David Strachan comments on proposal from the European Commission on the final Basel 3.1 reforms has been saved
David Strachan comments on proposal from the European Commission on the final Basel 3.1 reforms
27 October 2021
David Strachan, Head of Deloitte's EMEA Centre for Regulatory Strategy comments on today’s legislative proposal from the European Commission on the final Basel 3.1 reforms:
“Today’s legislative proposal from the European Commission is a major milestone in a long-running process. While important negotiations will now follow that can and will change the final law, the Commission’s proposal of CRD6/CRR3 will have enormous influence over the rules the EU banking sector will eventually need to implement.
“The Commission’s proposals differ quite widely from the global Basel standards, both in terms of their timing and their content. This will create more regulatory divergence and an increasingly complex regulatory landscape, in particular for international banks.
“The Commission estimates that its approach to implementing Basel 3.1 will lead to a 6.4% to 8.4% increase in average minimum capital requirements for EU banks. These figures are considerably lower than the previous impact assessment done by the European Banking Authority, which estimated an 18.5% average increase in minimum capital requirements if the Basel 3.1 framework was implemented in full. This gap in estimates shows the likely effect of the modifications that the CRD6/CRR3 proposal contains.
“Today’s proposal puts more pressure on the alignment between the EU and other countries’ regulatory frameworks for bank capital. For an international bank operating in Europe, particularly if it operates in the EU through a Third Country Branch, this means an increasingly different regulatory environment, as well as having potential competitiveness implications.”
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