Commission seeks input on Basel III market risk rules for banks

The European Commission has launched a targeted consultation on the prudential framework for market risk for banks, the Fundamental Review of the Trading Book (FRTB). Introduced by Basel III, this framework incorporates more sophisticated risk measurement techniques, to better match banks' capital requirements with the real risks in their market activities. Basel standards are global banking rules from the Basel Committee on Banking Supervision that aim to ensure banks have enough capital, can handle financial stress, and manage liquidity risks. Except for the FRTB, all Basel III requirements have been in place since 1 January 2025, demonstrating the EU's commitment to a timely application of international standards for banks.

The Commission adopted delegated acts to postpone the implementation of the market risk rules under the FRTB until 1 January 2027 using the maximum extension allowed by the Capital Requirements Regulation. This decision was justified by delays or deviations in the Basel III implementation by other major global jurisdictions. As emphasised in the Savings and Investments Union Communication, the intense competition between banks in their trading activities makes the preservation of a level playing field between internationally active banks in that area a high priority.

As other major jurisdictions are still considering the way to implement the FRTB framework, the Commission has launched a targeted consultation running until 6 January 2026. The focus is on policy options to be adopted by a delegated act offering specific changes to mitigate negative capital effects for EU banks for three years, ending in 2029. This approach would help banks advance in applying the FRTB rules, lower their costs, and maintain the level-playing field until other countries adopt the FRTB standards. The proposed policy options comprise of two main components. The first focuses on adjusting areas of the framework where other major countries have already deviated or plan to deviate in their final implementation. The second part introduces a targeted 'multiplier', which is an adjustment factor designed to neutralise the capital impact on banks that might face negative effects from the FRTB rules. The Commission invites the views of stakeholders on how to design the multiplier. This design should be straightforward, sensitive to risk, and easy to implement, maintain, and supervise.

Respond to the consultation