AIMA

CRD I

CRD II

CRD III

CRD IV/CRR

CRD I

A key piece of European legislation in delivering a single market in financial services, the Capital Requirements Directives (CRD) set common capital standards for European financial institutions and implemented the Basel Accord of 1988 across the European Union. 

Formally adopted in June 2006 and entering into force on 1 January 2007, the CRD framework has been subject to a number of amendments – the latest revisions being in the form of a European Commission proposal published on 20 July 2011.

CRD II

The CRD framework was first amended in May 2009.  CRD II covers: (i) large exposures; (ii) hybrid capital instruments; (iii) supervisory arrangements (colleges); (iv) liquidity risk management; (v) securitisations; (vi) the waivers for banks organised in networks; and (vii) adjustments to certain technical provisions and largely follows technical advice put forward by the then Committee of European Banking Supervisors (now the European Banking Authority).

CRD III

In parallel with work undertaken by Basel, the European Commission adopted legislative proposals in July 2009 on amendments to provisions relating to the trading book, re-securitisation and remuneration.  The final text agreed by the European Commission, Parliament and Council of Ministers was published in the Official Journal on 14 December 2010, with an implementation deadline of 31 December 2011.  Its key relevance to asset management firms was the introduction of remuneration rules.  Whilst many of the elements of the CRD III provisions had little real application in respect of the typical hedge fund  remuneration model, the agreed text contained explicit permission for such rules to be applied proportionately.  In the UK, these rules have been implemented through revisions to the FSA’s already existing Remuneration Code.

The relevant consultations, legislation and AIMA documents can be found here.

CRD IV/CRR

On 20 July 2011, the European Commission adopted a further legislative proposal to strengthen the regulation of the banking sector. This proposal replaces the current Capital Requirements Directives with a Directive and a Regulation. Most of the reformed Pillar 1 requirements for calculating capital requirements and resources are set out in the Regulation and will be directly applicable to all firms in scope. The Directive includes requirements for Pillar 2 and Pillar 3, as well as for the Basel capital buffers. 

European Commission Proposals on Capital Requirements