The EU plans to finalise the implementation of Basel III international agreements into EU law. The Basel III agreements were reached by the EU and its G20 partners in the Basel Committee on Banking Supervision to make banks more resilient to possible economic shocks. Basel III comprises a number of measures to enhance prudential regulatory standards, supervision and risk management of banks as a response to the global financial crisis of 2007/2008.
The Commission’s proposal of the capital requirements directive aimed at strengthening the regulatory and supervisory landscape for banks operating in the EU by closing loopholes for third country branches, by enhancing and harmonising supervisory tools and powers in important areas and by ensuring that supervisors are sufficiently independent from economical and political influence and by incorporating environmental, social and governance related risks.
The Commission’s proposal of the capital requirements regulation aimed to reinforce and facilitate the allocation of capital and liquidity within banking groups in Europe without imposing a significant increase in their capital requirements. The framework for credit risk and operational risk will be further improved and supported by a so called “output floor” which aims at reducing unjustified variances in banks’ risk metrics.
The European Commission presented its proposals on a review of the capital requirements directive and the capital requirements regulation on 27 October 2021. Now that the Council has set its position on the proposals, it is ready to start negotiations with the European Parliament in order to agree on a final version of the texts.
The full documentation is available at https://www.consilium.europa.eu/en/press/press-releases/2022/11/08/banking-sector-council-agrees-its-position-on-the-implementation-of-basel-iii-reforms/