About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

European Parliament Adopts Banking Reform Package – Including Revised Rules on Capital Requirements (CRR II/CRD V) and Resolution (BRRD/SRM)

Subscribe to our newsletter

It has taken almost two years, but the European Parliament on April 16 finally endorsed the banking reform package proposed by the European Commission back in November 2016: covering key elements including the revised rules on capital requirements, and updating the framework of harmonised rules established in the wake of the financial crisis (the so-called ‘Single Rulebook’.)

The new rules will fine-tune various prudential and bank resolution aspects in order to make the banking sector more resilient to shocks while, according to the European Commission, making it “more growth-friendly and proportionate to banks’ complexity, size and business profile.”

The package implements a number of outstanding elements that are essential to make the financial system more resilient and stable, which have been finalised by global standard setters (i.e. the Basel Committee on Banking Supervision (BCBS) and the Financial Stability Board (FSB). This includes the elements of the Basel III framework already agreed at international level at the time of the Commission’s 2016 proposal. However, the more recent changes to that framework, most notably those on credit and operational risk agreed by the Basel Committee in December 2017, are not included in this banking package. The only exceptions are the revised rules on the leverage ratio and the new rules on the leverage ratio buffer.

However, some players believe the package does not go far enough. Michael Lever, Head of Prudential Regulation at the Association for Financial Markets in Europe, warns that there is more work to do on risk reduction measures.

“Much remains to be done. The European banking market continues to be segmented across national lines and the Banking Union is failing to deliver the degree of financial integration expected. Distrust amongst Member States lies at the root of this, resulting in barriers to the free flow of capital and liquidity across the EU, preventing the diversification of risk and introducing systemic fragilities,” he says.

Key measures of the new package include:

  1. A leverage ratio requirement for all institutions as well as a leverage ratio buffer for all global systemically important institutions;
  2. A net stable funding requirement;
  3. A new market risk framework for reporting purposes;
  4. A requirement for third-country institutions having significant activities in the EU to have an EU intermediate parent undertaking;
  5. Revised rules on capital requirements for counterparty credit risk and for exposures to central counterparties;
  6. A revised Pillar 2 framework;
  7. An updated macro-prudential toolkit;
  8. The exclusion of certain banks from the scope of application of the CRR and the CRD;
  9. A number of measures aimed at reducing the administrative burden related to reporting and disclosure requirements for small non-complex banks, as well as simplified market risk and liquidity rules for those banks;
  10. A new discount on capital requirements for investments in infrastructure and a more generous discount on capital requirements for exposures to SMEs;
  11. Targeted amendments to the credit risk framework to facilitate the disposal of non-performing loans and to reflect EU specificities;
  12. Targeted amendments related to the incorporation of environmental, social and governance aspects into prudential rules;
  13. Enhanced prudential rules in relation to anti-money laundering;
  14. A new total loss absorbing capacity (TLAC) requirement for global systemically important institutions;
  15. Enhanced Minimum Requirement for own funds and Eligible Liabilities (MREL) subordination rules for global systemically important institutions (G-SIIs) and other large banks referred to as top-tier banks;
  16. A new moratorium power for the resolution authority;
  17. Restrictions to distributions in case of MREL breaches; and
  18. Home-host related measures.

The legislative texts must now be formally adopted by the Council of Ministers before entering into law.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: ESG data sourcing and management to meet your ESG strategy, objectives and timeline

ESG data plays a key role in research, fund product development, fund selection, asset selection, performance tracking, and client and regulatory reporting, yet it is not always easy to source and manage in a complete, transparent and timely manner. This webinar will review the state-of-play on ESG data, consider the challenges of sourcing and managing...

BLOG

SteelEye Survey Finds Compliance Investment Falling while Regulatory Demands Continue to Rise

Compliance teams are facing escalating pressures driven by greater regulatory scrutiny and macroeconomic challenges, according to the 2024 Annual Compliance Health Check Report from SteelEye’. This is the third Annual Compliance Health Check report which surveyed over 400 senior compliance decision makers at financial institutions across major financial centres in the US, UK, APAC, and...

EVENT

Data Management Summit London

Now in its 14th year, the Data Management Summit (DMS) in London brings together the European capital markets enterprise data management community, to explore how data strategy is evolving to drive business outcomes and speed to market in changing times.

GUIDE

Enterprise Data Management, 2010 Edition

The global regulatory community has become increasingly aware of the data management challenge within financial institutions, as it struggles with its own challenge of better tracking systemic risk across financial markets. The US regulator in particular is seemingly keen to kick off a standardisation process and also wants the regulatory community to begin collecting additional...