EU Moves to Fine-Tune Trading Risk Rules Ahead of 2027 Rollout

Key Takeaways

• FRTB Consultation Launched: The European Commission has opened a public consultation on draft rules for market risk capital requirements under the Fundamental Review of the Trading Book.
• Basel III Alignment: The framework forms part of global standards set by the Basel Committee on Banking Supervision under Basel III, introducing more risk-sensitive approaches to trading activities.
• Transitional Capital Relief: Proposed amendments aim to offset the negative capital impact of the FRTB for three years after implementation.
• Focus on Competitiveness: The changes are designed to maintain a level playing field for EU banks competing in international markets.

Deep Dive

The European Commission is refining one of the most technically demanding pieces of post-crisis banking reform, launching a public consultation on how European banks should calculate market risk under the Fundamental Review of the Trading Book, or FRTB.

The consultation, published Wednesday, focuses on a draft delegated act that would adjust the EU’s approach to the framework ahead of its planned implementation in 2027. The FRTB forms part of the global standards developed by the Basel Committee on Banking Supervision under Basel III, and is intended to overhaul how banks measure and hold capital against risks arising from trading activities.

For regulators, the underlying objective has been consistent for years: bring capital requirements closer in line with the real risks banks take on their trading desks. The FRTB introduces more advanced risk-measurement methods, replacing earlier approaches that were widely seen as too blunt to capture the complexities of modern markets.

In the EU, most Basel III reforms have already been in force since January 1, 2025. The FRTB, however, has remained the notable exception, reflecting both its complexity and the significant capital implications it carries for banks.

The Commission’s latest proposal seeks to address those concerns without abandoning the broader reform. The draft delegated act introduces targeted amendments aimed at cushioning the immediate impact of the new rules. In particular, it would offset the expected increase in capital requirements for a period of three years once the framework takes effect.

That transition period is designed with competition in mind. European banks operate in global markets, and regulators have been wary of creating conditions that could leave them at a disadvantage compared with peers in jurisdictions where implementation timelines may differ.

The proposal also reflects feedback gathered during a targeted consultation at the end of 2025, along with input from experts across EU Member States. It is framed as part of a broader effort to support the bloc’s savings and investments union, where maintaining strong and competitive banking activity (particularly in trading) has become a policy priority.

The timeline now is relatively tight. The Commission expects to formally adopt the delegated act following a four-week scrutiny period, with a target date of May 19, 2026. If adopted as planned, the framework would apply from January 1, 2027 under the Capital Requirements Regulation.

For banks and supervisors alike, the consultation marks another step in bringing the FRTB from design to reality. After years of development at the global level, the focus in Europe is shifting toward implementation, albeit with a calibrated approach intended to balance risk sensitivity with competitive pressures.

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