The European Commission is set to delay the impact of the Fundamental Review of the Trading Book (FRTB) in a bid to stop EU lenders from being put at a disadvantage by US moves to cut capital requirements for big banks.
Reports suggest that Brussels will after Easter adopt legislation to neutralise the short-term impact of FRTB - a key component of the Basel III framework governing market risk. Brussels’ plan is to introduce a temporary multiplier that negates the increase for banks’ trading activities for up to three years, the officials said.
The European Banking Authority estimates that implementing FRTB would raise market risk capital requirements by about 30 per cent on average, with increases of up to roughly 80 per cent for some banks.
Commenting, Hyder Jumabhoy, Partner at international law firm White & Case LLP and Global Co-head of its Financial Institutions Industry Group and EMEA Co-head of its Financial Services M&A practice, said:
“Rumours that the European Commission may delay implementation of the Fundamental Review of the Trading Book indicates a possible concern that EU banks should not inadvertently be placed at a competitive disadvantage to international peers. At a time when global competition for capital is intense and customer choice is not limited by jurisdictional boundaries, maintaining a level playing field is critical to ensuring EU bank can continue to lend and invest effectively.
“While the FRTB framework is designed to strengthen resilience through more risk-sensitive capital requirements, postponing it could give credit institutions additional breathing space to prepare themselves and mitigate market disruption.
“Current speculation is unlikely to materially impact EU bank M&A consolidation activity. The past 12 months have seen deal activity accelerate across the European banking sector, amid rising regulatory and economic challenges, with more than 50 transactions in 2025 alone. EU lenders continue to feel the pressure to build scale and scope, improve operational efficiency and bolster shareholder returns.”
