The European Commission’s proposal to amend the single rulebook, the "banking package" – the Capital Requirements Regulation (CRR), the Capital Requirements Directive (CRD) the Bank Recovery and Resolution Directive (BRRD), and Single Resolution Mechanism Regulation (SRMR) has finally reached its final stages after more than two years of negotiations.
With the agreement reached by Ecofin at the beginning of December, the Trilogue was concluded and in February the texts were approved by the Permanent Representatives Committee. Between April and May, after the final approval of the European Parliament and Council, publication in the Official Journal is expected.
Since 2013, when the Basel III capital rules (CRR and CRD4) were implemented, the European supervisory rules had never undergone such a significant change. The proposal not only incorporates some international technical standards (finalised by the Basel Committee and the Financial Stability Board) that had to be transposed into EU legislation, but also contains provisions aimed at safeguarding the principle of proportionality (i.e. the application of the rules according to the size and operational complexity of the lenders) and increasing banks’ lending capacity.
The mandate received from the Commission required that the regulatory changes should be implemented "without leading to an overall increase in capital requirements, nor damaging the ability of banks to finance the real economy, in particular small and medium-sized enterprises". The "banking package" will probably be remembered as the first post-crisis "expansive" regulatory intervention, given that it features several amendments aimed at favouring credit supply through the reduction of capital absorption required by prudential regulation.
What are the main credit support measures contained in the CRR amendment?
Most of these reforms will be implemented within two years of the entry into force of the law (ie from mid-2021), although with some exceptions. For example, the correction of the LGD parameter on massive sales of NPLs will be immediately operational.
After the entry into force of the amendments to the CRR, the EBA will start an intense activity, having to issue more than forty technical standards and guidelines over the next five years. These documents are necessary to implement the new provisions in a uniform manner. In the meantime, after the European elections, a new dossier is likely to arrive on the lawmakers' table: the adoption of Basel 4 rules (ie the finalisation of the Basel 3 reforms) approved by the Basel Committee in December 2017.