On 20 July 2011, the EU Commission published a provisional draft of its much-awaited legislation to implement the proposals of the Basel Committee on Banking Supervision, known as “Basel III,” into EU law. It is not, however, light reading. At nearly 700 pages of detailed text, it is likely to be a helpful addition to known cures for insomnia. For those not needing assistance in this area, we have sought to condense the main features of the proposals into just a few (all right, slightly more than a few) pages, focusing particularly on the material differences between Basel III and CRD4.

Whereas Basel II and Basel III focus only on internationally active banks, the Capital Requirements Directive in Europe currently applies to all European banks, as well as to European investment firms in general. The proposed CRD4 directive and regulation retain this approach and this gives rise to certain required adaptations of the Basel III proposals.

In addition to implementing Basel III, the Commission’s draft proposals (known generally as CRD4) will replace the existing Capital Requirements Directive,2 along with its subsequent amending directives (known generally as CRD23 and CRD34). The Commission proposes to achieve this with the combination of a new directive (which would need to be separately implemented into the national laws of the EU member states in order to have direct effect in those countries) and a new regulation (which would have direct effect on EU regulators and institutions covered by the regulation).