Regulatory Consistency Assessment Programme (RCAP) - Assessment of Basel III regulations - European Union

Through its Regulatory Consistency Assessment Programme (RCAP), the Basel Committee monitors the timely adoption of regulations by its members, assesses their consistency with the Basel framework and analyses the quality of intended regulatory outcomes. The RCAP also helps member jurisdictions to identify deviations from the Basel framework and assesses their materiality. This report describes the Committee's assessment of the implementation of the Basel capital standards in the European Union (EU). 

The assessment was based on the EU's Capital Requirements Regulation and Fourth Capital Requirements Directive and took account of relevant rules in place at the Member State level. It concluded that eight of the 14 components meet all minimum provisions of the relevant Basel standards and these were therefore graded as "compliant", the highest possible grade. Four of the components were assessed as "largely compliant", one notch below the highest grade, reflecting the fact that most but not all provisions of the global standard were satisfied. One component - the Internal Ratings-based (IRB) approach for credit risk - was assessed "materially non-compliant" (one notch above the lowest grade), the findings in relation to which pertained primarily to the treatment of exposures to SMEs, corporates and sovereigns. Another component was found to be "non-compliant" (the lowest possible grade). This relates to the EU's counterparty credit risk framework, which provides an exemption from the Basel framework's credit valuation adjustment capital charge for certain derivatives exposures. 

The overall grade for the EU was assessed as materially non-compliant. At the same time, the Committee recognises and welcomes the commitment of the European authorities to converge toward the Basel standards, such as the provisions the EU has already made to limit over time the application of standardised risk weights to central government exposures.