On May 7, 2018, the European Banking Authority announced that the European Commission had requested technical advice on implementing the final Basel III reforms into EU law. The Basel Committee published the final revisions to Basel III on December 7, 2017. The revisions cover the standardized approach and the Internal Ratings-Based approach for credit risk, the Credit Valuation Adjustment risk framework, the leverage ratio framework, including the introduction of a leverage buffer for Global Systemically Important Banks, the operational risk framework and the new output ratio floor. The revised standards will take effect from January 1, 2022, except for the output floor which may be phased-in until January 1, 2027.
The Commission has asked the EBA to provide technical advice on the potential impact of the revisions on the EU banking sector and the wider EU economy and on any potential implementation challenges. The Commission has also requested that the EBA consider the potential changes to the Basel market risk framework, on which the Basel Committee is currently consulting. Implementing the Basel III reforms, including any changes to the market risk framework, will mean changing the Capital Requirements Directive and the Capital Requirements Regulation as well as the relevant underlying technical standards.
The European Commission has asked the EBA to deliver its report by June 30, 2019. However, should it not be possible to provide the analysis on the CVA and market risk rules by that date, the EBA may deliver that portion of its advice by September 30, 2019 at the latest. The EBA intends to launch a data collection exercise in July this year, with further information on the scope of the exercise expected in the coming months.
The EBA's announcement, the call for advice and the Commission's letter are available at http://www.eba.europa.eu/-/eba-will-support-the-commission-in-the-implementation-of-the-basel-iiiframework-in-the-eu?_sm_au_=iVV6J6sfkfqRP7JR, details of the final Basel III reforms are available at: https://finreg.shearman.com/basel-iii-finally-finalized and details of the proposed revisions to the Basel market risk framework are available at: https://finreg.shearman.com/basel-committee-consults-on-proposedrevisions-to.
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