EU Council adopts legislative framework to reduce risks in banking system

The EU Council has adopted reforms to CRD IV and the BRRD, as approved by the European Parliament in April.

The package includes:

• a leverage ratio requirement for all institutions and a leverage ratio buffer for all ‘global systematically important’ institutions;
• a new stable funding requirement;
• a new market risk framework for reporting, and simplified liquidity rules for small non-complex banks;
• a requirement for third-country institutions to have an EU intermediate parent undertaking;
• a new total loss absorbing capacity requirement for all ‘global systematically important’ institutions;
• enhanced minimum requirement for own funds; and
• a new moratorium power for the resolution authority; and
• targeted measures to cater for incentives in public infrastructure and SMEs and a credit risk framework for the disposal of non-performing loans.

The package will be published in June and enter into force 20 days later. Most of the new rules will apply from mid 2021.