CRR-reglugerðin - 32013R0575

WHAT IS THE AIM OF THE REGULATION?

• Known as the capital requirements regulation (CRR), Regulation (EU) No 575/2013 aims to strengthen the prudential requirements of banks in the European Union (EU). This is done by requiring them to keep sufficient capital, loss-absorbing liabilities and liquid assets in order to ensure their financial soundness. The regulation also requires banks to disclose to the public how they comply with the prudential requirements.
• The overall objective is to make banks more robust and resilient in periods of economic stress.

KEY POINTS

The regulation establishes a single set of harmonised prudential rules, which banks throughout the EU must respect. This single rule book aims to ensure the uniform application of global standards (Basel III) in all of the EU Member States.

The legislation has been amended several times, in line with evolving international regulatory standards set by the Basel Committee on Banking Supervision.

The main elements of Regulation (EU) No 575/2013 include the following.

• Higher and better capital requirements. Banks must have a total amount of capital that corresponds to at least 8 % of their assets, measured according to their risks. For example, some assets, such as cash, are considered safe and do not attract a capital requirement; other assets – such as loans to other banks, businesses or consumers – are considered more risky and thus have a capital requirement. The more risky assets an institution holds, the more capital it must have.
• Liquidity measures. To ensure banks have sufficient liquidity, the regulation introduces two liquidity requirements:
  • the liquidity coverage ratio, which aims to ensure that banks have enough liquid assets (e.g. cash or other assets that can be quickly converted into cash with little or no loss of value) in the short term;
  • the net stable funding requirement, which aims to ensure that banks do not rely too much on short-term funding to fund their medium- and long-term assets.
• Limiting leverage. The regulation sets out a binding leverage ratio, which aims to limit banks from financing too large a portion of their activities with debt.

Amending legislation

• Amending Regulation (EU) 2016/1014 extended the period during which commodity dealers are exempted from the large exposures and own funds requirements laid down in Regulation (EU) No 575/2013 until 31 December 2020 or the date of entry into force of any amendments, whichever is the earlier.
• Amending Regulation (EU) 2017/2395 introduced transitional arrangements to mitigate the impact of introducing the International Accounting Standards Board Reporting Standard 9 (IFRS 9)¹ on own funds and for the large exposures treatment of certain public sector exposures denominated in the domestic currency of any Member State. It required the banks that use IFRS to prepare their financial statements to apply IFRS 9 as of 1 January 2018. Because this could lead to a sudden significant increase in expected credit loss provisions – and thus to a sudden decrease in institutions’ common equity tier 1 capital² – the regulation allowed institutions to add a portion of the increase in expected credit loss provisions to their common equity tier 1 capital as additional capital for a transitional period of five years until 31 December 2022.
• Amending Regulation (EU) 2017/2401 lays down revised capital requirements for positions in a securitisation³. It amends the regulatory capital requirements for institutions acting as initiators, sponsors or investors in securitisation transactions, in order to adequately reflect the specific features of simple, transparent and standardised securitisations.
• Amending Regulation (EU) 2019/630 amends Regulation (EU) No 575/2013 as regards minimum loss coverage for non-performing exposures. It aims to prevent any excessive accumulation of non-performing loans⁴ in the future without sufficient coverage of losses on banks’ balance sheets. It seeks to ensure that banks set aside sufficient own funds when new loans become non-performing. The regulation lays down a prudential backstop allowing institutions to cover, up to common minimum levels, the incurred and expected losses on newly originated loans once those loans become non-performing. Where a bank does not comply with the applicable minimum coverage requirement, a deduction from its own funds will be required.
• Amending Regulation (EU) 2019/876 introduced changes relating to 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.
• Amending Regulation (EU) 2019/2033 sets up a European prudential framework for investment firms. Previously, all investment firms were subject to the same capital, liquidity and risk management rules as banks.
• Amending Regulation (EU) 2020/873 introduced some targeted changes to Regulation (EU) No 575/2013 in response to the COVID-19 pandemic. These seek to introduce temporary relief from capital requirements in order to maximise banks’ ability to lend and absorb pandemic-related losses, while preserving their resilience. These changes include adjusting the timing of the implementation of certain international accounting standards and temporarily extending preferential treatment to non-performing loans benefiting from a government guarantee as part of the measures to mitigate the economic impact of the pandemic.
• Amending Regulation (EU) 2021/558 introduces changes to increase the overall risk sensitivity of the EU framework for securitisations, to ensure that the use of securitisation becomes more economically viable for institutions within a supervisory framework that preserves the EU’s financial stability.
• Amending Regulation (EU) 2022/2036 introduces changes in relation to the consolidated calculation for global systemically important institutions with multiple resolution entities to better ensure that the loss absorption and recapitalisation of banks occurs through private means when those banks become financially unviable and are, subsequently, placed in resolution.
• Amending Regulation (EU) 2023/2869 requires that, when making public any information, the institutions covered by Regulation (EU) No 575/2013 submit that information at the same time to the relevant collection body for the purpose of making it accessible on the European single access point established under Regulation (EU) 2023/2859.
• Amending Regulation (EU) 2024/1623 contains further rules to improve banks’ resilience to economic shocks by strengthening regulation, supervision and risk management aspects. The amendments seek to limit the impact of banks’ internal models to compute capital requirements, enhance the measurement of credit risk, operational risk and market risk and introduce a prudential regime for credit institutions’ exposures to crypto-assets.

Delegated and implementing acts

Regulation (EU) No 575/2013 gives the European Commission powers to adopt delegated and implementing acts in order to give full effect to the banking single rule book. A full list of these acts is available here.

FROM WHEN DOES THE REGULATION APPLY?

• Regulation (EU) No 575/2013 has applied since 28 June 2013.
• Amending Regulation (EU) 2016/1014 has applied since 19 July 2016.
• Amending Regulation (EU) 2017/2395 has applied since 1 January 2018.
• Amending Regulation (EU) 2017/2401 has applied since 1 January 2019.
• Amending Regulation (EU) 2019/630 has applied since 26 April 2019.
• Amending Regulation (EU) 2019/876 has applied since 28 June 2021, with some exceptions.
• Amending Regulation (EU) 2019/2033 has applied since 26 June 2021.
• Amending Regulation (EU) 2020/873 has applied since 27 June 2020.
• Amending Regulation (EU) 2021/558 has applied since 10 April 2022.
• Amending Regulation (EU) 2022/2036 has applied since 14 November 2022, apart from some exceptions which have applied since 1 January 2024.
• Amending Regulation (EU) 2023/2869 has applied since 9 January 2024.
• Amending Regulation (EU) 2024/1623 has applied since 1 January 2025, other than the exceptions listed in Article 2.

BACKGROUND

• Regulation (EU) No 575/2013 is part of a legislation package, including a directive, that was adopted to make the EU’s banking sector more resilient. The regulation sets out the prudential requirements for financial institutions, while the accompanying capital requirements directive (Directive 2013/36/EU) governs the access to deposit-taking activities.
• For further information, see:
  • Prudential requirements (European Commission).

KEY TERMS

1. International Financial Reporting Standard 9 (IFRS 9). A standard that aims to improve the financial reporting of financial instruments with the use of a more forward-looking model to recognise expected credit losses on financial assets. The application of IFRS 9 may lead to a sudden significant increase in expected credit loss provisions, and consequently to a sudden decrease in institutions’ common equity tier 1 capital. Therefore, arrangements are needed to mitigate the potentially significant negative impact on common equity tier 1 capital arising from expected credit loss accounting.
2. Common equity tier 1. A component of tier 1 capital that comprises a bank’s core capital and includes ordinary shares and retained earnings.
3. Securitisation. A transaction that enables a lender – often a bank – to refinance a set of loans/assets (e.g. mortgages, car leases, consumer loans, credit cards) by converting them into securities that others can invest in.
4. Non-performing loans. A loan is generally considered non-performing when more than 90 days have passed without the borrower (a company or individual) paying the amounts due or interest that have been agreed upon, or when it becomes unlikely that the borrower will repay it.

MAIN DOCUMENT

Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, pp. 1–337).

Successive amendments to Regulation (EU) No 575/2013 have been incorporated into the original text. This consolidated version is of documentary value only.

RELATED DOCUMENTS

Regulation (EU) 2023/2859 of the European Parliament and of the Council of 13 December 2023 establishing a European single access point providing centralised access to publicly available information of relevance to financial services, capital markets and sustainability (OJ L, 2023/2859, 20.12.2023).

Regulation (EU) 2023/2869 of the European Parliament and of the Council of 13 December 2023 amending certain Regulations as regards the establishment and functioning of the European single access point (OJ L, 2023/2869, 20.12.2023).

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 (OJ L 176, 27.6.2013, pp. 338–436).

See consolidated version.

Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ L 201, 27.7.2012, pp. 1–59).

See consolidated version.