(Finance) – The European Commission adopted a today delegated act that postpones by one year (i.e. until 1 January 2026) the date of application of a part of the Basel III standards in the EU, namely the Fundamental Review of the Trading Book (FRTB). The FRTB incorporates more sophisticated risk measurement techniques that aim to better align capital requirements with the actual risks banks face in their capital markets activities.
The Commission “is always been committed to promptly implementing Basel III standards – reads a note – The entry into force of the final text of the banking package on 9 July as well as the entry into force in the EU of the new Basel requirements from 1 January 2025 are proof of this”. In this way, the EU is among the first major jurisdictions to finalise the implementation of the Basel standards.
The EU executive highlights that it is aligned implementation of standards across all jurisdictions is essentialwith delays and deviations in implementation in key jurisdictions that could undermine the credibility of the standards. This could ultimately hinder the international level playing field and undermine global financial stability.
The Commission’s ongoing monitoring of the implementation of the Basel standards in the rest of the world indicates that some major jurisdictions have yet to finalise their rules or communicate implementation timelines. This is why, to preserve a global level playing field for European banks internationally active in relation to their business activities, the Commission has decided to postpone the entry into force of this part of the Basel III standards. The Basel III standards will apply to all EU banks from 1 January 2025, with the exception of the market risk framework (provided that the co-legislators do not object to the delegated act).
L’delegated actadopted in accordance with the mandate received by the Commission from the European Parliament and the Council, is now subject to the scrutiny of the European Parliament and the Council for a period of 3 months.
“We remain firm in our international commitment to financial stability: the international Basel III standards will apply in the EU from 1 January 2025. This will ensure a reliable and stable banking sector for EU citizens and businesses: the implementation of Basel III rules is in the EU interest”, he commented. Mairead McGuinness, Financial Services Commissioner, financial stability and the Capital Markets Union.
“However, as major jurisdictions have not yet finalised the implementation of the Basel III rules, it is necessary to delay the application of the new capital requirements for market risk by one year, to preserve an international level playing field for EU banks,” he added. working closely with the European Banking Authority and supervisory authorities to provide banks with the technical details needed for a consistent approach across Europe.”