The European Commission has announced banking reforms aimed at further reinforcing the ability of EU banks to withstand potential shocks. The measures are part of Commission's ongoing work to reduce risk in the banking sector and build on existing EU banking regulations that have been put in place to address systemic weaknesses in the wake of the 2008 financial crisis.

Capital Requirements Directive and the Bank Recovery and Resolution Directive

The proposals amend the following pieces of legislation:

• The Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD) which were adopted in 2013 and which set out prudential requirements for credit institutions (i.e. banks) and investment firms and rules on governance and supervision;
• The Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR) which were adopted in 2014 and which spell out the rules on the recovery and resolution of failing institutions and establish the Single Resolution Mechanism.

Europe needs strong + diverse banks

Valdis Dombrovskis, the commissioner responsible for Financial Stability, Financial Services and Capital Markets Union, said: “Europe needs a strong and diverse banking sector to finance the economy. We need bank lending for companies to invest, remain competitive and sell into bigger markets and for households to plan ahead. Today, we have put forward new risk reduction proposals that build on the agreed global standards while taking into account the specificities of the European banking sector."

The reforms include measures to increase the resilience of EU institutions and enhancing financial stability, measures to improve banks' lending capacity to support the EU economy, as well as measures to further facilitate the role of banks in achieving deeper and more liquid EU capital markets to support the creation of a Capital Markets Union.

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CTMfile take: A big part of these reforms are aimed at increasing the capacity of banks to lend to businesses, which supports one of the European Commission's flagship initiatives to stimulate investment in Europe.