EU Commission proposes amendments to CRD 4, BRRD and SRM Regulation

EU Commission proposes amendments to CRD 4, BRRD and SRM Regulation

The EU Commission has unveiled a package of legislative proposals intended to further strengthen the resilience of EU banks. Among other things, the proposals incorporate the remaining elements of the regulatory framework agreed within the Basel Committee on Banking Supervision (BCBS) and Financial Stability Board (FSB), as well as proposals to make the EU post-crisis reforms more growth-friendly and proportionate to banks' complexity, size and business profile. The legislative proposals comprise proposals for:

• a Directive to amend the Capital Requirements Directive (CRD 4) and a Regulation to amend the Capital Requirements Regulation (CRR); and
• two Directives to amend the Bank Recovery and Resolution Directive (BRRD) and a Regulation to amend the Single Resolution Mechanism Regulation (SRMR).

The CRD 4/CRR amendments include proposals for a binding leverage ratio (LR), requirements for the net stable funding ratio (NSFR) and the fundamental review of the trading book (FRTB) to ensure that banks hold sufficient capital in line with the effective risks they take when trading in securities and derivatives. The measures are also intended to make capital requirements more proportionate for smaller and less complex institutions, in relation to disclosure, reporting and trading book-related requirements.

The BRRD amendments include a requirement for global systemically important institutions (G-SIIs) to meet total loss-absorbing capacity (TLAC) requirements, which will be integrated into the EU's existing minimum requirement for own funds and eligible liabilities (MREL) system. The measures also propose the harmonisation of insolvency ranking of unsecured debt instruments, enhanced proportionality for the existing rules and specific measures intended to enhance the capacity of banks to lend to small and medium-sized enterprises (SMEs) and fund infrastructure projects.

The legislative proposals will now be submitted to the EU Parliament and EU Council for their consideration under the ordinary legislative procedure.