European banks will get a short-term break on new capital requirements starting in 2027. The EU is introducing a temporary multiplier that reduces how much capital banks must hold under the Fundamental Review of the Trading Book (FRTB), part of Basel III reforms. This move aims to keep EU banks competitive while the US and UK delay full implementation of these standards.
What the temporary adjustment means
Instead of scrapping the stricter Basel III rules, the EU will apply a time-limited multiplier from January 1, 2027, through December 31, 2029. This multiplier lowers the capital banks need to reserve against trading risks, easing the increased burden from the FRTB overhaul. The formal approval of this change is expected around June 4, 2026. Previously, some Basel III provisions were postponed until 2026, further stretching the timeline for full compliance.
Impact on European banks and competition
Big European banks such as Deutsche Bank and BNP Paribas stand to benefit the most. The capital requirements under FRTB significantly affect their trading operations, influencing their ability to engage in market-making and lending activities. By acting now, Brussels aims to avoid putting its banks at a disadvantage compared to US and UK counterparts, who are still slow to adopt these reforms. This step balances the EU's commitment to global banking standards with the practical reality that major partners are lagging behind.
