The European Parliament and Council reach draft agreement Tuesday on EU banking rules to implement ‘Basel III’ reforms aimed at boosting the strength and resilience of banks operating in the EU.

The amendments to the Capital Requirements Regulation and the Capital Requirements Directive implement the final set of international standards agreed by the EU and its G20 partners in the Basel Committee on Banking Supervision, so-called Basel III standards, to make banks more resilient to possible economic shocks. Specifically, the package aims to ensure that banks using “internal models” to calculate their capital requirements measure risks in a consistent way.

“This is a major step forward which will help ensure that European banks can continue to operate also in light of external shocks, crises or disasters,” said Sweden finance minister Elisabeth Svantesson, for the EU presidency: “The swift implementation of global standards is also an important signal for our international partners and the EU’s continued commitment to international cooperation and multilateralism.”

Beyond the implementation of Basel III standards, the package also contains a number of measures to keep the EU prudential framework fit for purpose in terms of Environmental, Social and Governance (ESG) risks and in terms of supervision, including regarding third-country branches. It also provides stronger tools for supervisors overseeing EU banks.

Overall, the new rules will ensure that EU banks become more resilient to potential future economic shocks, while contributing to Europe’s transition to climate neutrality. The new rules amending the Capital Requirements Regulation (CRR) are expected to apply from 1 January 2025, with certain elements of the regulation phasing in over the coming years. Changes related to the supervision of credit institutions are implemented via an amendment of the Capital Requirements Directive (CRD) and will have to be transposed by member states by 30 June 2026.

Source: European Commission

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