EU CNCL Basel III Implementation Deal

On Jun. 27, EU CNCL confirmed provisional agreement on Basel III.

  • Provisional agreement reached on the implementation of the Basel III reforms.
  • Follows EP ECON Jan. 2023 voted to finalize reforms of banking rules, see #161248.
  • Provisional Agreement
  • EU CNCL and EP negotiators reached a provisional agreement on amendments to the Capital Requirements Regulation and the Capital Requirements Directive.
  • Output Floor
  • Under the agreement, negotiators have agreed on how to implement so-called output floor, limiting banks' variability of capital levels computed by using internal models.
  • And on appropriate transitional arrangements to allow for market players to adapt.
  • Negotiators further agreed to make improvements to the areas 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.
  • Fit and Proper Framework
  • Agreement further includes a harmonized fit and proper framework for assessing the suitability of members of institutions' management bodies and key function holders.
  • Supervisory Independence
  • Agreement was also reached on rules to safeguard supervisory independence.
  • Notably by providing for minimum cooling-off period for staff/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 governance bodies.
  • Crypto Assets/ESG
  • Negotiators also agreed on a transitional prudential regime for crypto assets and on amendments to enhance banks' management of ESG risks.
  • Third-Country Branches
  • Under agreement, negotiators decided to harmonize minimum requirements applicable to branches of third-country banks and the supervision of their activities in the EU.
  • Next Steps
  • Agreement has been agreed ad referendum and is therefore provisional as it needs to be confirmed by Council and Parliament before CRR3/CRD6 can be formally adopted.
  • On Jun. 27, 2023, GE DK issued comments on EU CNCL/EP agreement, see #177371.
  • Jun. 29, 2023 EP on Banking Rule Deal
  • On Jun. 29, 2023, EP published details of the deal that had been reached to finalize reforms of the banking rules, and to implement Basel III standards into EU legislation.
  • Document dated Jun. 29, 2023, received Jul. 7, and was then summarized on Jul. 11.
  • The new texts agreed take into account the concrete conditions of EU banking sector by introducing some European specificities, where possible, on a transitional basis.
  • On the Output Floor, EP negotiators made sure that by Dec. 31, 2028, EC would assess the overall situation of the banking system in single market, with EBA and ECB.
  • MEPs made sure that the EU carbon neutrality by 2050 objective and relevant agreed EU sustainability goals were taken into account, and that financial institutions should take into account all of the relevant ESG risks when assessing the value of collateral.
  • MEPs also made sure that banks will have to disclose their exposure to crypto-assets.
  • In CRD, MEPs pushed for provisions to avoid unsuitable persons on the management boards of large financial institutions, also promoting both diversity and gender balance.
  • Also in CRD, negotiators agreed on a framework for access to the EU markets for third country banks, with new requirement for third country credit institutions to establish a branch in the EU and apply for authorization unless they are subject to an exemption.
  • Provisional political agreement reached by EP negotiating team will now have to be approved first by Economic and Monetary Affairs Committee, followed by plenary vote.
  • EU CNCL also has to approve the deal that has been made, before it can come in force.
  • Dec. 7, 2023 EU CNCL Final Compromise Text
  • On Dec. 7, 2023, EU CNCL issued notice of compromise texts of regulation, directive.
  • Follows item note of Nov. 30, 2023, concerning confirmation of final compromise texts.
  • Coreper invited to give chairman mandate to inform the Chair of the EP's ECON Committee that, should the European Parliament adopt the texts of the proposals in the exact form as set out in documents 15882/23 and 15883/23, the Council would adopt the proposed regulation and directive thus amended.
  • Dec. 18, 2023 Letter to EP
  • On Dec. 18, 2023, EU CNCL issued information note, dated Dec. 14, attaching letter to EP ECON chair confirming that, should EP adopt its position at first reading in form set out in Annex, the Council would approve the EP's position and act would be adopted.
  • Apr. 2024 EP Plenary Adoption
  • On Apr. 24, 2024, EP plenary adopted its positions on draft regulation and directive.
  • May 1, 2024 EU CNCL on EP First Reading
  • On May 1, 2024, EU CNCL issued notes of Apr. 30, 2024, on EP first reading outcomes.
  • Parliament's position reflects what had been previously agreed between institutions.
  • Council should therefore be in a position to approve the Parliament's position.
  • Acts would then be adopted in the wording which corresponds to Parliament's position.
  • May 21, 2024 Proposed Adoption
  • On May 21, 2024, EU CNCL issued item notes concerning proposed adoption of acts.
  • Coreper asked to confirm agreement and to suggest Council approve EP's positions, as set out in PE-CONS 79/23, PE-CONS 80/23, as an "A" items at forthcoming meeting.
  • If the Council approves the Parliament's positions, the legislative acts will be adopted.
  • May 30, 2024 EU CNCL Adoption
  • On May 30, 2024, EU CNCL announced adoption of the new rules to make banks operating in EU more resilient to possible economic shocks, strengthen supervision.
  • The new rules update the Capital Requirements Regulation and Directive that translate the Basel III standards into EU legislation, also go beyond Basel III implementation.
  • In latter regard harmonize minimum requirements applicable to authorization of branches of third-country banks and the supervision of their activities in the EU
  • Also set transitional prudential regime for crypto assets and introduce amendments to enhance banks' management of environmental, social and governance risks.
  • This is the the last stage of the adoption procedure, the amended CRR and CRD will now be published in EU Official Journal and enter into force 20 days after publication.
  • Member states will have 18 months to transpose the directive into national legislation.
  • The regulation will apply from Jan. 1, 2025.
  • May 31, 2024 Adopted Texts
  • On May 31, 2024, EU CNCL issued the final adopted texts of regulation and directive.
  • Document dated May 31, 2024, received from EU CNCL Jun. 3, summarized on Jun. 6.
  • Jun. 2024 Official Journal
  • On Jun. 19, 2024, EU CNCL issued final Reg 2024/1623 and Dir 2024/1619 in the OJ.
  • Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of EU, Jul. 9, 2024; shall apply from Jan. 1, 2025.
  • Note that points of Article 1 listed in Article 2, para 3, shall apply from Jul. 9, 2024.
  • Directive shall enter into force on the twentieth day following that of its publication in the OJ of EU; Article 1, point (44)(c) and point (45)(c), shall apply from Jul. 29, 2024.
  • Member States shall adopt and publish, by Jan. 10, 2026, the laws, regulations and administrative provisions necessary to comply with the directive.
  • They shall apply those measures from Jan. 11, 2026.
  • However, Member States shall apply the measures necessary to comply with the amendments set out in Article 1, points (9) and (13), from Jan. 11, 2027.
  • However, Member States shall apply the measures necessary to comply with the amendments set out in Article 1, point (13), as regards Articles 48k and 48l of Directive 2013/36 from Jan. 11, 2026, and with the amendments set out in Article 1, point (9), as regards Article 21c(5) of Dir 2013/36 from Jul. 11, 2026.
  • In Jul. 2024, EC proposed to postpone market risk rules by 1 year, see #220687.
  • In Aug. 2024, EBA issued final RTS making revisions to align with CRR3, see #222791.

Regulators EP; EU CMSN; EU CNCL
Entity Types B/D; Bank; SIFI
Reference OJ L, 6/19/2024; PR, Reg 2024/1623, Dir 2024/1619, PE-CONS 79/1/23 REV 1, PE-CONS 80/1/23 REV 1, 5/31/2024; PR 470/24, 5/30/2024; PR, 9575/24, 9576/24, PE-CONS 79/23, PE-CONS 80/23, 5/21/2024; PR, 9130/24, 9008/24, 5/1/2024; PR, P9_TA(2024)0363, A9-0030/2023, P9_TA(2024)0362, A9-0029/2023, 4/24/2024; PR, 12/18/2023; PR, 16883/23, 12/14/2023; PR, 12/7/2023; PR, 15882/23, 15883/23, 12/4/2023; PR, 15881/23, 11/30/2023; PR 6/29/2023; PR 6/27/2023; 2021/0341 (COD); 2021/0342 (COD); BRRD Dir 2014/59; CRD/CRR Dir 2013/36, Reg 575/2013; Basel III; EBU; ESG; Citation: PE-CONS 79/23; PE-CONS 80/23; Reg 2024/1623; Dir 2024/1619;
Functions BCS; Compliance; C-Suite; Environment; Financial; Legal; Operations; Registration/Licensing; Reporting; Resolution; Risk; Social; Technology; Treasury
Countries European Union; Cross-Border
Category
State
Products Banking; Cryptocurrency; Equity; Loan; Mortgage; Payments
Regions EMEA
Rule Type Final
Rule Date 6/27/2023
Effective Date 1/1/2025
Rule Id 177370
Linked to Rule :161248
Reg. Last Update 6/19/2024
Report Section EU

Last substantive update on 06/23/2024