Basel III Reforms: New EU Rules to Increase Resilience to Economic Shocks

The European Council (Council) adopted new rules aimed at making financial institutions operating in the EU more resilient to possible economic shocks. The changes are intended to strengthen their supervision and risk management as well as sustainability in the banking sector. The new rules update the capital requirements regulation and directive that translate the Basel III standards into EU legislation.

The reforms added an “output floor” feature that limits the risk of excessive reductions in financial institutions’ capital requirements. The reforms also set a transitional regime for crypto assets and amendments to enhance the management of Environmental, Social and Governance (ESG) risks.

This is the last step of the adoption procedure. The amended capital requirements regulation and capital requirements directive will be published in the EU’s Official Journal. Member states will have 18 months to implement the directive into national legislation. The regulation changes will apply beginning January 1, 2025. Click here for more information.

Council of the European Union