Commission proposes one-year delay of Basel III market risk rules

The European Commission has adopted last June 12 a delegated act that postpones by one additional year – until 1 January 2027 – the date of application of the one remaining part of the Basel III international standards in the EU – the Fundamental Review of the Trading Book (FRTB). The FRTB aims to introduce more sophisticated risk measurement techniques, allowing for a closer alignment between capital charges and the actual risks banks are facing in their capital markets activities.

The application of the Basel standards is important for a resilient EU banking sector and to safeguard global financial stability. The Commission has always been committed to a timely implementation of the Basel III standards. As a matter of fact, most of the Basel III requirements entered into force on 1 January 2025 thanks to the 2024 Banking package.

As regards the FRTB, the Banking package includes the possibility for the Commission to postpone the entry into force of the FRTB or to amend it, for a time limited period, by way of a delegated act.

Last year, the Commission adopted a first delegated act to postpone by one year – until 1 January 2026 – the date of the FRTB application in the EU, in order to align its implementation with other major global jurisdictions and to preserve the global level playing field for internationally active European banks in respect to their trading activities.

Recent international developments have indicated further delays in the Basel III implementation by some major global jurisdictions. Therefore, concerns regarding the international level playing field and the impact on EU banks remain high. That is why, based on the responses to a recent public consultation and its own technical assessment, the Commission has decided to propose to delay by a further year the date of the implementation of the FRTB capital requirements, until 1 January 2027.

As outlined in the Savings and Investments Union Communication, the Commission remains vigilant to avoid penalising EU banks that are internationally active on global financial markets, as well as to preserve their competitiveness in European markets vis-à-vis third country banks.

Next steps

This delegated act is now subject to the scrutiny of the European Parliament and Council for a period of 3 months (that can be extended for another 3-month period).

The delay of the application date of the FRTB rules by one further year will give the Commission time to assess the international developments and carry out further work on the next steps on the FRTB implementation in the EU, with the objective to preserve an international level playing field for EU banks.

Background

The entry into application of the Banking Package (the Capital Requirements Regulation and the Capital Requirements Directive) on 1 January 2025 is a key milestone towards the faithful implementation of the Basel standards in the EU.

At the same time, and as underlined in the Savings and Investments Union, the intense competition between banks in their trading activities makes the preservation of a level playing field between internationally active banks in that area a high priority. Banks play a key role in the development of EU capital markets and the SIU. The implementation of the FRTB should therefore converge as much as possible across jurisdictions to prevent distortions of the playing field.

More information: European Commission