The implementation of a critical component of the Basel III global bank capital regulations has been postponed by the European Union for one year, with the new date set for January 2026. The objective of this postponement is to preserve competitive parity between EU banks and their U.S. counterparts, as stated by Mairead McGuinness, the EU’s chief financial services officer.
In response to the global financial crisis of 2007-09, which involved the utilization of taxpayer funds to rescue failing institutions, these Basel III reforms were proposed. In order to fortify the banking sector’s resilience, the reforms are being implemented progressively on a global scale.
The United States is unlikely to meet its original deadline of July 2025 for these reforms, as Commissioner McGuinness observed. “In practice, the entry of application of the Basel standards in the U.S. is now highly unlikely to take place before January 1st, 2026, at the earliest,” she said in a conference presentation. A global level playing field for those large European institutions that are in competition with other global players is guaranteed by this one-year delay. It provides us with the opportunity to observe the actions of others.
Initially, the EU intended to execute all Basel III reforms by January 2025. Nevertheless, the fundamental review of the trading book (FRTB), which pertains to the manner in which banks conduct market risk management in their trading operations, is particularly affected by the delay. The remaining components of the Basel III reforms will be implemented in accordance with the established timeline, according to McGuinness.
The EU’s dedication to preventing its financial institutions from being at a disadvantage in comparison to their international counterparts, particularly those in the United States, is evidenced by this strategic delay.