EC consults on application of market risk prudential framework

The European Commission (EC) has launched a consultation on the Fundamental Review of the Trading Book (FRTB) under Basel III, focusing on market risk for banks. Although most Basel III requirements have applied since January, the EC postponed FRTB implementation on several occasions and most recently to 1 January 2027 due to delays and uncertainty regarding FRTB implementation in other major jurisdictions. To address potential negative impacts arising from an unlevel playing field in the international implementation of the FRTB, the consultation seeks feedback on whether the EC should adopt a delegated act, using its powers under Article 461a of the Capital Requirements Regulation by the end of March 2026. This empowerment, due to previous postponements, now only allows the introduction of targeted relief measures and targeted multipliers for up to three years. Longer term solutions will be duly and timely considered in a comprehensive way. The proposed policy options comprises two main components: (i) the introduction of temporary targeted amendments to the market risk framework that would address aspects of the framework on which other jurisdictions have already deviated or indicated that they would plan to deviate in their final FRTB implementation; and (ii) the introduction of a multiplier for the overall market risk capital requirements that banks negatively impacted by the new rules (i.e., banks facing an increase in capital requirements for market risk) would be allowed to use to significantly limit their market risk capital requirements increases for three years. The EC highlights that due to the temporary nature of the multiplier and its objective, the methodology should be simple and risk‑sensitive, and relatively easy to implement, maintain and supervise. The deadline for responses is 6 January 2026.

Return to main website.