The European Commission has launched a public consultation on a draft delegated act regarding the prudential framework for market risk for banks, known as FRTB (Fundamental Review of Trading Book). A move to smooth out the latest Basel 3 banking rules on market risks until the end of 2029, with the aim of eliminating unequal conditions for European institutions operating internationally. A comparison first of all with US institutions, where there is strong deregulation desired by the Trump administration.
The FRTB
Implemented as part of the global banking standards of the Basel Committee on Banking Supervision (Basel III), the FRTB – explains the Commission – “introduces more advanced risk measurement methods to better align capital requirements for trading activities with the risks that banks actually face”. All Basel III requirements are effective from 1 January 2025, confirming the EU’s commitment to timely implementation of international standards. Only the FRTB remains pending.
The consultation
Brussels is proposing changes that “aim to ensure a level playing field for EU banks operating internationally in the trading sector by offsetting the negative impact of the FRTB on capital requirements for a period of three years”. The proposed measures reflect contributions from Member States’ experts and feedback from a 2-month targeted consultation, which took place at the end of 2025. According to the Commission, the draft delegated act is “in line with the objectives of the Communication on the Savings and Investment Union, which highlights how strong competition between banks in their trading activities makes maintaining a level playing field for internationally active banks a priority”.
The formal adoption of the delegated act is expected next month, on 19 May. A timeline which, adds Brussels, “should provide banks and competent authorities with sufficient visibility to implement the regulatory framework starting from 1 January 2027”.
Outside the EU
If in the United Kingdom the application of the rules on market risks is expected between 2027 and 2028. The times become uncertain moving to the United States. Here last March a 3-month consultation was started, which however does not shed light on the starting date and shows a clear reduction in the requirements of the Basel Committee.
What does the ECB think
The EU Commission has adopted a “reasonable” approach. This is the opinion of Frank Elderson, member of the ECB executive committee and vice president of Supervision. “If other jurisdictions were to diverge significantly, then there would come a time when we would need to think about how to ensure a level playing field internationally,” Elderson said. “There have been proposals on how to address this. I think the European Commission has found the right way to do it,” he added, noting that adopting FRTB standards will lead to “more robust risk management.”
