Coverage: weekly note · Information to 28 March 2026
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TGB Weekly Research Note · 28 March 2026
The first post-implementation numbers from the EBA put the fully loaded hit to EU banks' CET1 ratios close to what was estimated before the rules went live, while the UK has finalised its rules for 1 January 2027.
The desk view
More than a year after the EU's banking package took effect on 1 January 2025, the evidence from supervisory data is that the capital impact is landing close to where pre-implementation estimates put it. The EBA's 2025 stress test found that restating end-2024 balance sheets under the new rules moved the aggregate transitional CET1 ratio by 3 bps, against a 129 bps reduction on a fully loaded basis, most of it from the output floor. The EBA's October 2024 estimate on earlier data was a 140 basis point fall. Its new CRR3/CRD6 dashboard, published on 23 March 2026, projects that the average CET1 ratio would slightly decrease under fully loaded rules, to around 15.3%, from a transitional 16.3% in Q4 2025. In our view the open questions are now timing and trading-book parity, not the size of the bill.
Day one in the EU: operational risk up, credit risk down
Most of the Basel III requirements entered into force in the EU on 1 January 2025 through the 2024 Banking package; the market risk rules of the Fundamental Review of the Trading Book (FRTB) are the exception. An early test of the new rules came in the EBA's 2025 EU-wide stress test, published on 1 August 2025, in which banks reported their end-2024 starting point under both the old and the new rules. The restatement had an overall negligible impact of 3 bps on the aggregate transitional CET1 ratio, and the EBA said the increase associated with the new credit risk rules was offset by decreases in market risk, operational risk and other components. Half of the sample showed an impact below 50 bps; among the rest, the median negative impact was 90 bps and the median positive impact 137 bps. None of the banks was constrained by the output floor at the starting point.
The EBA's December 2025 Risk Assessment Report found that total RWAs rose by 3% in the year to Q2 2025, to EUR 10.1 tn, mainly because operational risk RWAs increased by more than EUR 300 bn (30%) under the new CRR3 calculation. Credit risk RWAs fell by EUR 116 bn over the same period. The output floor added only EUR 2 bn, or 0.02% of total RWAs, for banks using internal ratings.
Operational risk share of EU/EEA RWAs, %
Source: European Banking Authority, EBA Risk Dashboard - Q4 2025 (PDF), 23 March 2026.
Over the same period the share of credit risk fell from 81.9% to 77.9%.
Early data against pre-implementation estimates
The benchmark is the EBA's third mandatory Basel III monitoring report, published in October 2024 on December 2023 data from 152 banks. It estimated that Tier 1 minimum required capital would rise by 7.8% at full implementation in 2033, with the output floor contributing 5.7% and operational risk 2.8%, and that the CET1 ratio would fall by 140 basis points. The stress-test restatement, on end-2024 data, put the fully loaded reduction at 129 bps, 11 bps less. The EBA attributed a 110 bps fall to the expiry of the output floor transitional arrangements and 21 bps to the phase-out of other transitionals.
The EBA's new CRR3/CRD6 dashboard, which replaces the old monitoring report, extends the series to December 2025. With the transitional CET1 ratio at 16.3% in Q4 2025, it projects that the average ratio would slightly decrease under fully loaded rules, to around 15.3%, reflecting a 4.7% relative rise in Tier 1 minimum required capital once the floor is fully phased in. The number of institutions bound by the floor rises from 2 at December 2025 to 33 on a fully loaded basis, and no capital shortfall appears before 2030. The total shortfall is then projected at EUR 424.8m, rising to EUR 12.7bn once the floor is fully implemented.
Estimated fully loaded impact of the EU Basel III reform
| Estimate | Data as of | CET1 ratio effect | Main driver |
|---|---|---|---|
| Basel III monitoring report (October 2024) | December 2023 | -140bp | Output floor (5.7% of MRC) |
| 2025 EU-wide stress test restatement | End-2024 | -129bp | Output floor (-110bp) |
| CRR3/CRD6 dashboard (March 2026) | December 2025 | Slight fall, to about 15.3% | Output floor (4.7% Tier 1 MRC rise) |
Source: European Banking Authority, Basel III monitoring exercise results based on data as of 31 December 2023 (EBA/REP/2024/22), 7 October 2024; European Banking Authority, 2025 EU-wide stress test - Results, 1 August 2025; European Banking Authority, The European banking sector enters period of geopolitical uncertainty from a position of strength (Q4 2025 Risk Dashboard and CRR3/CRD6 dashboard press release), 23 March 2026.
The three exercises differ in sample and method, and the EBA notes that the dashboard records the credit risk impact as zero because reporting data do not yet capture credit risk transitional arrangements. Read together, the post-implementation CET1 figures sit close to, and slightly below, the pre-implementation estimate. The dashboard's 4.7% rise starts from the CRR3 transitional rules already in force, while the 7.8% estimate started from the old framework, so the two are not directly comparable. As the dashboard omits credit risk transitionals, its lower Tier 1 figure is best read as a floor, not a sign of a shrinking impact. The more robust finding is about timing: the operational risk charge arrived on day one, while the output floor bound only 2 institutions at December 2025 and is projected to bind 33 once fully loaded, as its calibration climbs from 50% in 2025 to 72.5% in 2030.
The UK has final rules and a lighter estimate
On 17 January 2025 the PRA, in consultation with HM Treasury, delayed UK implementation by one year to 1 January 2027 to allow more clarity on US plans, while shortening transitional periods so that full implementation stays at 1 January 2030. PS1/26, published on 20 January 2026, confirmed that the rules take effect on 1 January 2027, with the internal model approach for market risk following on 1 January 2028. Apart from market risk, the PRA made no substantive changes to the near-final rules.
The PRA's impact estimate has come down. It put the increase in Tier 1 capital requirements for major UK firms at 3.2% in PS17/23, and in September 2024 said the aggregate increase was likely to be less than 1% by 1 January 2030. The Financial Policy Committee added a system view on 2 December 2025, lowering its benchmark for Tier 1 requirements from around 14% to around 13% of RWAs. It expects Basel 3.1 to let the PRA cut Pillar 2A requirements by around ½ percentage point.
Trading-book parity is the remaining variable
The FRTB is where the timetable is still moving. The Commission's June 2025 delegated act pushed EU application to 1 January 2027, the maximum extension allowed under the CRR, citing delays and deviations in other major jurisdictions. Its consultation, open until 6 January 2026, set out options to mitigate negative capital effects for three years, ending in 2029, including a targeted multiplier. In the United States, the agencies requested comment on 19 March 2026 on proposals that include the final Basel III components, and anticipate that overall capital would modestly decrease.
For bank executives, the banking-book reform is no longer a capital-planning surprise; the remaining work is managing the output floor glide path and trading-book rules still in flux.
What to watch
- 18 June 2026: comment deadline for the US capital proposals
- 1 January 2027: UK Basel 3.1 rules take effect and EU FRTB application date
- 1 January 2028: UK internal model approach for market risk takes effect
- 2030: EU output floor reaches 72.5%; UK full implementation on 1 January 2030
Primary sources: European Commission (DG FISMA), Commission proposes to postpone by one additional year the market risk prudential requirements under Basel III, 12 June 2025; Bank of England / Prudential Regulation Authority, PS1/26 - Implementation of Basel 3.1: Final rules, 20 January 2026; European Banking Authority, 2025 EU-wide stress test - Results, 1 August 2025; European Banking Authority, Basel III monitoring exercise results based on data as of 31 December 2023 (EBA/REP/2024/22), 7 October 2024; European Banking Authority, The European banking sector enters period of geopolitical uncertainty from a position of strength (Q4 2025 Risk Dashboard and CRR3/CRD6 dashboard press release), 23 March 2026; European Banking Authority, Risk Assessment Report of the European Banking Authority - December 2025, 4 December 2025; European Banking Authority, EBA Risk Dashboard - Q4 2025 (PDF), 23 March 2026; Bank of England / Prudential Regulation Authority, The PRA announces a delay to the implementation of Basel 3.1, 17 January 2025; Bank of England / Prudential Regulation Authority, PS9/24 - Implementation of the Basel 3.1 standards near-final part 2, 12 September 2024; Bank of England (Financial Policy Committee), Financial Stability in Focus: The FPC's assessment of bank capital requirements, 2 December 2025; European Commission (DG FISMA), Commission seeks input on Basel III market risk rules for banks, 6 November 2025; Federal Reserve Board, FDIC and OCC, Agencies request comment on proposals to modernize the regulatory capital framework and maintain the strength of the banking system, 19 March 2026.