Finance
EU to 'neutralise' Impact on Bank Capital From Basel Trading Rule, EU Source Says
Published by Global Banking & Finance Review®
Posted on March 18, 2026
2 min readLast updated: March 18, 2026
Quick Summary
The EU plans to neutralise the impact of the Basel III FRTB trading-book reforms on bank capital by deploying a temporary multiplier and targeted relief measures as it delays implementation to preserve competitiveness amid global laggards.
EU Set to Neutralise Impact of New Basel Trading Rules on Bank Capital
EU Response to Basel III Trading Book Reforms
BRUSSELS, March 18 (Reuters) - The European Union plans to "neutralise" the impact on lenders' capital requirements from a new global banking reform affecting their trading operations, an EU official close to the topic said on Wednesday.
Adoption and Implementation Timeline
The EU is set to adopt the Fundamental Review of the Trading Book, a key part of the Basel III package devised in the wake of the global financial crisis, from January next year. The EU has already delayed its implementation as it tries to maintain the competitiveness of its lenders in the face of delays in other financial centres. The rules are not yet in place in Britain or the United States.
Key Features of the FRTB
The FRTB governs capital and reporting requirements relating to banks' trading assets, crucially including how risk should be measured using a standard method or banks' own calculations. It seeks to match banks' capital requirements more closely with the real risks in their trading activity.
Concerns from European Banks
European banks have urged the EU to refrain from imposing new burdens that their competitors overseas do not face.
Temporary Multiplier to Offset Capital Impact
The EU is to introduce a "temporary multiplier" that neutralises the capital impact on banks that might be affected negatively by the FRTB rules, the source said.
The plan formed part of a consultation launched last year, in which the European Commission sought feedback and said the design of a multiplier "should be straightforward, sensitive to risk, and easy to implement, maintain, and supervise".
International Regulatory Landscape
The Trump administration is seeking to ease regulations on American banks and has been moving closer to proposing a new version of the so-called "Basel endgame" rules dictating how large banks must measure their risk.
That has put pressure on rival jurisdictions wanting to keep their financial institutions competitive.
The Bank of England has delayed the implementation of FRTB until 2028.
Reporting Credits
(Reporting by Jan Strupczewski in Brussels; Editng by Tommy Reggiori Wilkes, Kirsten Donovan)
Key Takeaways
- •The EU will delay implementation of FRTB to January 1, 2027 and apply a temporary multiplier to neutralise capital impacts for up to three years
- •The ‘temporary multiplier’ mechanism is part of a targeted consultation aimed at ensuring risk‑sensitivity, simplicity, and ease of supervision
- •The move seeks to keep EU banks competitive internationally, as neither the US nor the UK have implemented equivalent Basel III endgame standards yet
Frequently Asked Questions about EU to 'neutralise' impact on bank capital from Basel trading rule, EU source says
1What is the EU's plan regarding the new Basel trading rule?
The EU plans to neutralise the impact on banks' capital requirements caused by the Fundamental Review of the Trading Book (FRTB) rules.
2When will the EU adopt the FRTB rules?
The EU is set to adopt the Fundamental Review of the Trading Book from January next year.
3How does the EU plan to neutralise the impact of FRTB on banks?
The EU will introduce a 'temporary multiplier' to neutralise the capital impact on banks affected by the FRTB rules.
4Why has the EU delayed the implementation of the Basel trading rule?
The EU delayed FRTB implementation to maintain the competitiveness of its banks, as similar rules are not yet enforced in the UK or US.
5What is the Fundamental Review of the Trading Book (FRTB)?
FRTB is a set of global regulations under Basel III that determines capital and reporting requirements for banks' trading assets.
