In their daily trading activities, banks can incur losses in their on‑ and off‑balance sheet positions from adverse movements in market prices. Consequently, they are required to identify and quantify market risk and hold sufficient capital to absorb these potential trading losses.
On 4 June, the European Commission adopted a delegated act introducing a targeted multiplier and targeted operational relief measures amending the fundamental review of the trading book (FRTB), the new Basel III market risk capital framework for banks. Banks will apply these amended rules from January 2027 until January 2030.
The 2024 banking package — comprising the revised Capital Requirements Regulation (CRR3) and the Capital Requirements Directive (CRD6) — came into force in January 2025, marking a significant milestone in the EU’s implementation of the Basel III framework. Most of the prudential requirements took effect on schedule, with the exception of the FRTB.
Despite being finalised by the Basel committee in 2019, the FRTB has become one of the lengthiest regulatory implementation exercises of the post‑financial crisis era, with some major jurisdictions yet to publish final rules. In this context, for the EU, the question is no longer simply when banks will comply, but how to ensure they do so without being placed at a structural competitive disadvantage vis‑à‑vis their global peers.
Maintaining a level playing field
Anticipating the risk of divergence in global implementation, a specific safeguard was included in the CRR (Article 461a). It mandates that the European Commission must monitor international FRTB timelines and empowers it to adopt delegated acts to ensure a level playing field should significant deviations emerge. The empowerment allows the Commission to delay the entry into force for up two years and to introduce targeted amendments to address distortions to the level playing field, for up to three years.
First in 2024, and then again in 2025, the Commission adopted a delegated act to delay the entry into force by one year each, to 1 January 2027.
A further outright postponement not being possible under the CRR3 empowerment, the Commission is now using the CRR empowerment to bring targeted adjustments to the FRTB applicable from 1 January 2027 for a period of 3 years.
The targeted measures address problematic aspects of the framework, in terms similar to what other major jurisdictions have already done or signaled they would in their FRTB implementation.
They will also introduce a multiplier designed to neutralise the capital impact on banks negatively impacted by the new FRTB rules. The proposals reflect feedback gathered during the consultation, input from Member State experts, and a further four‑week public consultation in May.
At the heart of the Commission’s decision to use its empowerment lies a main concern: the competitive position of EU banks in global capital markets. The Commission has always explicitly stated that the intensity of competition in banks’ trading activities makes level playing field considerations a top priority, particularly in light of the savings and investments union agenda, which depends on dynamic and competitive European capital markets.
The implementation by major jurisdictions remains key. The US agencies have only recently (March 2026) published a public consultation open until mid‑June on a new proposal to implement the Basel III international standards , with significant amendments. The timeline for implementation remains unclear and will likely be decided later this year. The UK will implement the Basel III framework from 1 January 2027 but will delay the implementation of the internal models for market risk by at least one additional year. The EU has consistently considered that unilateral implementation of the FRTB would expose European banks to significant capital cost disadvantages in their cross‑border trading activities. Furthermore, applying the standard only to European banks could be ineffective, as trading activities could then move to less‑regulated international banks.
What comes next…
The delegated act is now submitted to the Council and Parliament for a three‑month scrutiny period (extendable by a further three months). If no objection is raised, the measures will enter into application on 1 January 2027 and will be applicable for a three‑year period. This will give the Commission the necessary time to monitor developments in other major jurisdictions before determining the most appropriate long‑term approach on market risks.
Related links
Questions and answers: Banking package
Implementing and delegated acts – CRR
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