This Commentary urges the European Parliament and EU Council 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 author argues that 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.
Karel Lannoo is Chief Executive Officer and Senior Research Fellow at CEPS.
