Commission launches consultation on EU approach on market risk rules for banks

The European Commission has launched a consultation to help determine the best approach for the application of the EU's framework on market risk prudential requirements for banks. The Fundamental Review of the Trading Book (or FRTB) introduced by Basel III aims to incorporate more sophisticated risk measurement techniques, allowing for closer alignment between capital charges and the actual risks banks are facing in their activities in capital markets.

Last year, the Commission postponed by one year - until 1 January 2026 - the date of FRTB application in the EU, in order to align implementation with other major global jurisdictions. Except for this specific part, the EU has implemented the Basel III standards since 1 January 2025, demonstrating its commitment to a timely application.

However, recent international developments indicate further possible delays in these jurisdictions, raising concerns on the international level playing field and the impact on EU banks. As outlined in the Savings and Investments Union Communication, the Commission remains vigilant to avoid internationally active EU banks being penalized, as well as preserving their competitiveness vis-à-vis third country banks.

In this context, the Commission is consulting on possible action within its mandate around three potential options: (1) implementing the FRTB as currently laid down in the Banking package, from 1 January 2026; (2) postponing the date of application by a further year (1 January 2027); or (3) introducing temporary and targeted amendments to the market risk framework for up to three years. Combinations of these options or other alternatives could also be envisaged provided they are within the Commission's mandate.

Interested parties can submit their contributions by 22 April 2025. More information is available here.

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