27 June 2024

CRR – A European adoption of global Basel III standards

To improve financial stability in the Union, the EU has been implementing the Basel III framework on the regulation, supervision and risk management of banks. This three-pillar framework was formulated by the Basel Committee on Banking Supervision (BCBS) in response to the financial crisis in 20072009.

The first pillar of the framework defines minimum capital requirements for banks. To adopt those standards, the EU established the Capital Requirements Regulation (CRR) in 2013. Since then, CRR has been subject to multiple amendments to gradually reflect the Basel III standards, and to account for current economic challenges in the EU (e.g. the recovery from COVID-19 pandemic or the Union’s climate transition goals).

The most recent amendment, commonly referred to as ‘CRR III’, was released on 19 June 2024 in the Official Journal of the European Union1, and embeds the final BCBS standards2 in EU law. The majority of the CRR revisions will start to apply from 01 January 2025.

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Relevance for fund look-through reporting

For look-through credit risk calculations on fund portfolios, we observe the following key changes under CRR III:

  • Capital charges for selected exposure classes will increase significantly, most notably for equity exposures, subordinated debt, and certain alternative investments. For equity exposure, the change shall gradually be phased in until 2029.
  • For certain exposure classes, capital computation approaches have been made more specific, implying more extensive input data requirements. For example, for unrated exposures against banks, information about the health of the institution will be needed.
  • The approaches for Credit Valuation Adjustment (CVA) computation have been revised.

Impact on services to our existing clients

The regulatory changes in CRR will affect computations underlying the following report types:

  • WM Datenservice CRR reporting: Solva3, KPA4, CRR5
  • GroMiKV BVI reporting
  • Finanz Informatik KVG-Schnittstelle reporting

The amendment is applicable for reports with reference date as of 01 January 2025 or later.

About our CRR services

Through a personalised, high quality client service, we help asset manager clients satisfy their European bank investors’ regulatory fund reporting needs. Our managed service entails:

  • Data acquisition from client front, mid and back office systems, as well as from third-party sources (e.g. fund administrators)
  • Data validation and enrichment from major data vendors (e.g. WM Datenservice)
  • Computation of relevant CRR-related analytics, e.g. the portfolios’ average risk weights (Solvabilitätskennziffer), CVA charges, country breakdowns for the countercyclical capital buffer, and equity deductibles
  • Production of reports according to industry templates
  • Safe, timely and transparent dissemination of reports to dedicated bank investor audience and asset manager clients, either through the SolvencyAnalytics online platform or client-specific channels (e.g. SFTP)
  • Consulting service, including
    • consulting on upcoming regulatory changes (e.g. CRR III), and answering investor ad-hoc requests
    • supporting our clients in acquisition of regulated institutional investors
    • coordination with auditors to obtain CRR attestations

Our clients are onboarded by our portfolio management, regulatory and IT professionals in a proactive effort to understand their reporting needs, data landscape, and other specificities relevant for the reporting setup.

To learn more about our reporting services, contact us at info@solvencyanalytics.com.

1 Regulation (EU) 2024/1623 of the European Parliament and of the Council of 31 May 2024 amending Regulation (EU) No 575/2013 as regards requirements for credit risk, credit valuation adjustment risk, operational risk, market risk and the output floor

2 BCBS 424: Basel III: Finalising post-crisis reforms (December 2017)

3 Risikogewichte und Fremdwährungsanteile nach CRR

4 KSA Risikogewicht nach Ländern zur Ermittlung des antizyklischen Puffers

5 Eigenkapitalabzugspositionen und CVA-Risiko