FRTB Delays in EU: Strategic Relief or Regulatory Loophole

On the other side, critics warn that continued deferrals risk creating a regulatory gap. While jurisdictions such as the U.S. and parts of Asia move forward with their Basel III “endgame” plans, the EU’s slower timeline could encourage regulatory arbitrage, where banks exploit differences between regions to minimize capital requirements. This divergence not only complicates global competitiveness but also undermines the very purpose of Basel reforms—creating a level playing field and enhancing systemic stability.

Moreover, the delays raise concerns about credibility and resilience. The EU’s banking sector has already faced pressures from low profitability, high costs, and fragile recovery conditions. Weakening or postponing capital rules may improve short-term earnings but could leave banks more vulnerable in times of stress. In a world marked by volatile markets, geopolitical shocks, and climate-related financial risks, regulators face the challenge of balancing prudence with pragmatism.

Ultimately, the question is whether the EU’s approach is a temporary strategic adjustment or a step that inadvertently weakens trust in global banking reform. The outcome will have far-reaching implications—not just for European banks, but for the integrity of the Basel framework and the future of international financial regulation.

In short, the EU’s FRTB delays highlight a crucial tension: should regulators prioritize immediate relief for banks, or enforce consistency to strengthen the long-term resilience of the financial system?