On 27 June 2023, the Council of the EU announced that a provisional agreement has been reached on the implementation of Basel III reforms through amendments to the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD IV).

Negotiators from the Council presidency and the European Parliament provisionally agreed on the following:

  • How to implement the so-called ‘output floor’, limiting banks’ variability of capital levels computed by using internal models, and the appropriate transitional arrangements to allow sufficient time for market players to adapt.
  • To make improvements to the area of credit risk, market risk and operational risk. They also agreed to provide for additional proportionality in the rules, in particular for small and non-complex institutions.
  • A harmonised ‘fit and proper’ framework for assessing the suitability of members of the institutions’ management bodies and key function holders.
  • Rules to safeguard supervisory independence, notably by providing for a minimum cooling-off period for staff and members of governance bodies of competent authorities before they can take up positions in supervised institutions, and a limit on the time in office for the members of the governance bodies.
  • A transitional prudential regime for crypto assets and on amendments to enhance banks’ management of ESG risks.
  • To harmonise minimum requirements applicable to branches of third-country banks and the supervision of their activities in the EU.

The agreement has been reached ‘ad referendum’ and is therefore provisional as it still requires confirmation by the Council and the Parliament before it can formally be adopted.

The European Commission has welcomed the political agreement reached between the European Parliament and the Council, noting that it will ensure EU banks become more resilient to possible economic shocks, while contributing to Europe’s transition to climate neutrality.

The new rules amending the CRR are expected to apply from 1 January 2025, with certain elements of the regulation phasing in over the coming years.

Changes related to the supervision of credit institutions are implemented via an amendment of CRD IV and will have to be transposed by member states by 30 June 2026.