CRD 

Changes to the Capital Requirements Framework (CRDV/CRRII)

On June 2019, the European Union published a number of changes to the capital requirements framework following the adoption of Captial Requirements Directive V and Capital Requirements Regulation II. 

The package also implements the outstanding elements of Basel III:requirements for the Net Stable Funding Ratio (NSFR) and the Leverage Ratio (LR). 

The new CRDV/CRRII texts introduce:

  • A leverage ratio requirement for all institutions. A net stable funding requirement. A new market risk framework for reporting purposes. A requirement for third-country institutions having significant activities in the EU to have an EU intermediate parent undertaking. Revised rules on capital requirements for counterparty credit risk and for exposures to central counterparties. A revised Pillar 2 framework. An updated macro-prudential toolkit.
  • The exclusion of certain banks from the scope of application of the CRR and the CRD. 
  • A number of measures aimed at reducing the administrative burden related to reporting and disclosure requirements for small non-complex banks, as well as simplified market risk and liquidity rules for those banks.
  • Targeted amendments to the credit risk framework to facilitate the disposal of non-performing loans and to reflect EU specificities.
  • Targeted amendments related to the incorporation of environmental, social and governance aspects into prudential rules.
  • Enhanced prudential rules in relation to anti-money laundering.
  • A new total loss absorbing capacity (TLAC) requirement for global systemically important institutions.
  • Enhanced Minimum Requirement for own funds and Eligible Liabilities (MREL) subordination rules for global systemically important institutions (G-SIIs) and other large banks referred to as top-tier banks.
  • Restrictions to distributions in case of MREL breaches.
  • Home-host related measures. 

Next Steps

Legislation was updated to implement CRDV in December 2020.

Banks should be working on implementation of the changes.  

The GFSC has set up a working group with industry to consider, implement and operationalise the requirements.   

 

Documents

Q & A: CRD V/ IFD/ BRRD II Download

CRDV & BRRD II Derogations: Session Two  Download
Governance: CRDV & CRR2 Download

Further information on the Bank Recovery and Resolution Directive can be found here.

Further information on the Investment Firm Directive and Investment Firm Regulation can be found here.