The European Banking Authority (EBA) has published a report in response to two calls for advice to assist the European Commission on the adoption into European legislation of two new international frameworks proposed by the Basel Committee on Banking Supervision: the new standardised framework for counterparty risk and the new market risk framework.

In the report the EBA provides its preliminary views on the potential introduction of greater proportionality in the implementation of these new frameworks. The EBA considers that there is room to increase the proportionality of regulation in general.

The EBA sets out in the report certain recommendations that are addressed to the European Commission. These include:

  • increasing the threshold value for small trading book business below which institutions are able to use the non-trading book approach for the computation of capital requirements;
  • introducing a threshold for small derivative businesses below which institutions are allowed to use simple approaches currently used for the computation of capital requirements, subject to recalibration; and
  • considering additional proportionality solutions for banks outside the traditional scope of the Basel standards that could include, for both of the new frameworks, the use of approaches that are simpler and more conservative than the ones developed in Basel.

View EBA report on implementation of counterparty and market risk frameworks, 4 November 2016