EC seeks further views on market risk prudential requirements for EU banks

The European Commission has launched a consultation on a draft delegated act proposing targeted amendments to the EU prudential framework for banks' market risk, specifically the Fundamental Review of the Trading Book (FRTB) under the Capital Requirements Regulation (CRR). While most Basel III reforms have applied since 1 January 2025, the FRTB has been deferred on several occasions, most recently to 1 January 2027 in response to uncertainty around implementation timelines and potential deviations from the Basel standards in other major jurisdictions. The draft delegated act sets out amendments, intended to apply from 1 January 2027, to support a level playing field for EU banks competing internationally in trading activities by offsetting the negative capital impact of the FRTB for a period of three years. The proposals reflect feedback from a November 2025 consultation and input from member state experts. Formal adoption of the delegated act is expected on 19 May, to provide banks and supervisors with greater certainty ahead of implementation.

The amendments and the multiplier proposed in the delegated act have an impact on requirements in other parts of the CRR, which are ancillary to, or connected with the entry into application of the FRTB. The explanatory memorandum states that where necessary, guidance on how banks should apply these requirements during the postponement period will be provided in the communication package and further specified by the EBA to ensure consistency and harmonisation in implementation across banks. It also states that considering the temporary nature of the targeted measures of the delegated act and the potential for permanent distortions to the level playing field from other jurisdictions' implementation, the Commission will reassess the necessary next steps in the context of the 2026 report on the competitiveness of the EU banking sector.

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