The Commission has published its proposal to replace the current Capital Requirements Directives (as amended) with new legislation (CRD IV). The new legislation will comprise a Directive governing the access to deposit-taking activities (updating the current rules on establishment, passporting and prudential supervision) and a Regulation governing how activities of credit institutions and investment firms are carried out. The proposal will:

  • require banks to hold more and better capital to resist future shocks by themselves. This part of the proposal implements the Basel III requirements;
  • set up a new governance framework so supervisors can monitor banks more closely and take action if they perceive a risk that merits it;
  • create a Single Rule Book for banking regulation. The Commission says this will improve both transparency and enforcement. The Regulation creating the Single Rule Book will cover capital, liquidity, the leverage ratio and counterparty credit risk; and
  • limit banks’ reliance on credit ratings by imposing new requirements for internal opinions and ratings.

The Directive will include new rules on enhanced supervision and introduce new requirements for banks to hold capital buffers. The Commission intends to follow the same timescales for implementation as Basel III. (Source: Commission Proposes CRD IV and Proposal for CRD IV)