Brussels consults on implementation of Basel III reforms

The EU Commission has launched a public consultation on implementation of the Basel III standards - the reforms to improve the regulation, supervision and risk management in the banking sector.

Largely in response to the credit crisis, banks are now required to maintain proper leverage ratios and meet certain minimum capital requirements.

Basel III (or the Third Basel Accord or Basel Standards) is a global, voluntary regulatory framework on bank capital adequacy, stress testing, and market liquidity risk. This third instalment of the Basel Accords was developed in response to the deficiencies in financial regulation revealed by the financial crisis of 2007-08. It is intended to strengthen bank capital requirements by increasing bank liquidity and decreasing bank leverage.

The consultation is supposed to help the EU ensure that the specificities of the European banking sector are fully taken into account and to ensure that banks are able to perform their role of financing the economy and financing the green transition.

The Basel III framework was developed in response to the financial crisis. The consultation aims to gather views from interested parties on specific topics such as credit risk, operational risk, market risk, credit valuation adjustment risk, securities financing transactions as well as in relation to the so-called output floor.

The consultation will also be the opportunity for the Commission services to welcome stakeholders' views on other related subjects with a view to ensuring convergent and consistent supervisory practices across the Union and alleviating the administrative burden.

The consultation follows a first exploratory consultation conducted in spring 2018, the technical advice submitted to the Commission by the European Banking Authority, and the ongoing exchange with stakeholders and Member States' experts.

The Commission is to hold a public conference on 12 November to discuss the impact and challenges of implementing the final Basel III reforms in the EU.

The feedback from the public consultation and the EBA's advice will feed into the Commission's impact assessment.