CRR3 compliance and challenges for banks in 2025

The Capital Requirements Regulation III (CRR3) has been applicable to EU banks since January 1, 2025 As part of the EU’s Basel III implementation, CRR3 aims to enhance financial stability by addressing inconsistencies in risk weighting and ensuring sufficient capital buffers across institutions.  

With the regulation now live, banks must ensure their internal systems, risk models, and reporting processes are fully aligned with the new requirements. The focus now shifts to ongoing compliance, supervisory expectations, and future regulatory developments. 

Key regulatory changes under CRR3: 

CRR3 refines capital and risk management requirements in several areas: 

• Revised output floor – The 72.5% output floor limits the extent to which banks can lower capital requirements using internal models, ensuring greater consistency across institutions. 
• Market risk & FRTB implementation – Though institutions continue to use their current (pre-FRTB) methodologies as available under CRR2 to calculate their own funds requirements for market risk, many institutions are running FRTB calculations in parallel to prepare for the transition. 
• Operational risk overhaul – The new Standardised Approach (SA-OR) replaces previous methodologies, reducing variability in capital requirements. 
• Credit risk adjustments – Changes to the Standardised Approach (SA-CR) and Internal Ratings-Based (IRB) model impose stricter rules on risk weights, collateral treatment, and exposure classifications. 

These regulatory shifts require banks to restructure their capital frameworks while maintaining operational efficiency and business continuity. 

Industry readiness and implementation challenges: 

With CRR3 now live, banks face ongoing challenges in fully embedding the new regulatory framework, including: 

1. Data and System Readiness 

Increased data granularity requirements, demand improved risk aggregation and real-time reporting capabilities. 

2. Compliance Timelines & Supervisory Engagement 

While the core CRR3 framework is active, certain provisions are subject to transitional arrangements running until 2030. 

Firms must ensure they regularly engage with regulators to clarify supervisory expectations and feedback loops. 

3. Capital Impact and Business Adjustments 

The binding output floor is expected to increase capital requirements for banks heavily reliant on internal models. 

Banks must balance business strategy adjustments with the need to maintain regulatory capital buffers. 

RegTech’s role in CRR3 compliance: 

Given the complexity of CRR3, banks are turning to RegTech solutions to manage compliance efficiently. Key benefits include: 

• Automated regulatory reporting – Reduces manual effort, improves data integrity, and accelerates compliance processes. 
• AI-driven analytics – Enhances capital forecasting, stress testing, and risk mitigation. 
• Cloud-based scalability – Supports real-time risk calculations and seamless integration with legacy banking systems. 

Looking Ahead: 
Pillar 2 & 3 monitoring – Supervisors will continue to use these to assess the effectiveness of CRR3 and refine capital frameworks. 

EU vs. Global regulatory alignment – While the EU has implemented CRR3, differing timelines in the US and other jurisdictions pose challenges for global banks. 

Emerging regulatory focus areas – The integration of ESG risks, stress testing enhancements, and liquidity frameworks is expected in future regulatory iterations. 

How Suade can help: 
 
Suade is a trusted leader in regulatory reporting and risk management, providing advanced software to global financial institutions. Our automation-first regulatory reporting platform enables banks to seamlessly manage CRR3 capital and risk reporting requirements with: 

• Automated Basel III & CRR3 compliance reporting 
• Real-time risk analytics and stress testing 
• Seamless data integration for accurate, efficient reporting 

Ensure full CRR3 compliance with Suade – Get in touch today.