On 23 November 2016 the European Commission published proposed amendments to the Capital Requirements Regulation and Directive, the Bank Recovery and Resolution Directive, and the Single Resolution Mechanism Regulation.

The Commission's aims for these amendments include seeking to increase the resilience of EU institutions and enhance financial stability; measures to improve banks' lending capacity to support the EU economy; and measures to further facilitate the role of banks in achieving deeper and more liquid EU capital markets to support the creation of a Capital Markets Union.

Importantly the Commission is proposing to require third country banking groups that have significant European businesses to establish and obtain authorisation for an intermediate EU holding company. This proposal in particular demonstrates a move away from international harmonisation and mutual recognition of bank prudential standards towards greater international fragmentation and national ring fencing.

The amendments themselves fall into three main categories:

  • Amendments to capital and liquidity requirements.
  • Amendments to the resolution framework.
  • Amendments to improve proportionality.

The Commission does not foresee these amendments going live before Summer 2019 at the soonest.

We are publishing three separate client alerts that cover all aspects of the Commission's proposals.

This first client alert focuses on the following new provisions and proposed amendments:

  • Leverage Ratio
  • Own Funds and Liquidity requirements
  • large exposures
  • the Commission's approach to 'proportionality' and
  • the treatment of SME exposures
  • powers to exempt entities from CRD and CRR

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