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Part I Origin and Context of Capital Requirements for European Credit Institutions, 1 Historical Evolution of Bank Capital Requirements in the European Union

Christos V. Gortsos

From: Capital and Liquidity Requirements for European Banks (1)

Edited By: Bart P.M. Joosen, Marco Lamandini, Tobias H. Tröger

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved.date: 22 May 2024

Bank supervision — Basel 2 — Basel 3 — Capital adequacy — Basel committee on Banking Supervision

This chapter provides an overview of the historical evolution of bank capital requirements and capital adequacy legislation in the European Union (EU) under the influence of international financial standards. It begins by reviewing bank capital adequacy requirements within the system of prudential banking regulation and dealing with the various sources of negative externalities in the banking system, the components of the so-called ‘bank safety net’. The chapter then looks at the international financial standards developed by the Basel Committee on Banking Supervision (BCBS) until the outbreak of the recent (2007–2009) Global Financial Crisis (GFC) and their impact on the shaping of the relevant EU banking legislation. It also traces the migration in 2010 from the so-called ‘Basel II’ capital adequacy framework to the ‘Basel III’ regulatory framework, before considering its incorporation into EU law in the context of the Banking Union. The emphasis is mainly placed on the basic provisions of the two legislative acts of the European Parliament and of the Council: the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD IV). Finally, the chapter studies the most recent (June 2020) amendments of the former legislative acts implemented amidst the current pandemic crisis.

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