European Commission Consults on Implementing Final Basel III Reforms

The European Commission has launched a public consultation on aligning the EU rules on capital requirements to certain final outstanding elements of the Basel III international standards. On December 7, 2017, the Basel Committee on Banking Supervision published the last part of the Basel III reforms. The revisions were to the standardized approach and the Internal Ratings-Based approach for credit risk, the Credit Valuation Adjustment risk framework, the leverage ratio framework, including the introduction of a leverage buffer for Global Systemically Important Banks, the operational risk framework and the new output ratio floor. It was agreed that the revised standards would be implemented from January 1, 2022, except that the output floor would be phased-in until January 1, 2027. The Commission's consultation closes on January 3, 2020.

The EU's regulatory capital rules and requirements are set out in the EU Capital Requirements Directive and Capital Requirements Regulation, as well as technical standards and other secondary legislation supplementing the CRR and CRD. Following a request from the Commission, in August 2019, the European Banking Authority provided technical advice to the Commission on implementing certain aspects of the Basel III reforms - the credit risk, operational risk, output floor and securities financing transactions.

Following an assessment of the EBA's advice as well as responses to an earlier consultation, a number of issues have been raised on which the Commission is seeking further input. The Commission's consultation covers credit risk, Securities Financing Transactions, operational risk, market risk, CVA risk, the output floor, centralised supervisory reporting and disclosures, sustainable finance and management fitness and propriety.

The EBA is expected to provide its advice relating to CVA risk and market risk before the end of 2019.

View the consultation paper.

View details of the EBA's technical advice, part 1.

View details of the Commission's consultation on implementing Basel III.

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