CRR II

CRR II (Regulation (EU) 2019/876) amends the original Capital Requirements Regulation (Regulation 575/2013). It introduces binding requirements for the Net Stable Funding Ratio (NSFR), a Leverage Ratio floor of 3% of Tier 1 capital, the new Standardised Approach SA-CCR for counterparty credit risk and extended FRTB reporting obligations. The regulation became applicable on 28 June 2021 and applies directly to all credit institutions and investment firms in the EU.

The NSFR (Net Stable Funding Ratio) under Articles 428a ff. CRR requires that available stable funding (ASF) equals at least 100% of required stable funding (RSF). Its purpose is to ensure adequate medium- to long-term liquidity. The NSFR complements the short-term Liquidity Coverage Ratio (LCR) and reduces reliance on short-term wholesale funding.

The Standardised Approach for Counterparty Credit Risk (SA-CCR, Articles 274 ff. CRR) replaces the former Mark-to-Market Method and the Standardised Method. It calculates the exposure value from the current replacement cost plus a potential future exposure (PFE) add-on. SA-CCR is more risk-sensitive, better accounts for netting and collateral, and delivers more accurate capital requirements for derivative positions.

Under CRR II a binding Leverage Ratio of at least 3% of Tier 1 capital relative to the total exposure measure applies (Articles 429 ff. CRR). Global systemically important institutions (G-SIIs) face an additional Leverage Ratio buffer equal to 50% of their G-SII capital buffer. The Leverage Ratio acts as a backstop to the risk-based capital ratio.

CRR II strengthens the proportionality principle through simplified disclosure and reporting requirements for small, non-complex institutions as defined in Art. 4(1)(145) CRR. These institutions benefit from a simplified NSFR calculation (sNSFR, Articles 428ai ff. CRR), reduced disclosure frequencies and lighter data requirements in supervisory reporting. The goal is to ease the burden on proportionally regulated institutions while maintaining financial stability.

CRR II (2019/876) implements partial Basel III reforms (NSFR, Leverage Ratio, SA-CCR), while CRR III (2024/1623) finalises the Basel III framework — introducing an output floor, a revised credit risk standardised approach and FRTB as a binding capital requirement rather than a reporting obligation only. CRR III requirements apply from 1 January 2025, with transitional arrangements through 2030. Both regulations must be considered in parallel.

Under CRR II the FRTB (Fundamental Review of the Trading Book) is initially anchored as a reporting obligation only (Art. 430b CRR). Institutions must report SA/IMA market risk calculations in parallel without capital impact. Only CRR III makes the FRTB a binding capital requirement. The CRR II reporting obligation serves supervisory data collection and helps institutions prepare for CRR III requirements.