CRR/CRD Implementation

CRR III introduces the output floor, which limits the capital relief from internal models (IRB approach) to a maximum of 27.5% compared to the standardised approach — with a phase-in from 2025 to 2030 (gradually rising from 50% to 72.5%). The credit risk standardised approach (SA-CR) is fundamentally revised: new risk weights for real estate exposures, more granular exposure classes, and stricter requirements for external ratings. For institutions using the IRB approach, the option for partial use applications is removed for certain portfolios. Implementation requires adjustments to calculation engines, data infrastructure, and reporting processes.

CRR III is directly applicable as an EU Regulation since 1 January 2025. CRD VI, as a Directive, must be transposed into national law — applicable from 11 January 2026. The output floor is phased in: 50% from 2025, rising annually to 72.5% by 2030. FRTB capital requirements have been binding since January 2025, with certain market risk framework elements postponed to January 2026. EBA guidelines on ESG disclosures apply from 31 December 2026. Institutions should align their implementation roadmap to these regulatory milestones to avoid compliance gaps.

A CRR III gap analysis follows four steps: (1) Stocktaking of current capital calculations, risk models, and reporting processes. (2) Systematic comparison against new CRR III requirements — structured by credit risk (SA-CR/IRB), operational risk (standardised measurement approach), CVA, FRTB, output floor, and disclosure. (3) Quantitative impact assessment on own funds, RWA, and capital ratios. (4) Prioritised action plan with implementation roadmap, responsibilities, and timeline. Particular data challenges arise from requirements for property valuations, external ratings, and granular exposure classification.

The output floor is one of the central innovations of CRR III (also known as Basel 3.1). It caps the benefit institutions can derive from using internal models (IRB approach) versus the standardised approach. By 2030, risk-weighted assets (RWA) from internal models must not fall below 72.5% of the SA-CR result. During the transition phase (2025–2030), the floor rises incrementally. For implementation, this means: parallel RWA calculation under SA-CR and IRB, capital planning adjustments, assessment of strategic portfolio decisions, and potentially realigning the model strategy.

CRD VI strengthens governance requirements for credit institutions: stricter fit-and-proper assessments for management bodies, enhanced risk committee requirements, and for the first time, a mandatory prudential transition plan. In the ESG domain, CRD VI requires systematic consideration of sustainability risks in the risk strategy, ICAAP, and business strategy. National transposition varies by member state — in Germany via the BRUBEG Act, encompassing adjustments to the Banking Act (KWG) and MaRisk. Institutions must adapt their governance structures, reporting processes, and risk models accordingly.

ADVISORI supports credit institutions through the entire CRR III/CRD VI implementation cycle: (1) Regulatory analysis and gap analysis with quantitative impact assessment. (2) Creation of an institution-specific implementation roadmap with milestones and dependencies. (3) Technical execution in calculation systems, reporting software, and data infrastructure. (4) Adaptation of governance structures and processes in line with CRD VI. (5) Validation of implementation and preparation for SREP examinations. Our consultants bring extensive experience in regulatory transformation projects at credit institutions of varying sizes.

The Fundamental Review of the Trading Book (FRTB) is part of CRR III and introduces binding capital requirements for market risk. Banks must choose between the revised standardised approach (SA) and the internal model approach (IMA) — with tightened approval requirements for the IMA. FRTB implementation requires the adoption of new risk measures (Expected Shortfall replacing VaR), establishment of trading desks per regulatory specifications, adaptation of P&L attribution tests, and integration into existing regulatory reporting. Certain market risk rules were postponed to January 2026.

Data sourcing is one of the biggest challenges in CRR III implementation. New requirements particularly affect: granular property valuation data for revised risk weights, external rating information for new SA-CR classification, data to differentiate specialised lending and infrastructure exposures, and expanded Pillar III disclosure data. These data are frequently distributed across multiple systems, not available at the required granularity, or require new interfaces to external data providers. An early data quality review is therefore a critical success factor for any CRR III implementation project.