Banks Upbeat EU Could Keep 20% CCF for Trade Finance Products

According to published reports, the EU appears to be on a path for abandoning a planned tenet of Basel reforms which would raise the credit conversion factor (CCF) from 20% to 50% for off-balance sheet products such as performance bonds, guarantees, and standby letters of credit.

In a 24 January 2023 press release, the European Parliament announced its Economic and Monetary Affairs Committee voted to finalize the Capital Requirements Regulation (CRR) and Directive (CRD) for implementation of Basel III reforms in Europe, while avoiding a significant increase in overall capital requirements for the EU banking system by maintaining the CCF at 20% for off-balance sheet trade finance instruments.