On Thursday 4 June, the European Commission submitted a draft delegated act simplifying the prudential framework applicable to the market risk of investment banks ('Fundamental review of the trading book' or FRTB) (see EUROPE 13854/18).
After the EU postponed the application of the FRTB rules for two years - until January 2027 - this delegated act, which will be deemed adopted if the European Parliament and the Council of the EU do not object, aims to preserve a level playing field between European banks and their competitors from third countries that do not apply the FRTB rules. It will reduce operating costs for European banks, but without calling into question the final application of the initial prudential standards.
Valid for three years from January 2027, the targeted amendments to the CRR Regulation (575/2013) will affect both the standardised approaches of the FRTB rules (exposure to sovereign risk) and the internal prudential models used by certain large investment banks (profit and loss attribution test, risk factor eligibility test).
For all banks, a more flexible treatment will be introduced in the calculation of capital requirements relating to banks’ exposures to harmonised investment funds (UCITS). Similarly, a multiplier will neutralise the impact on the capital of banks adversely affected by the FRTB rules.
See the draft delegated act: https://aeur.eu/f/m6d (Original version in French by Mathieu Bion)