European Commission Seeks Input on Market Risk Prudential Framework for EU Banks
On April 22, 2026, the European Commission initiated a public consultation regarding a proposed delegated act that focuses on the prudential framework governing market risk for banks, specifically addressing the Fundamental Review of the Trading Book (FRTB).
This framework is part of the global banking standards implemented by the Basel Committee on Banking Supervision under Basel III. The FRTB introduces advanced methodologies for measuring risk, aimed at aligning capital requirements for trading activities more closely with the risks that banks encounter during trading operations. Notably, all Basel III mandates, with the exception of the FRTB, have been effective since January 1, 2025, highlighting the EU’s dedication to promptly implementing international regulatory standards.
The current draft of the delegated act proposes specific amendments to the FRTB rules applicable to EU banks, set to become effective on January 1, 2027, as per the Capital Requirements Regulation. These amendments are designed to enhance competitive equity among EU banks engaged in international trading by mitigating the adverse capital implications of the FRTB over a transitional period of three years.
The proposed amendments are a direct reflection of insights garnered from a targeted consultation conducted over a two-month span at the close of 2025, alongside feedback from experts from Member States.
This draft is consistent with the objectives outlined in the savings and investments union Communication, emphasizing that fostering healthy competition among banks in their trading activities is crucial for maintaining equitable conditions for banks operating internationally.
The final adoption of the delegated act is anticipated to occur at the conclusion of a four-week review period on May 19, 2026. This timeline affords banks and regulatory authorities essential clarity for the implementation of the new regulatory framework starting in January 2027.
