How To Achieve CRR3: Basel IV Key Considerations for European Banks

Sataporn Ungcharoenwong

Timeline to implement: January, 2025

What that means for European Banks:

Only 9 months left for the evaluation, selection, and implementation process.

What are the changes European Banks need to prepare for?

To ensure financial stability and compliance

  • Numerous model changes needed for IRB portfolios
  • Standardized approach as fallback approach for low default portfolios
  • Output floor to be implemented on de-consolidated level for the IRB portfolios
  • Much more granular data needed for SA approach, especially for the real estate portfolios

Some of the major CRR3 challenges impacting European Banks

  1. IRB model changes continue to drive the agendas of most banks given the scrutiny
    • Constraints in the use (low default portfolios)
    • Parameter input floors
    • General responses to TRIM results
    • Modelled CCF changes
  2. Real estate portfolios under the SA approach require detailed consideration:
    • New segregation rules for income producing real estate, that is considered materially riskier than non-IPRE
    • The LTV/ETV using new collateral valuations for LTV have a different definitions
    • Complex lien structures require new and detailed information
  3. Output Floor calculations for IRB portfolios is new territory, often not well understood. On top of that, individual subsidiaries are expected to have their own SA output floor calculations.

What do banks need to stay ahead of timeline and smoothly comply with CRR3 requirements?

  1. Fast onboarding processes and project delivery – the January 2025 deadline is not getting any farther away
  2. Consider model change management beyond the 2025 timeline models will continue to be updated
  3. Output floor calculations should not be an afterthought
  4. Prepare for change beyond 2025

Why ElysianNxt is the CRR3 solution

The key thing now for European Banks is to quickly, and astutely, select a solution that can address all of these and still have time for implementation before January 2025. ElysianNxt’s Basel.NXT can be implemented within months.

Get ready for CRR3. Request for your demo here.

Still thinking? Check our digital booklet to learn the details of or products!

Piet Mandeville

Product Director and Director Professional Services

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