Capital Requirements Regulation (CRR)
Capital Requirements Regulation aims to provide a single set of harmonised prudential rules which institutions in the EU must respect. Throughout the years CRR has been revised many times, building on the lessons learnt from the financial crises, to strengthen the resilience of the EU banking sector
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Capital Requirements Regulation – upcoming changes
On January 1st 2025, an updated version of Capital Requirements Regulation and Capital Adequacy Directive (so called CRR3 and CRD6) will come into force. The goal of the new rules is to finalize the implementation of the outstanding elements of international standards agreed by the Basel Committee for Banking Supervision (specifically the so-called “Basel III reform”) in the European Union law. The reform of the prudential framework for institutions introduces significant changes in the methods of calculating capital requirements for all types of risks, expands the reporting requirements and modifies the rules of prudential consolidation and own funds calculation.
Why should banks start working on CRR3 right now?
CRR3 will introduce changes to the methods of calculating capital requirements for all types of risk. The changes introduced by CRR3 will result in an increase in capital requirements. However, the size of the impact may differ significantly between institutions, as it will depend on the structure of banks’ portfolios, the methods used for calculating capital requirements and the approach taken to CRR3 implementation. The reform that we are facing will require changes in IT systems used for calculating and reporting capital requirements and process adaptation, considering both calculation and reporting processes, as well as management processes in the area of product offering, financial planning and strategy. The time that is left to get compliant with the new requirements is very short, considering the vast scope of changes. Therefore, the work should start now.
How can we help?
In Deloitte, we have a team of professionals experienced in capital adequacy and implementations of regulatory changes. Deloitte’s Centre for Regulatory Strategy keeps us up to date with the legislation process and our global network provides us with information about the CRR3 implementation approach adopted by different banks in Europe. Apart from the regulatory know-how, we also have an IT system – Deloitte Fluent CAD – that our team has been developing internally and that addresses CRR3 requirements in terms of capital requirements calculation, regulatory reporting, and stress testing. This unique combination of the regulatory knowledge and experience and an internationally implemented IT system will allow us to provide comprehensive support in CRR3 implementation. The time that is left to get compliant with the new requirements is very short, considering the vast scope of changes. Therefore, the work should start now.
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