Brussels, 31 March 2025
The European Commission has proposed maintaining the current rules on liquidity requirements for certain financial transactions under the EU banking prudential framework. This move aims to ensure a level playing field between European and international banks, supporting the liquidity of EU financial markets. If adopted, it will contribute to the competitiveness of the EU financial system, ultimately benefiting citizens and businesses alike.
Under the Capital Requirements Regulation (CRR), some short-term securities financing transactions (SFTs) currently benefit from lower liquidity requirements than those set out in the Basel III international standards. This transitional treatment is set to expire on 28 June 2025, after which higher requirements of the Basel standards would apply. In simpler terms, the proposal focuses on short-term transactions where assets are temporarily exchanged for cash. These transactions are essential for banks to provide liquidity to markets, particularly for government bonds.
The proposed changes to the so-called Net Stable Funding Ratio (NSFR) will: support the liquidity of EU markets, including government and NextGeneration bonds; avoid increasing issuance costs for EU Member States and the European Union when issuing bonds; and ensure that EU banks can compete on an equal footing with banks from other countries. This is in line with goals set out in the Savings and Investments Union Communication.
The Commission’s proposal will now be reviewed by the European Parliament and the Council. Given the upcoming expiry of the current transitional treatment, the Commission calls on the co-legislators to process this proposal swiftly.
For more details, questions and answers are available online.