Current developments

On 7 June 2019, the fundamental changes to the CRD (Capital Requirements Directive) and the CRR (Capital Requirements Regulation) were published in the EU's Official Journal. The amended requirements are commonly referred to as CRD V and CRR II. The new CRD requirements had to be transposed into national law by 28 December 2020. Some of the new CRR changes are applicable from as early as 27 June. Other amendments will be successively applied for the first time at later dates, but no later than 28 June 2023.

The amendments due to the CRD V and the CRR II address, among others the following topics:


  • Pillar 2 capital requirements and recommendations
  • Limitation of both the supervisory review and evaluation process (SREP) and Pillar 2 to microprudential oversight
  • Change in the scope of the systemic risk buffer with the possibility of sector-specific application, e.g. to residential or commercial real estate financing
  • Introduction of a revised framework for interest-rate risk in the banking book


  • Proportional application of some requirements for small and non-complex institutions (in particular with regard to reporting and disclosure requirements)
  • Waivers from liquidity requirements for subsidiaries
  • Implementation of the globally agreed total loss-absorbing capacity (TLAC) standard for global systemically important banks
  • New provisions relating to eligible liabilities
  • Standardised approach for counterparty credit risk (SA-CCR)
  • New approaches to determine the capital requirements for market risk based on the revised Basel trading book provisions for the market risk (FRTB), which initially only trigger additional reporting requirements
  • Large exposures regime
  • Leverage ratio as an additional capital requirement and adjustment of the calculation method
  • Net stable funding ratio (NSFR) and the simplified calculation of the net stable funding ratio (sNSFR)
  • Expansion of preferential treatment with regard to the capital requirements for credit risk at small and medium-sized entities (SME supporting factor)

The published amendments due to CRR II do not yet include the Basel III finalisation package agreed internationally at the end of 2017 (see also Basel regulatory framework). This requires in a further major need for amendment of the CRR (CRR III) – particularly with regard to the introduction of an output floor for institutions that use internal approaches for determining own funds requirements. Other fundamental changes due to the CRR III relate to the different approaches for determining the own funds requirements for each of the risk types, such as the credit risk, operational risk or the risk of a credit valuation adjustment (CVA risk). Work on implementation in Europe is proceeding at full speed. Currently, a first-time application of the new requirements before 2025 is rather unlikely (taking into account a usual implementation period of two years).

The reform of Basel III will be of essential importance for Pfandbrief banks and real estate financiers. In the European implementation of the reform, the changed starting position due to the adverse effects of COVID-19 must also be taken into account.