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Agreement in principle achieved regarding the execution of Basel III reforms in the banking sector

On 27 June 2023, the Council of the EU announced a provisional agreement on implementing Basel III reforms through amendments to the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD IV).

Negotiators from the Council presidency and the European Parliament provisionally agreed on the following:

  • How to implement the so-called 'output floor', limiting banks' variability of capital levels computed using internal models and the appropriate transitional arrangements to allow market players to adapt. The Basel III standardized output floor will be applied at all levels of consolidation (including "solo-level"). The Commission must assess the output floor's application level by the end of 2028 and its impact on the Banking Union.
  • To improve the areas of credit risk, market risk and operational risk. They also agreed to provide additional proportionality in the rules, particularly for small and non-complex institutions.
  • A harmonized 'fit and proper' framework for assessing the suitability of members of the institutions' management bodies and key function holders. Additionally, rules to safeguard supervisory independence, notably by providing for a minimum cooling-off period for staff and members of governance bodies of competent authorities before they can take up positions in supervised institutions and a limit on the time in office for the members of the governance bodies.
  • To harmonize minimum requirements applicable to branches of third-country banks and the supervision of their activities in the EU
  • Negotiators also agreed on a transitional prudential regime for crypto assets and amendments to enhance banks' management of ESG risks.

The agreement has been agreed 'ad referendum' and is therefore provisional as it still needs to be confirmed by the Council and the Parliament before it can be formally adopted.

The new rules amending the 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 CRD IV and must be transposed by member states by 30 June 2026.

For inquiries please contact:

RBI Regulatory Advisory

Raiffeisen Bank International AG | Member of RBI Group | Am Stadtpark 9, 1030 Vienna, Austria  | Tel: +43 1 71707 - 5923