S&Ds are proud of a good and balanced agreement on the EU legislative package on capital requirements for banks, which was voted on today by the Parliament’s committee on economic and monetary affairs. The agreement, negotiated by our MEP Jonás Fernández, aims to ensure better resilience of EU banks to future economic shocks, while contributing to the green transition and post-pandemic recovery.

Today’s agreement represents Parliament’s position on two legislative proposals presented by the European Commission in October 2021. They are amending the Capital Requirement Regulation (CRR) and the Capital Requirement Directive (CRD), to transpose the global Basel III agreement into European legislation and to introduce additional reforms into the EU legislation. The deal voted by the committee is set to be the Parliament’s mandate for negotiations with EU member states.

Jonás Fernández, MEP, the Parliament’s rapporteur on the capital requirement legislation, and S&D spokesperson on economic and monetary affairs, said:

"The adoption of the Capital Requirements Directive and the Capital Requirements Regulation by the Parliament’s committee on economic and monetary affairs earlier today sends a clear message: some EU specificities have been included, while the European Parliament is committed to the transposition of the Basel III international agreement as close as possible into EU legislation. As rapporteur on behalf of the Socialists and Democrats, I have managed to avoid the inclusion of further deviations that were defended by other political groups.

“The Basel agreement has been negotiated by jurisdictions across the world to strengthen financial stability globally and to close the widening gap between large banks that typically use internal models to calculate risk weights and small banks that use standardised approaches. The introduction of a so-called output floor will help close this gap by capping the risk weight large banks can apply vis-à-vis internal models. Attempts by some members to permanently carve out certain asset classes from this requirement in deviation from the Basel agreement only works in service of large banks and jeopardises financial stability as well the EU’s credibility as a reliable negotiating partner in international fora. Consequently, including a clear limitation of four years, at the most, to any potential extension of the transitional arrangement, is a key element in the Capital Requirements Regulation text green-lit today.

"The inclusion of environmental, social, and governance (ESG) considerations, in line with social-democratic principles of social justice and sustainability, is another point of which I am particularly satisfied as rapporteur. We have strengthened ESG requirements by demanding banks to adopt transitional plans to address ESG risk, with a focus on the EU objective of achieving climate neutrality by 2050, and by imposing disclosure requirements. Besides, ESG considerations have been included in the calculation of collateral, increasing capital requirements."