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Own funds requirements · Reviewed 11 September 2026

Planning for CRR III, the output floor and FRTB

CRR III implements major elements of the final Basel III reforms in EU law. Much of the framework has applied since 1 January 2025. The output floor is phased in over time, while the FRTB market risk framework has separate dates and transitional measures. Capital planning needs to calculate these developments separately before combining their effects.

T-NEX GmbHFirst version: Updated: Editorial policy
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What CRR III and Basel IV mean

For risk management, financial planning, regulatory reporting and regulatory data owners in German and European CRR credit institutions.

CRR III is the common name for the amendments to the Capital Requirements Regulation introduced by Regulation (EU) 2024/1623. Basel IV is a market label for the finalisation of Basel III. It does not denote a separate European law. The CRR, its amending legislation and the relevant technical requirements are the applicable references.

The reform covers credit risk, CVA risk, operational risk, market risk and the output floor, among other subjects. The parallel CRD VI instrument is a directive requiring national transposition. Institutions should therefore identify whether a workstream concerns directly applicable CRR requirements, national implementation or a supervisory expectation. Different instruments lead to different implementation and evidence requirements.

Overview

How the output floor works

The output floor limits how far internal approaches can reduce the total risk exposure amount used in capital ratios below a standardised comparison amount. In simplified form at the applicable level: TREA = max(U-TREA; factor × S-TREA). U-TREA is the unfloored total risk exposure amount; S-TREA is the comparison amount calculated using the specified standardised approaches.

The final factor is 72.5%. It is not a capital ratio or a uniform risk weight applied to every loan. The comparison operates at the total level. Institutions therefore need reliable standardised-approach data even when they use approved internal models. Whether the floor actually binds depends on the relationship between the two total amounts.

If an institution exclusively uses standardised approaches for the relevant calculations and U-TREA equals S-TREA, the floor alone does not increase the denominator. Other CRR III changes may still affect its capital needs. The label output floor is therefore insufficient to determine the institution's overall exposure to the reform.

Overview

Which factor applies in each year?

Article 465 CRR sets out the phase-in. The factor is 55% in 2026 and 60% in 2027. It reaches the final 72.5% in 2030. Certain further transitional treatments apply to particular exposures and may last longer. They do not postpone the entire output floor to 2033.

Reliable planning records the legal basis, conditions and expiry date of each transitional option. Comparison calculations must use the same reference date and application level. Different consolidation perimeters or outdated standardised-approach inputs can otherwise create an apparent capital effect that does not represent the actual reform.

YearOutput floor factorPlanning relevance
202550%Start of phased application
202655%Current factor at this guide's review date
202760%Next capital-planning step
202865%Further increase towards the final factor
202970%Last regular intermediate step
From 203072.5%Final factor under Article 92 CRR
Overview

A worked example in euros

A fictional institution has U-TREA of EUR 600 million and S-TREA of EUR 1,000 million. In 2026, the floor is EUR 550 million, below U-TREA. The TREA used therefore remains EUR 600 million. With unchanged inputs, the EUR 725 million floor would bind in 2030.

The Pillar 1 total capital requirement of 8% alone consequently rises from EUR 48 million to EUR 58 million. With total capital held constant at EUR 100 million, the total capital ratio falls from 16.67% to 13.79%. The calculation isolates the floor. It excludes portfolio changes, further transitional provisions, P2R and capital buffers.

A higher RWA denominator does not mean every component of the previous capital stack should automatically be scaled up unchanged. For national P2R requirements, Section 6c(2a) and (2b) KWG contains provisions addressing the point at which the floor becomes binding and the prevention of double-counting. The actual supervisory review belongs in the requirements plan.

Original simplified example; amounts in EUR million.
Measure20262030 with constant portfolio
U-TREA600600
S-TREA1,0001,000
Factor × S-TREA550725
Applicable TREA600725
8% Pillar 1 total capital4858
Ratio with EUR 100 million total capital16.67%13.79%
Overview

FRTB: application in 2027 and targeted relief

FRTB revises market risk own funds calculations, including standardised approaches, internal models and the trading-book boundary. Delegated Regulation (EU) 2025/1496 moves the capital-relevant application date to 1 January 2027. Reporting obligations and preparation work need separate assessment.

On 4 June 2026, the Commission adopted delegated act C(2026) 3647. It provides for targeted operational relief and multipliers for 2027 through the end of 2029. At the checked status, the Commission's overview lists it as adopted but not yet in force. Describing this as a blanket postponement of every FRTB obligation until 2030 does not accurately reflect the approach.

The Bundesbank also explains the EBA no-action letter of 3 August 2026 on the trading-book boundary during the transition beginning in 2027. Such a supervisory approach is distinct from a regulation entering into force. Calculation approaches, the trading-book boundary, reporting and disclosure therefore each need their own controlled legal and implementation version.

Overview

The data and controls needed now

Start by identifying the approaches in use and the affected portfolios. For both calculation streams, establish authoritative data sources and how identifiers, collateral, valuations and classifications are brought together. Parameter changes need effective dates and traceable approval.

A useful comparison separates volume effects, changes in risk weights, model changes and transitional effects. That decomposition explains why a capital ratio's denominator changed. A single old-versus-new total without reconciliation makes business acceptance more difficult.

Institutions with trading activities also need alignment between trading-book classification, risk calculations and regulatory reports. Tests should use understood portfolios with explainable expected results. Technical execution is insufficient if the same exposure receives inconsistent business classifications. Exceptions need investigation before a dataset or calculation becomes an approved reporting source.

Overview

Bring CRR III into ongoing bank management

Results belong in the normative ICAAP capital plan and business-line management. Reports should show whether the floor already binds, when it first binds in the forecast, and which portfolios or assumptions drive the effect. Potential actions need assessment alongside their costs, lead times and secondary effects.

T-NEX can support data reconciliations, project coordination and recurring reporting. One starting point is a traceable analysis based on the institution's existing, accountable calculation processes. Interfaces, controls and approvals are aligned with the current business systems and responsibilities. This allows the reporting project to address a defined operational need while preserving clear ownership of regulatory calculations.

FAQ

Frequently asked questions

Does CRR III start only in 2027?

No. Much of the framework has applied since 1 January 2025, including the phased output floor. The capital-relevant FRTB market risk framework has a separate application date and transitional measures.

What does 72.5% mean for the output floor?

It is the final factor applied to the standardised total risk exposure comparison amount. It is neither the required capital ratio nor a uniform risk weight for every loan.

Does the floor require standardised-approach banks to hold more capital?

The floor alone adds no denominator where U-TREA and S-TREA are equal. Other CRR III changes can nevertheless affect capital requirements.

Has all of FRTB been postponed until 2030?

That does not accurately describe the checked position. The application date is 1 January 2027. The Commission act adopted in June 2026 provides targeted relief for 2027–2029; its entry into force and supplementary supervisory measures require separate attention.

Sources & further reading

  1. Regulation (EU) 2024/1623: CRR III, particularly Articles 92 and 465eur-lex.europa.eu
  2. Directive (EU) 2024/1619: CRD VIeur-lex.europa.eu
  3. Delegated Regulation (EU) 2025/1496: FRTB applicationeur-lex.europa.eu
  4. Section 6c KWG: P2R and the output floorgesetze-im-internet.de
  5. Commission: status of CRR implementing and delegated actsfinance.ec.europa.eu
  6. C(2026) 3647 final, 4 June 2026finance.ec.europa.eu
  7. Bundesbank: FRTB including the August 2026 EBA no-action letterbundesbank.de
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