The European Commission has today adopted a delegated act that postpones by one year (i.e. until 1 January 2026) the date of application of one part the Basel III standards in the EU – the Fundamental Review of the Trading Book (FRTB). The FRTB incorporates more sophisticated risk measurement techniques that aim to align capital charges more closely to the actual risks banks are facing in their activities in capital markets.
The Commission has always been committed to a timely implementation of the Basel III standards. The entry into force of the final text of the Banking Package on 9 July as well as the entry into application in the EU of the new Basel requirements from 1 January 2025 are a proof of that.
By doing so, the EU is among the first major jurisdictions to finalise the implementation of the Basel standards. The application of these standards is important for the functioning of a well-regulated and stable banking sector that can contribute to financial stability and economic growth.
However, aligned implementation of the standards across jurisdictions is essential. Delays and deviations in implementation in major jurisdictions could undermine the credibility of the standards. This could ultimately hamper the international level playing field and undermine the global financial stability.
The Commission’s ongoing monitoring of the implementation of the Basel standards in the rest of the world indicates that some major jurisdictions have yet to finalise their rules or communicate on their timelines for implementation. That is why, to preserve the global level playing field for internationally active European banks in respect to their trading activities, the Commission has decided to postpone the entry into force of this part of the Basel III standards. The Basel III standards will apply to all EU banks from 1 January 2025, with the exception of the market risk framework (provided the co-legislators do not object to the delegated act).
The delegated act has been adopted in accordance with the mandate received by the Commission from the European Parliament and Council.
Next steps
The delay of the application date of the FRTB rules by one year will give us time to assess the international developments and our next steps. This delegated act is now subject to the scrutiny of the European Parliament and Council for a period of 3 months.
Background
The recent entry into force of the Banking Package (the Capital Requirements Regulation and the Capital Requirements Directive) represents a key milestone towards the faithful implementation of the Basel standards in the EU. It reaffirms our willingness to fulfil our international commitment and to implement the new prudential rules as of 1 January 2025, as previously announced.
An international level playing field is particularly important for capital market activities. Competition between internationally active banks is very intense in this area due to the ease with which market activities can be conducted across jurisdictions. The implementation of the FRTB should therefore converge as much as possible across jurisdictions to prevent distortions of the playing field.
