On 26 April, Member State representatives met for a full day’s discussion of the Risk Reduction Measures legislation. The meeting focused on the European Commission’s (Commission) November 2016 proposal for amendments to the Capital Requirements Regulation (CRR) and Capital Requirements Directive (CRD). Discussions are still centered on the aspects of the proposal which are likely to be ‘fast-tracked’ with discussion of many of the more controversial aspects not likely to begin until Estonia takes over the chairmanship of the meetings in July 2017.

An informal agreement has been reached with the European Parliament to ‘fast-track’ the proposed amendments integrating the International Financial Reporting Standard on financial instruments into the prudential framework and the large exposures regime. These were discussed at a technical session during the morning. The aim to is reach agreement on these aspects before the end of June with final adoption of the legislation to take place irrespective of progress on other components of the package.

Some Member States are also keen to apply the same treatment to provisions on home-host balance in the supervision of credit institutions. A large group of smaller Member States are hoping to reach a quick agreement on the Commission’s proposed waivers to these requirements and revert back to the current CRR text. Similarly, certain Member States are looking for an early agreement on amendments to the criteria of ‘eligible liabilities’, ie those liabilities which could feasibly bear losses in a resolution.

The process of ‘fast-tracking’ is itself not simple and requires the agreement of the Commission and European Parliament, or a unanimous vote in the Council to override a Commission objection. Disagreements between the institutions over this complex process are themselves starting to slow down negotiations on the whole package. The next meeting will take place on 30 May 2017. Informal discussion on how to proceed with negotiations is expected to continue in the meantime.

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