Capital Requirements Directive - CRD IV (Basel III)

What is CRD IV Regulation?

Capital Requirements Directive IV is the latest regulatory framework proposed by the European Commission to help implement Basel III rules in the EEA. CRD IV is made up of Capital Requirements Directive (CRD) and the Capital Requirements Regulations (CRR) which span three pillars of requirements; capital, leverage and liquidity.

Under the CRR, new supervisory reporting frameworks for Common Reporting (COREP) and Financial Reporting (FINREP) are introduced by the European Banking Authority (EBA) in an attempt to create reporting templates for all EU banks to use when reporting to their national regulators.

When does CRD IV Regulation begin?

Effective from 1st January 2013 and will follow the Basel III timetable set by the Basel Committee.

Which firms will be affected?

According to the EC, CRD IV will apply to more than 8,000 banks, amounting to 53% of global bank assets, and is estimated to lead to an extra €460 billion of new capital having to be raised by 2019.

How will CRD IV regulation impact you?

Key points at a glance

The CRD IV is closely aligned with the objectives of Basel III and the proposal includes;

  • Capital: Nature and structure of capital will be regulated such that:

o Tier 1 capital will be predominantly Common Equity with the remaining form of Tier 1 capital subject to strict criteria which would exclude innovative hybrid capital instruments;

o The upper and lower categories of Tier 2 will be replaced with a single set of criteria;

o Tier 3 will be phased out altogether; and deductions will be harmonised and, broadly, applied against the Common Equity element of Tier 1 capital.

  • Capital requirements for CCR exposures will be strengthened by requiring the potential exposure amount to be calculated using stressed data, a capital add-on to capture a capital valuation adjustment risk, a capital charge for specific wrong way risk and tougher margin and collateral requirements.
  • An unweighted leverage ratio will be introduced.
  • Pro-cyclicality will be reduced by introducing a moveable capital buffer range above the minimum capital requirements, with a restriction on distributions and payments of discretionary bonuses if capital levels fall within the buffer range.

Related regulations

If you are affected by this regulation then you may also be affected by these:

How UnaVista can help you with CRD IV Regulation?

UnaVista can assist you with a number of regulations, so that you don’t have to build separate solutions for each problem, future regulations can then be catered for through the platform when required. Other regulations to UnaVista can support you with include EMIR, Short Selling and FATCA.

  • Accurate compliance: Consolidate capital requirements data into a centralised repository to facilitate controlled risk monitoring and support overall CRD IV conformance
  • Improve efficiency: Report from one place in line with the new frameworks for COREP and FINREP to national regulators in the EU, with comprehensive auditing of the process
  • Reduce risk: Exceptions and deviations from buffers are managed using tailored workflow processes, graphical dashboards, and appropriate automated alerts to ensure capital levels remain within regulatory guidelines.