reduce administrative burdens. The Commission has committed to repealing or consolidating outdated legislation, with a number of proposals already identified. More than half of the Work Programme’s legislative initiatives will focus on making EU law “lighter, clearer and easier to implement“.

The Commission also plans to stress-test the EU legislative stock, identifying areas where rules can be streamlined without compromising investor protection or market integrity. This could pave the way for a more integrated approach to fund regulation in the future.

 

What This Means for Fund Managers

For fund managers, the Work Programme offers both clarity and caution:

  • The absence of immediate reform to the EAD means existing UCITS investment strategies remain valid, but firms should continue to monitor developments.
  • The focus on competitiveness and digitalisation may create opportunities for innovative fund products, especially those aligned with the EU’s strategic priorities in tech and sustainability.
  • The tax and ESG-related initiatives will require close scrutiny.

 

Looking Ahead

While the Commission’s decision to deprioritise the EAD review in the near-term may disappoint some stakeholders, it reflects a broader strategic recalibration. By focusing on high-impact reforms and reducing legislative clutter, the EU aims to foster a more agile and resilient financial ecosystem.

We will continue to track all developments relating to EAD in 2026.

 

For information and advice on UCITS eligibility requirements or further information on the Commission’s 2026 Work Programme, please contact any member of our Asset Management and Investment Funds Group.