20/06/2013 - Economic and Financial Affairs Council (ECOFIN)
New rules to strengthen banks: final Council approval
On 20 June 2013, the Council adopted stricter capital requirements for banks and investment firms (the "CRD 4 package"). The new rules will be published in the Official Journal before 1 July 2013 and will apply from 1 January 2014.
Purpose of CRD 4
The new rules are designed to:
- enshrine in EU law a comprehensive set of international standards known as Basel III
- increase financial stability, by making banks more resilient in the face of financial shocks
- spur sustainable economic growth, by introducing harmonised single-market rules while also ensuring that credit continues to flow to the real economy.
The legislative package
The CRD 4 package is composed of a regulation establishing prudential requirements that institutions must respect and a directive governing access to deposit-taking activities. Its adoption required the agreement of the European Parliament, which was obtained on 28 February.
The new measures include:
- a requirement to hold a higher proportion of top-quality (common equity tier 1, CET 1) capital to cover unexpected losses
- additional capital requirements in the form of buffers
- provisions on liquidity and leverage.
Member states will retain the possibility to impose tighter prudential requirements to address increased risks.
Bankers' bonuses will be capped. The first bonuses to be affected will be those paid in 2015 in respect of performance in 2014.
The new legislation will also strengthen governance and transparency.