European Commission Adopts Delegated Regulation Amending EU Capital Requirements Regulation Postponing Application Date of Own Funds Requirement for Market Risk

The European Commission has adopted a Delegated Regulation amending the EU Capital Requirements Regulation with regard to the date of application of the own funds requirements for market risk. In addition, alongside the Delegated Regulation, the Commission has published a related Q&A document. Article 461a of the CRR, as amended by CRR III, requires the Commission to monitor the international implementation of the Basel III Fundamental Review of the Trading Book standards across jurisdictions and includes an empowerment to adopt delegated acts to ensure an international level playing field, if there are significant deviations in implementation by third countries.

The Commission's monitoring of the FRTB's implementation across jurisdictions shows that, while some jurisdictions have recently implemented the standards, other jurisdictions, for which level playing field considerations are very relevant, are behind and significant uncertainty remains about the timelines and possible deviations in implementation. Most significantly, the U.S. has not yet implemented the FRTB standards or been sufficiently clear about when or how it would be ready to do so. The Commission's assessment is that given the current regulatory developments in the U.S., the Basel standard will likely not be implemented by U.S. agencies before 2026. Therefore, the Commission has adopted the Delegated Regulation which postpones by one year, until January 1, 2026, the date of application of the FRTB standards for the banks' calculation of their own funds requirements for market risk. Until then, the current market risk requirements, including the calculation of own funds requirements for market risk, market risk reporting and disclosure requirements, remain applicable. The Delegated Regulation will now be scrutinized by the European Parliament and Council of the European Union for a period of three months. The Delegated Regulation will then enter into force on the day after its publication in the Official Journal of the European Union and will apply from January 1, 2025.

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