Projected implementation of the CRR III/CRD IV Banking Package

The EU Capital Requirements Regulation (CRR) III / Capital Requirements Directive (CRD) IV package is a legislative package aimed at ensuring that EU banks become more resilient to future economic shocks along with ensuring they cope with current economic factors such as COVID recovery and climate goals.

The package consists of 139 mandates which will be implemented in the coming years which are made up of regulatory and implementing technical standards, guidelines, opinions, reports, and maintaining lists and registers. The implementation date of the banking package is 1 January 2025.

Key takeaways

The package is an important element in the Basel III implementation within the EU and includes amendments to the CRR and CRD and consists of seven main areas broken down as follows:

1. Credit risk

Contains the largest number of mandates which cover clarifications needed for the new standardised approach and adjustments to the IRB framework.

2. Market risk

Implementing, continuing and finalising Credit Valuation Adjustment (CVA) rules and Fundamental Review of the Trading Book (FRTB) monitoring.

3. Operational risk

Elements necessary for the calculation of the capital requirements, consisting of business indicator calculation, loss clarification and operational risk management.

4. Reporting and disclosure

Reporting requirements will be used to support Basel III implementation and monitoring along with new reporting frameworks for third-country branches (TCBs). Pillar III disclosures will reflect the new CRR 3/CRR IV requirements.

5. Market access and third-country branches

Reforms in the area of market access including a minimum harmonisation regime for EU market access of branches of credit institutions headquartered in TCBs and new supervisory tools for prudential assessment of material changes in credit institutions.

6. Governance

The main aim is reinforcing banks’ governance, specifically regarding suitability. Includes a focus on identifying, managing, monitoring and reporting ESG risks as they occur.

7. ESG

Introduces new definitions and mandates for ESG risks.

Breaking down the CRR III/CRD IV package

The package consists of:

  • 60 Regulatory and implementing standards.
  • 29 Guidelines.
  • 36 Reports and opinions.
  • 14 Operational products used for regulatory disclosure.

The CRR III/CRD IV package will be developed using a phased approach and will be rolled out in the following way:

Phase 1: Mandates (32) with a deadline of up to one year from the entry into force of the package on 1 January 2025. It predominantly focuses on areas resulting from the transition to Basel III including; credit, operational and market risk.

Phase 2: Mandates (43) with a deadline of up to two years from the entry into force of the package on 1 January 2025. It will contain a mix of CRR and CRD mandates.

Phase 3: Mandates (21) with a deadline of up to three years from the entry into force of the package on 1 January 2025. It includes most of the remaining regulatory product mandates and a number of reports.

Phase 4: Mandates (36) with a deadline of up to four years from the entry into the force of the package on 1 January 2025. This phase will be made up of a number of products, mostly consisting of reports. The EBA will try to consult a year before the legal deadline on mandates where required, e.g., regulatory and implementing technical standards and guidelines. The specific timing will vary depending on the complexity and prioritisation of the mandates.

In addition, there are seven mandates which are will be made operational in 2025 that are ongoing and reoccurring.

How can we help

Our prudential risk experts recognise that regulations remain a pivotal driver for the strategic priorities of financial institutions. Our team excels at helping clients within the financial services sector to navigate the intricate web of regulations. We work in tandem with our clients to identify their regulatory responsibilities and develop strategies for full compliance.

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