CRR3 – what to expect in 2025?
Capital Requirements Regulation
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.
What changes do we expect?
CRR3 will introduce changes to the methods of calculating capital requirements for all types of risk.
How will the changes impact banks?
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 and the methods used for calculating capital requirements. It should be noted that the changes’ impact may have different directions – some of the changes will definitely cause an increase in capital requirements, some – decrease, but in case of some changes the impact is uncertain – may be an increase or a decrease depending on different conditions. Therefore, the determination of the final impact of new regulations on the capital position of banks requires a detailed analysis of their portfolios. While analyzing the impact, it is crucial to consider those changes that allow to decrease capital requirements. Such opportunities usually involve extended data requirements, which is why it is important to identify new data requirements early, start gathering the data, take care of the data integrity, completeness and correctness.
During the next 2 years we are facing a serious reform of prudential framework for institutions. The changes will result in an increase in capital requirements, which, considering the current capital position, might cause a need to raise additional capital for some of the banks. Moreover, due to a significant scope of introduced changes, there will be a need for process adjustments, considering both calculation and reporting processes, as well as management processes in the area of product offering, financial planning and strategy.
