The European Commission has adopted temporary changes to how EU banks will apply new Basel III market risk rules, with the measures due to run for three years from 1 January 2027.
The adjustments relate to the Fundamental Review of the Trading Book (FRTB) — a part of the Basel III global standards that changes how banks measure risk in their trading activities and how much capital they must hold against potential losses, the Commission explained in a statement on Thursday.
Basel III is a set of international banking standards agreed by the Basel Committee on Banking Supervision, and the EU has implemented all other elements since 1 January 2025.
The Commission said delays to FRTB implementation in major jurisdictions have raised concerns that EU banks operating in global financial markets could face competitive distortions.
It noted it had already postponed the EU’s market risk rules for two years, using the full deferral period allowed under the Capital Requirements Regulation (CRR) — the EU’s main rulebook for bank capital requirements.
Multiplier to reduce temporary capital impact
The Commission said it is now using powers under the CRR to introduce further adjustments to the FRTB through a delegated act, including a “multiplier” intended to temporarily offset capital impacts for EU banks that would otherwise be adversely affected.
Europe’s banks “must be able to compete on equal terms with their international peers”, and the measures are “targeted and time-limited”, Commissioner for Financial Services and the Savings and Investments Union Maria Luís Albuquerque said.
The delegated act will be reviewed by the European Parliament and the Council during a three-month scrutiny period that can be extended by a further three months.
If there are no objections, the measures will apply from 1 January 2027 for three years.
