Current developments

In June 2024, the CRD (Capital Requirements Directive) and the CRR (Capital Requirements Regulation) were fundamentally revised. This essentially represented the EU implementation of the internationally agreed “Basel III Reform” from the end of 2017 – also known as Basel IV in the banking industry. The amended requirements are referred to as CRD VI and CRR III. The new requirements of CRD VI are to be incorporated into national legal and administrative regulations, which are then predominantly to be applied from January 11, 2026. The necessary implementation law is expected in the second half of 2025. The new requirements of CRR III, on the other hand, are predominantly to be applied from January 1, 2025 (with transitional arrangements partly until 2032). The initial application of the amended capital requirements for market risks will be postponed by one year to January 1, 2026.

The Basel III reform, now implemented into EU law, was internationally agreed upon at the end of 2017 (see also Basel regulatory framework). However, a number of European peculiarities that deviate from the Basel requirements remain (e.g., SME supporting factor, CVA exemption for non-financial companies). The changes through CRD VI and CRR III include, among other things, the following topics:

 CRD

• Requirements for the management of sustainability risks with regard to environmental, social, and responsible corporate governance (ESG risks)

CRR

• Credit risk standard approach (KSA) and internal ratings-based approach (IRBA) to determine capital requirements for credit risk (including for real estate financing, including the new exposure class ADC, i.e., acquisition, development, and construction of real estate, as well as for sovereign financing and ship and aircraft financing)
• Introduction of a capital floor (so-called output floor) to limit possible capital reliefs when using risk-sensitive internal approaches (IRBA etc.) with various transitional provisions, especially for residential real estate financing
• Trading book definition: introduction of lists of financial instruments assumed to be assigned to or not assigned to the trading book; however, the general trading book definition remains unchanged, where trading intent is the central condition for trading book assignment
• Extension of reporting requirements for market risks to hard capital requirements (previously only reporting obligations)
• Revision of CVA requirements according to Basel specifications; removal of the methods of the current CRR, establishment of three different complex standard approaches
• Approaches to determine capital requirements for operational risk
• ESG risks: harmonized definitions, extension of reporting requirements, acceleration of the EBA report on supervisory treatment

CRD VI and CRR III contain numerous mandates for technical standards and guidelines to specify the new requirements. To handle these extensive mandates, the European Banking Authority (EBA) has created a roadmap and divided it into four phases (see figure).