CRD IV—essentials

The following Financial Services practice note provides comprehensive and up to date legal information covering:

  • CRD IV—essentials
  • Scope of EU CRD IV and EU CRR
  • Definitions of capital
  • Own funds
  • Liquidity
  • Liquidity Coverage Ratio (LCR)
  • Leverage ratio
  • Net Stable Funding Ratio
  • Capital buffers
  • Counterparty credit risk
  • More...

CRD IV—essentials

This Practice Note introduces key concepts in the EU’s package of prudential measures, the Capital Requirements Directive IV (Directive 2013/36/EU) (EU CRD IV) and the Capital Requirements Regulation (EU) 575/2013 (EU CRR) (also known collectively as EU CRD IV), which implemented the global capital adequacy framework, Basel III, in the EU. The majority of EU CRD IV became effective on 1 January 2014, except for certain provisions specified in Article 521 of the EU CRR. As EU CRD IV combined a directive and a regulation, elements of the requirements were directly applicable in EU Member States and others required national implementation. This Practice Note also considers how the UK implemented the EU CRD IV measures, and the divergence in the UK’s approach to prudential measures as a result of its withdrawal from the EU.

Background to the EU CRD IV and EU CRR

EU CRD IV recast the existing Capital Requirements Directive (Directive 2006/48/EC) and (Directive 2006/49/EC) (EU CRD) and introduced EU-specific reforms relating to prudential requirements for credit institutions and investment firms.

Basel III is a global package of reforms which set out international standards of capital adequacy following the 2008 financial crisis. The G20 Declaration (the Declaration of 2 April 2009 on 'Strengthening the Financial System') called for internationally consistent efforts aimed at strengthening transparency, accountability and regulation by improving the quantity and quality

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