No-action letter eases market risk implementation for EU banks
The European Banking Authority has issued a no-action letter advising supervisors to suspend enforcement of trading book boundary rules. The measure aims to prevent costly operational dual-compliance for EU banks ahead of revised market risk rules taking effect on January 1, 2027.
Safeguarding the level playing field
The European Banking Authority recommends that national competent authorities refrain from prioritizing enforcement actions regarding the Fundamental Review of the Trading Book boundary provisions between banking and trading books, as well as internal risk transfers and related reporting requirements.
The recommendation responds to the European Commission's Delegated Act adopted on June 4, 2026, which modifies own funds requirements for market risk starting January 1, 2027.
Without supervisory flexibility, institutions applying the institution-specific multiplier introduced by the Delegated Act would face an operationally complex and costly implementation of multiple versions of the boundary framework, while creating competitive disparities among Union banks.
Legal mechanics and temporary fixes
Issued under Article 9c of the EBA Founding Regulation, the no-action letter addresses direct conflicts between legislative acts that raise significant implementation issues.
The underlying Delegated Act, adopted under Article 461a of the Capital Requirements Regulation, establishes a three-year temporary market risk framework.
As the act remains under scrutiny by the European Parliament and Council, the EBA also published technical considerations and clarified treatments for supervisory benchmarking exercises to ensure harmonized application.
A necessary supervisory patch
The EBA's move highlights the ongoing friction in implementing complex trading rules.
Instructing supervisors to pause enforcement admits the framework created an unworkable burden.
While this pause saves banks money, it underlines how fragile the FRTB rollout remains.