On May 30, the Council of the European Union adopted new rules to improve the resilience of banks to economic shocks in order to make banks in the EU more resilient. The rules amend the Capital Requirements Regulation (CRR) and Capital Requirements Directive (CRD) to strengthen supervision, improve risk management and increase the sustainability of the banking sector.
The CRR and CRD transpose the international Basel standards into EU law. The Basel III standards were agreed by the Basel Committee on Banking Supervision (BCBS) in response to the global financial crisis of 2007/08.
The new EU regulations on Basel III reform aim to make banks operating in the EU more resilient to potential economic shocks. A key feature of the reforms is the introduction of an output floor to limit the risk of excessive reductions in banks’ capital requirements and to make these requirements more comparable. In addition, the minimum requirements for the licensing of branches of banks from third countries and the supervision of their activities in the EU will be harmonized beyond the implementation of the Basel III standards. The rules also provide for a transitional regime for crypto-assets and introduce changes to improve banks’ management of environmental, social and governance (ESG) risks.
This is the final step in the adoption process. The amended Directive and Regulation will enter into force 20 days after their publication in the Official Journal of the EU. Member states will have 18 months to transpose the Directive into national law. The Regulation will apply from January 1, 2025.