Follow Us

Follow us on Twitter  Follow us on LinkedIn

15 February 2019

European Council: Banking Union: EU ambassadors endorse full package of risk reduction measures

Default: Change to:

The EU will soon have in place a more robust framework to regulate and supervise banks. EU ambassadors endorsed an agreement reached between the Romanian presidency and the Parliament on a set of revised rules aimed at reducing risks in the EU banking sector.

"The risk reduction measures agreed today will ensure that banking sector holds enough capital to lend safely to consumers and businesses. At the same time, taxpayers are shielded from any difficulties which banks might be facing", said Eugen Teodorovici, Minister of finance of Romania.

The package agreed by the Council and the Parliament comprises two regulations and two directives, relating to:

  • bank capital requirements (amendments to regulation 575/2013 and directive 2013/36/EU);
  • the recovery and resolution of banks in difficulty (amendments to directive 2014/59/EU and regulation 806/2014).

The risk reduction package is intended to implement reforms agreed at international level following the 2007-2008 financial crisis to strengthen the banking sector and address outstanding challenges to financial stability. Presented in November 2016, they include elements agreed by the Basel Committee on Banking Supervision and by the Financial Stability Board (FSB).

Among the core measures agreed to reduce risk in the banking system, the package enhances the framework for bank resolution. It requires global-systemically important institutions ('G-SIIs') to have more loss-absorbing and recapitalisation capacity by setting the requirements as regards the amount and quality of own funds and eligible liabilities (MREL) to ensure an effective and orderly "bail-in" process. It also provides provisional safeguards and possible additional actions for resolution authorities.

The package also strengthens bank capital requirements to reduce incentives for excessive risk taking, by including a binding leverage ratio, a binding net stable funding ratio and setting risk sensitive rules for trading in securities and derivatives.

In addition, the banking package contains measures to improve banks' lending capacity and to facilitate a greater role for banks in the capital markets, such as:

  • reducing the administrative burden for smaller and less complex banks, linked in particular to reporting and disclosure requirements;
  • enhancing the capacity of banks to lend to SMEs and to fund infrastructure projects;

Press release

Text of the political agreement on the capital requirements regulation

Text of the political agreement on the capital requirements directive

Text of the political agreement on the bank recovery and resolution directive

Text of the political agreement on the single resolution mechanism

© European Council

< Next Previous >
 Hover over the blue highlighted text to view the acronym meaning
Hover over these icons for more information

Add new comment