FinRegQA-EU: Corruption-Based Preference Data for Grounded EU Financial Regulatory Question Answering

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Large Language Models (LLMs) struggle with region-specific factual knowledge, particularly in financial regulation. While benchmarks such as CFinBench, provide broad coverage of financial knowledge in other regions, no comparable resource exists for European financial regulation. We close this gap by proposing an end-to-end pipeline for evaluating and improving LLMs on European financial regulatory question answering. Our dataset is grounded in the official Q&A corpora of the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA). We evaluate candidate answers with a pointwise LLM-as-a-Judge protocol using three judges from distinct model families, retain only unanimously judged pairs, and sharpen the rejected side through a taxonomy of regulatory failure modes : law swaps, article swaps, hallucinated citations, and hallucinated text. By fine-tuning on the resulting preference pairs exposes a divergence at the core of our findings: supervised fine-tuning attains the highest judge score of any method yet got the lowest rule-based Citation F1. SFT is producing longer answers with three times as many citations, most of them unsupported. DPO and GRPO offer the better trade-off with more concise answers and the highest citation F1 among fine-tuned models. Standard LLM-as-a-Judge evaluation rewards citation density as evidence of grounding and cannot detect when those citations are fabricated. Thus, we detect a blind spot that matters wherever answers must be verifiable. We release the benchmark and evaluation stack at https://github.com/auliakharis/FinRegQA-EU.