The European Commission has today adopted a delegated act that postpones the application date of the remaining Basel III standards in the EU by one year until January 1, 2027. The FRTB aims to introduce more sophisticated risk measurement techniques, allowing capital requirements to better align with the actual risks banks face in their capital markets activities.
The application of the Basel standards is crucial for a resilient EU banking sector and to safeguard global financial stability. The Commission has always been committed to timely implementation of the Basel III standards. In fact, most Basel III requirements took effect on January 1, 2025, thanks to the 2024 Banking package.
Regarding the FRTB, the Banking package allows the Commission to postpone or amend the FRTBs entry into force for a limited period through a delegated act.
Last year, the Commission adopted an initial delegated act to postpone the FRTBs application date by one year - until January 1, 2026 - to align its implementation with other major global jurisdictions and to maintain a level playing field for internationally active European banks in their trading activities.
Recent international developments have indicated further delays in Basel III implementation by some major global jurisdictions. Therefore, concerns about the international level playing field and the impact on EU banks remain high. That is why the Commission has decided, based on responses to a recent public consultation and its own technical assessment, to propose delaying the implementation of the FRTB capital requirements by one additional year until January 1, 2027.
As outlined in the Savings and Investments Union Communication, the Commission remains vigilant to avoid penalizing EU banks that are internationally active in global financial markets and to preserve their competitiveness in European markets against third country banks.
Next steps
This delegated act is now subject to scrutiny by the European Parliament and Council for a period of 3 months (which can be extended for another 3 months).
The delay in the application date of the FRTB rules by one additional year will give the Commission time to assess international developments and carry out further work on the next steps for FRTB implementation in the EU, with the aim of preserving an international level playing field for EU banks.
Background
The entry into force of the Banking Package (the Capital Requirements Regulation and the Capital Requirements Directive) on January 1, 2025, is a key milestone towards faithful implementation of the Basel standards in the EU.
At the same time, as emphasized in the Savings and Investments Union, the intense competition among banks in their trading activities makes maintaining a level playing field between internationally active banks in this area a high priority. Banks play a crucial role in developing EU capital markets and the SIU. Therefore, the implementation of the FRTB should converge as much as possible across jurisdictions to prevent distortions of the playing field.
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