Commission adopts temporary adjustments to Basel III Market Risk Rules to safeguard EU banks’ competitiveness

To ensure that the EU banking sector benefits from a level playing field with international competitors, the European Commission has introduced targeted, time-limited amendments to its implementation of the new market risk capital framework for banks. The measures will apply for three years from 1 January 2027.

The Fundamental Review of the Trading Book (FRTB), part of the global Basel III banking standards set by the Basel Committee on Banking Supervision, strengthens risk measurement in banks’ trading activities and ensures that capital requirements more accurately reflect actual market risks. While the EU has fully implemented all other Basel III standards since 1 January 2025, delays in the FRTB implementation by major jurisdictions have raised concerns over competitive distortions faced by EU banks operating in global financial markets.

To address these challenges, the Commission had already postponed the market risk rules for two years, exhausting the full deferral period under the Capital Requirements Regulation (CRR). Last June 4, the Commission has exercised its empowerment under CRR to introduce adjustments to the FRTB through a delegated act, including a multiplier to temporarily offset capital impacts for EU banks adversely affected by the FRTB implementation.

The Commission’s decision aligns with the objectives of the Savings and Investments Union, which emphasises the need to safeguard the competitiveness of EU banks — particularly those active in global capital markets — vis-à-vis third-country institutions. Given that other major jurisdictions are expected to delay FRTB implementation for at least a year, today’s measures help maintain the playing field for EU banks and support EU capital market development.

The delegated act was drafted following a public consultation and technical assessment. It ensures a smooth, coherent implementation of the FRTB in the EU, while allowing further monitoring of its implementation globally.

For more information: European Commission