European commission opens consultation on market risk capital rules

The European Commission has launched a targeted consultation to assess how the EU should apply new market risk capital rules under the Basel III framework. This comes after a one-year delay in 2024 to give EU banks time to adjust—and to stay aligned with international developments.

That alignment is now under pressure. The US and UK have postponed their own implementation of the final Basel III standards, raising concerns about a level playing field for globally active banks.

To address this, the Commission is using powers under Article 461a of the Capital Requirements Regulation (CRR) to explore its next steps. A Delegated Regulation is expected by June 2025, but first, the Commission is asking for feedback from regulators, banks, industry bodies, academics and end-users.

What’s at stake?

Market risk capital requirements determine how much capital banks must hold against their trading book exposures. These rules directly affect capital planning, competitiveness, and how institutions manage risk.

If the EU moves ahead while other jurisdictions delay, EU banks could face a disadvantage when competing globally. The consultation aims to understand how best to preserve global alignment without compromising the EU’s prudential standards.

Focus areas for the consultation

The Commission is seeking views on several technical and policy issues, particularly around challenges with the Fundamental Review of the Trading Book (FRTB). These include:

• The internal model approach (IMA): Challenges with elements like the Profit and Loss Attribution Test (PLAT) and Non-Modellable Risk Factors (NMRFs)
• The standardised approach: How it compares to international implementations and whether operational changes are needed
• Practical data and modelling difficulties: Including those related to carbon markets and collective investment undertakings (CIUs)

Policy options on the table

The Commission outlines three potential paths forward:

1. Proceed as planned – Implement the new rules in 2026, as currently scheduled.
2. Delay by one year – Push the start date to 2027, giving more time to align globally.
3. Apply temporary adjustments – Introduce targeted relief measures, such as phased capital requirements or tailored fixes for complex exposures.

The consultation will collect qualitative and quantitative input to assess the risks and benefits of each approach.

Why this matters

This decision will shape how banks operate and compete in international markets. A misalignment between jurisdictions could create regulatory arbitrage, fragment the global financial system, and put EU institutions at a disadvantage.

But it’s not just about timing. It’s about designing a framework that is risk-sensitive, globally aligned, and feasible for banks to implement.

Get involved

The European Commission is calling on all stakeholders to contribute evidence, opinions, and proposals by the consultation deadline. The outcome will directly influence the Delegated Act due in mid-2025.

Now is the time to shape the EU’s approach to market risk—and ensure that the prudential framework supports both sound banking and global competitiveness.

The deadline date is 22 April, 2025.