CRD / CRR

Following the financial crisis, the Basel Committee on Banking Supervision updated its global standards (Basel III) which then had to be enshrined in law by legislators and regulators. For EU member states, the implementation of these international standards on capital requirements comes through EU legislation under the various iterations of the Capital Requirements framework (the Directive CRD and the Regulation CRR).

The next revision has recently been agreed - it will introduce new capital charges for equity. 

How does it affect private equity?

The prudential regime applying to banks has an impact on the price and availability of the services that banks can provide to their clients, including private equity and infrastructure investments. Article 132 of the Capital Requirements Regulation determines the risk weightings that apply to banks’ investments in funds under the standard model. European Banking Authority (EBA) Guidelines clarified that investments in private equity and venture capital funds are not covered in Article 128 of CRR, despite the reference to private equity in this Article.