The European Commission has announced a three-year delay in implementing a new market risk capital framework for banks, aligning with the international Basel III standards. This decision allows time to observe how the United States and Britain will apply these standards, ensuring European banks remain competitive.

Level Playing Field

The framework, part of the Fundamental Review of the Trading Book (FRTB), aims to enhance risk measurement in banks’ trading activities, ensuring capital reserves accurately reflect the risks undertaken. By postponing the implementation, the EU seeks to avoid placing its banks at a disadvantage compared to their US and UK counterparts.

EU Commissioner for Financial Services, Maria Luis Albuquerque, emphasized the importance of maintaining a level playing field in global financial markets. She stated, “Europe’s banks must be able to compete on equal terms with their international peers.” The delay provides the EU with the necessary time to monitor developments in other major jurisdictions before deciding on the most appropriate long-term approach.

Regulatory Coordination

Under current EU law, the new capital requirement rules were set to take effect in January 2027. However, the Commission’s revised timeline, unless vetoed by EU governments or the European Parliament within the next six months, will extend from 2027 to the end of 2029. This delay has been agreed upon in consultation with the European Central Bank and the European Banking Authority.

By coordinating with international partners, the EU aims to uphold its commitment to the Basel standards while ensuring its financial institutions are not unfairly disadvantaged in the global market.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.