On 27 October 2021, the European Commission published a new banking package. Adopting a review of EU banking rules (the Capital Requirements Regulation and the Capital Requirements Directive).

The new rules will ensure that EU banks become more resilient to potential future economic shocks, while helping towards Europe’s recovery from COVID-19 and the transition to climate neutrality.

The package is comprised of the following parts:

  • Implementing Basel III – the proposal aims to strengthen resilience to economic shocks. Specifically, the proposal aims to ensure that “internal models” used to calculate banks capital requirements do not underestimate the risks, ensuring sufficient capital to cover those risks.
  • Sustainability – the proposal aims to contribute to the green transition by making banks take into account sustainability considerations. Banks will be required to systematically identify, disclose and manage environmental, social and governance risks as part of their risk management.
  • Stronger supervision – the proposal aims to better protect financial stability and ensure EU banks have sound management. It establishes a clear set of rules, where supervisors assess whether senior bank staff have the requisite skills and knowledge for managing a bank.

The legislative package will now be discussed by the European Parliament and Council.