CRD4 – Maximum Harmonisation But Minimal Harmony?

On 20 July 2011, the EU Commission published a provisional draft of its much-awaited legislation to implement the proposals of the Basel Committee on Banking Supervision, known as "Basel III,"¹ into EU law. It is not, however, light reading. At nearly 700 pages of detailed text, it is likely to be a helpful addition to known cures for insomnia. For those not needing assistance in this area, we have sought to condense the main features of the proposals into just a few (all right, slightly more than a few) pages, focusing particularly on the material differences between Basel III and CRD4.

Scope and Structure

Whereas Basel II and Basel III focus only on internationally active banks, the Capital Requirements Directive in Europe currently applies to all European banks, as well as to European investment firms in general. The proposed CRD4 directive and regulation retain this approach and this gives rise to certain required adaptations of the Basel III proposals.