The Commission's CRD IV requires a deeper reading

Karel Lannoo, is Chief Executive Officer and Senior Research Fellow at CEPS. A shortened version of this article appeared in ‘Financieel Dagblad’ and the Financial Times.

The European Parliament and EU Council need to undertake a more thorough review of the draft Capital Requirements Directive IV (CRD IV), which implements Basel III in EU law, with a view to streamlining and tightening the proposal. The most important amendments to consider are the introduction of risk-weighting on sovereign exposures within the EU and the related application in the large exposures regime, a review of the generous risk-weighting afforded to real estate, and the full application of the leverage ratio.