The Basel framework: the global regulatory standards for banks
The Basel framework is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision (BCBS). The Basel III standards are minimum requirements which apply to internationally active banks, which ensure a global level playing field on financial regulation. The EBA participates as an observer at the Basel Committee and actively contributes to the Committee’s work, which aims to strengthen the regulation, supervision and risk management of the banking sector.
The Basel framework is implemented in the European Union mainly through the Capital Requirements Regulation (CRR) and Capital Requirements Directive (CRD). Through the CRR and CRD, the EBA is empowered to implement many of the more technical elements, for instances related to liquidity, own funds instruments, internal models and reporting/disclosure requirements.
While the original Basel framework stems back from 1988, the latest iteration, the so-called ‘Basel III framework’ was developed in response to the Global Financial Crisis in 2007/2008 and was finally concluded by the Basel Committee in 2017. The Basel III framework has, therefore, taken into account the weaknesses identified in the financial sector and aims to ensure that banks are better placed to absorb economic shocks while continuing to finance economic activity and growth.
Documents
- EBA Roadmap on strengthening the prudential framework
- Status of implementation of the EU Banking Package
Links
Implementing Basel III in the EU: the CRR and the CRD
The EU is committed to implementing the Basel III framework in the EU and has carefully monitored and analysed the impact for EU banks. The implementation has happened in several phases, with the first elements of the Basel III framework being implemented with the so-called “CRD IV” package on 17 July 2013. Later on, new liquidity requirements, i.e. the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) were implemented into EU law.
More recently, in 2021, a new CRR/CRD legislative proposal was published. This proposal, also known as “Banking Package”, incorporates additional changes, mainly linked to changes in the credit, market and operational risk capital framework. It was prepared by the European Commission, based on technical support from the EBA.
What is the role of the EBA in the implementation of the Basel III framework?
With the implementation of the Banking Package, the implementation of the Basel III framework will be complete. The EBA plays a key role in the implementation of the Basel III regulatory framework in the European Union, with a significant number of regulatory standards and guidelines. The EBA generally takes into account the Basel framework, while developing our technical guidance. From 2024 onwards, the EBA will work on the implementation of the final technical elements. You will find more details on this work in the EBA roadmap on strengthening the banking sector.
Mapping between Basel III standards and EU legislation
| Basel III standards | EU legislation |
|---|---|
| Basel III: A global regulatory framework for more resilient banks and banking systems (revised version June 2011) | Directive (EU) 2013/36/EU (CRD)*
Regulation (EU) 575/2013 (CRR)*
|
| Liquidity Coverage Ratio (January 2013) | Regulation (EU) 575/2013 (CRR)* with additional specifications in Commission Delegated Regulation (EU) 2015/61 with regard to liquidity coverage requirement for Credit Institutions |
| Net Stable Funding Ratio (October 2014) | Regulation (EU) 2019/876 (CRR2) |
| Basel III: Finalising post-crisis reforms (December 2017) | not yet transposed in EU legislation |
| Minimum capital requirements for market risk (January 2016, revised January 2019) | not yet transposed in EU legislation |
* And subsequent amendments