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The European Union announced on Thursday that it has given final approval to implement the remaining batch of Basel III rules, a set of tougher bank capital rules starting January 2025. These rules build on safeguards introduced after taxpayers had to bail out lenders during the global financial crisis over a decade ago.

The majority of the Basel III rules, created by the Basel Committee of banking regulators from the world’s major economies, have already been implemented. However, the final batch includes a key addition known as an ‘output floor’.

This safeguard aims to prevent large banks, which can use their own computer models to calculate capital buffers, from exploiting the system to the detriment of smaller rivals, who must use more conservative calculation methods set out by regulators.

Vincent Van Peteghem, Minister for Finance for Belgium, which holds the EU presidency, said, “The rules adopted today will ensure that European banks can continue to operate in the face of economic shocks.”

“They will also make the banking sector more sustainable and better able to deal with the green and digital transitions. This is an important step towards deepening the Banking Union.”

The bloc has included other rules, not part of the Basel norms, to harmonise the minimum requirements across the 27-country bloc for authorising branches of banks that are headquartered outside the EU.

The package also includes transitional capital requirements for banks’ holdings of crypto assets and changes to enhance how lenders manage environmental, social, and governance (ESG) risks.