Capital adequacy and liquidity regulation (CRR/CRD)

Capital adequacy and liquidity regulation (CRR/CRD)

The CRR/CRD regulatory framework (CRD package) consists of the Credit Requirements Directive (CRD IV) and the Capital Requirements Regulation (CRR). The regulatory framework aims to improve banks’ ability to bear risks by strengthening their solvency and liquidity position as well as their risk management.  

A reform package was issued on 7 June 2019 to further improve the resilience of EU credit institutions: Regulation (EU) No 2019/876 (CRR2) and Directive (EU) 2019/878 (CRDV) of the European Parliament and of the Council (CRDV).

The key points of the reform package:

  • a binding Leverage Ratio (LR) to prevent institutions from excessive leverage and a leverage ratio G-SIB buffer for institutions identified as being of global systemic importance
  • a binding Net Stable Funding Ratio (NSFR) to address the excessive reliance on short-term wholesale funding and to reduce long-term funding risk
  • more stringent rules concerning the minimum requirement for own funds and eligible liabilities, applying to institutions identified as global systemically important institutions (G-SII) and other large banks
  • for non-complex, small banks, reduce the administrative burden linked to some rules in the area of remuneration (namely those on deferral and remuneration using instruments, such as shares), which appear disproportionate for these banks
  • a new market risk framework for reporting, including measures to ease reporting and disclosure requirements and to simplify rules related to market and liquidity risks for small and structurally simple banks
  • changes in the macro-prudential toolkit (structural macro-prudential buffers (OSII-and systemic risk buffer) are added together and pillar 2 add-ons can not be used as a macro-prudential tool)
  • several other actions designed with a view to the EU's special characteristics. These include measures encouraging investments to public infrastructure projects and SMEs or a credit risk framework easing the removal of non-performing loans from the balance sheet. 

Updates to the CRR/CRD regulatory framework are upcoming:

  1. In December 2017, the Basel Committee on Banking Supervision published its recommendations on the finalisation of the Basel III framework. The recommendations will be implemented in Europe by updating the CRR/CRD package. On 11 October the European Commission has launched a public consultation on the implementation of the final Basel III reforms in the EU.
Open all Close all
Basic information

CRR/CRD regulatory framework

The Credit Requirements Directive (CRD IV) covers both requirements relating to the taking up of business and the provision of services as well as requirements relating to official supervision, sanctions and reliable corporate governance. It also includes additional capital requirements in the form of various buffers. The Directive is implemented through national legislation.

The Capital Requirements Regulation (CRR) is directly applicable legislation, so it does not require national implementation. The CRR includes provisions relating to calculation of own funds and prudential minimum requirements, liquidity, leverage ratio and large exposures. It also includes comprehensive provisions on disclosure requirements.

The EU’s Capital Requirements Regulation is complemented by regulatory and implementing technical standards, prepared by the European Banking Authority and adopted by the EU Commission as decisions and regulations, which are binding and directly applicable in the Member States.

The EBA maintains on its website an Interactive Single Rulebook, which not only contains the Credit Requirements Directive and the Capital Requirements Regulation, but also the corresponding technical standards developed by the EBA and adopted by the European Commission (RTS and ITS), as well as the EBA Guidelines and related Questions and Answers (Q&A).

The regulatory framework is accompanied by comprehensive COREP reporting.

Reform package (CRR2/CRDV)

Regulation (EU) N:o 2019/876 (CRR2) and Directive (EU) 2019/878 (CRDV) of the European Parliament and of the Council can be found HERE.

Releases related to the preparation of the reform package:

European Commission – press release (23.11.2016): EU Banking Reform: Strong banks to support growth and restore confidence

European Parliament – press release (16.4.2019): Parliament approves rules to reduce risks to EU banks and protect taxpayers

Council of the EU – press release (14.5.2019): Banking Union: Council adopts measures to reduce risk in the banking system

European Commission – Fact Sheet  (16.4.2019): Adoption of the banking package: revised rules on capital requirements (CRR II/CRD V) and resolution (BRRD/SRM)

Updates to the CRR/CRD regulatory framework are upcoming:

1. Basel Committee on Banking Supervision’s recommendations on the finalisation of the Basel III framework (so-called Basel IV)

Basel Committee on Banking Supervision: Basel III: Finalising post-crisis reforms

FIN-FSA supervision release 8.12.2017 – 70/2017 (in Finnish): Basel III solvency requirements updated – comparability of banks’ solvency figures to be improved

FIN-FSA online article (19.3.2018) (in Finnish): Basel III reforms harmonise banks’ solvency calculations – capital requirements for Finnish banks applying IRBA estimated to increase

Comission press release (7.12.2017): Banking regulation: Commission welcomes Basel Committee's agreement on post-crisis reforms

EBA press release on a Commission request for EBA consultation regarding the implementation of recommendations in Europe (7.5.2018): EBA will support the Commission in the implementation of the Basel III framework in the EU

EBAs public hearing (2.7.2019): EBA Basel assessment sees impact driven by large banks

EBAs press release (5.8.2019): EBA advises the European Commission on the implementation of the final Basel III framework

European Commission – public consultation: Alignment EU rules on capital requirements to international standards (prudential requirements and market discipline)

Application and schedule

The CRR/CRD regulatory framework applies to the following supervised entities:

  • credit institutions
  • investment firms, with the exception of investment firms referred to in chapter 6, section 1, subsection 4 of the Investment Services Act
  • management companies engaged in operations referred to in section 5 subsection 2 of the Investment Services Act (portfolio management companies)
  • central institutions of amalgamations of deposit banks
  • holding companies of credit institutions
  • holding companies of investment firms
  • parent companies of financial and insurance conglomerates.

Entry into force of the reform package 27 June 2019. However, as a rule, the application of provisions begins later than the date of entry into force:

The main rule concerning the CRD V Directive: 29 December 2020

The main rule concerning the CRR 2 Regulation: 28 June 2021

Note. Regulation includes several exceptions to the main rule regarding the application dates.

Regulatory links

DIRECTIVE 2013/36/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (Credit Requirements Directive, CRD IV) – Consolidated version here

DIRECTIVE (EU) 2019/878 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 20 May 2019 amending Directive 2013/36/EU as regards exempted entities, financial holding companies, mixed financial holding companies, remuneration, supervisory measures and powers and capital conservation measures (CRD V)

REGULATION (EU) No 575/2013 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL,  on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (Capital Requirements Regulation, CRR) Consolidated version here

REGULATION (EU) 2019/876 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL , of 20 May 2019 amending Regulation (EU) No 575/2013 as regards the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements, and Regulation (EU) No 648/2012 (CRR 2)

Regulatory and implementing technical standards adopted by the EU Commission as decisions and regulations

Interactive single rulebook maintained by the EBA

Q&As maintained by the EBA

The EBA's Guidelines and Recommendations classified by topic

Act on Credit Institutions and other related legislation

Regulation (EU) 2016/445 of the European Central Bank of 14 March 2016 on the exercise of options and discretions available in Union law (ECB/2016/4)

Guideline (EU) 2017/697 of the European Central Bank of 4 April 2017 on the exercise of options and discretions available in Union law by national competent authorities in relation to less significant institutions (ECB/2017/9)

Recommendation of the European Central Bank of 4 April 2017 on common specifications for the exercise of some options and discretions available in Union law by national competent authorities in relation to less significant institutions (ECB/2017/10)

ECB Guide on options and discretions available in Union law - Consolidated version November 2016

Regulations and guidelines 26/2013 Yhteiseurooppalainen raportointi (COREP) (in Finnish)

Regulations and Guidelines 5/2019: Regulations and Guidelines related to the Capital Requirements Regulation