Implementing Basel III/IV in the EU

The European Commission is now preparing the EU’s next bank capital legislative package, the sixth Capital Requirements Directive and third Capital Requirements Regulation (CRD6/CRR3). This legislative proposal is expected to be published in mid-2020 and will implement the final elements of the Basel III framework agreed in December 2017 by the Basel Committee on Banking Supervision (BCBS) (often referred to by industry as “Basel IV”).

The CRD6/CRR3 package will be wide-ranging, but is expected to include core Basel III components as well as market risk. However the Commission consultation also raises the prospect of further initiatives being included in the package, namely:

• Streamlining regulatory reporting;
• Reflecting environmental, social and governance (ESG) risks in the capital framework;
• Enhancing the fit-and-proper requirements in the CRD to strengthen bank governance.

This article provides further insight on key questions arising in the public hearing of November 12 held in Brussels to debate the EU’s approach to implementing the Basel framework.