Forbearance with an expiry date: what the EBA no-action letter actually suspends

On 3 August 2026 the European Banking Authority (EBA) published an opinion that it describes as a no-action letter. It advises national supervisors not to pursue supervisory or enforcement action in relation to the rules governing the boundary between the banking book and the trading book, or to internal risk transfers between the two.

The instinctive reading is that this means another postponement, three years of breathing space, question closed. All three parts of that reading are wrong.

What the document suspends is enforcement, and the rule itself stays in force. The breathing space is partial, because a substantial part of the obligations continues to apply. And the end of the forbearance lies in the Commission's hands: it stops as soon as the measure the Commission has announced becomes applicable, and at the latest at the end of 2029.

Why the boundary of all things

The line between the banking book and the trading book determines which positions are marked to market daily and backed by own funds for market risk, and which are not. Under the previous regime that allocation was largely principles-based and left institutions room for judgement. The Fundamental Review of the Trading Book (FRTB) tightens it considerably: narrow positive lists, stricter rules on reclassification, and the burden of proof on the institution that wants to move a position.

The pain does not come from the capital effect alone. The boundary runs through systems architecture, position management and reporting alike, so a change of regime here drags virtually every market risk system with it.

The second point of contention is internal risk transfers, trades that shift economic risk between the two books. Their recognition is disputed because a pure booking entry in which no risk actually leaves the bank would amount to an arbitrage instrument. Art. 106 CRR therefore requires a mirroring trade with an eligible third party.

The EBA acknowledges the operational cost openly. Paragraph 20 reads: “In comparison to the CRR2 boundary framework, the FRTB boundary framework is more prescriptive and therefore likely to be associated with stronger operational and administrative constraints.”

What a no-action letter is, and what it is not

A no-action letter does not repeal anything. It is a soft law instrument that issues a prioritisation recommendation to national supervisors. The substantive obligation under the CRR and the Capital Requirements Directive continues to exist in law; what falls is the likelihood of being pursued for a breach.

In practice the effect separates into three distinct layers.

Reporting pauses. The requirement to report the composition of the trading book and reclassifications between the books under Implementing Regulation (EU) 2024/3117 should remain suspended. The reference date moves to 31 March 2027.

The capital requirement continues. Own funds for market risk are not suspended, in whole or in part. What the document settles is only which version of the boundary framework underlies the calculation. Anyone reading a capital concession into it is reading in something that is not there.

The audit question stays open, and it is smaller than it looks. The Court of Justice of the European Union treats challenges to soft law issued by the European supervisory authorities as inadmissible for want of binding legal effect. An auditor insisting on strict application of the new regime would not formally be in the wrong. In practice that auditor would be standing against the Commission as well as the EBA, because the interpretative guidance quoted in the document comes from the Commission itself and concerns its own delegated act.

The multiplier, and a decoupling that is easily missed

The third delegated act introduces an institution-specific multiplier. It sets the own funds requirement under the old regime against the requirement under the FRTB regime and applies the ratio to the actual requirement. The Commission speaks of capital neutrality: the outcome should leave the same risk-weighted position as before, whether or not the institution is bound by the output floor.

Two details govern its use. The multiplier does not apply automatically. An institution has to notify its supervisor and demonstrate that the transition leaves it worse off. And the two reference dates behind the calculation, 8 and 9 July 2024, are not arbitrary: the remaining boundary elements of the new regime entered into force on 9 July 2024, and the 8th is the last day before.

More consequential for planning is a decoupling that the document leaves only implicit. The Commission's guidance makes clear that institutions using the multiplier should apply the old boundary regime “for the actual calculation of the capital requirements, and not solely for the purposes of the multiplier”. And for everyone else: “banks not using the multiplier should be afforded the same flexibility as those banks applying the multiplier”.

Put plainly: the operational relief on the boundary does not depend on the multiplier. An institution that has no need for it, because its calculation under the new regime is no more expensive, receives the relief anyway. For the decision due on 1 January 2027 that means two questions, not one.

A restriction that is easy to read past

The document first names Art. 325j (5) second sentence as part of the boundary framework without qualification. The operative paragraph 24 then confines the forbearance expressly to units in collective investment undertakings held with trading intent, and even there only where the institution applies the approach in Art. 325j (1) b (i) as it stood on 9 July 2024.

Read past that restriction and you assume broader forbearance for fund positions than the document grants. For institutions with meaningful fund holdings in the trading book, this is where close reading earns its keep.

The same exercise for the third time

This opinion is not the first of its kind. The EBA bridged the same boundary question in February 2023 and again in August 2024 by the same route. Three rounds of soft law, because the substantive clarification never arrived.

How such an exercise ends can be observed elsewhere. For the relationship between the payment services regime and the crypto-assets regime, the EBA issued a no-action letter in June 2025. In its follow-up opinion of February 2026 it declared the transition over and required affected providers to cease the relevant services from 2 March 2026. The structural overlap between the two frameworks had not been removed, only the forbearance.

The EBA is pressing for a genuine solution. It calls on the Commission to restore legal certainty by legislative means and points in a footnote to the Commission's communication of 17 July 2026, which announces a proposal for the first quarter of 2027.

The window is shorter than it looks

This is the most consequential statement in the document, and it is regularly reported incorrectly. The three-year duration belongs to the delegated act. The forbearance itself runs, under paragraph 24, “until the earlier of 31 December 2029 and the date where the measures to restore legal certainty and clarity referred to in the previous two points take effect”.

What governs is therefore the earlier of the two dates. The trigger is not when the Commission tables its proposal but when that proposal becomes applicable. Tabling is announced for the first quarter of 2027; when the act actually bites depends on how the legislative process runs and may fall considerably later.

This inverts the planning risk. The obvious worry is that nothing will have changed by 2029. The real exposure runs the other way: an institution that configures its systems for three years of the old boundary regime can lose that basis as soon as the Commission delivers. Both ends are real, and a project plan should know both.

A third date matters for implementation and barely features in the public discussion. What the document calls the old boundary regime means Art. 104 and 106 CRR as they stood before 28 June 2023. That is the text version that gets coded.

Why the EBA is waiting

The reasoning is unusually candid. Paragraph 19 reads: “it would be reasonable to assess these other jurisdictions' implementation of the boundary framework before enforcing its application in the Union.” The supervisor is saying that it wants to see what other jurisdictions do before enforcing in the Union.

Looking outward explains why. In the United Kingdom the Basel 3.1 package of the Prudential Regulation Authority (PRA) applies from 1 January 2027, though the internal models component for market risk has been deferred separately to 1 January 2028. In the United States a proposal from the federal banking agencies has been on the table since March 2026, with consultation closing in June; there is no final rule and no binding date.

The Commission names the competitive argument directly. Commissioner Maria Luís Albuquerque said on 4 June 2026: “Europe's banks must be able to compete on equal terms with their international peers. These targeted and time-limited measures help preserve a level playing field in global financial markets while maintaining our commitment to the Basel standards.”

There is no reliable EU figure for the capital effect

Anyone looking for a percentage that describes the effect of the new regime in Europe will not find one worth quoting. That is the state of the evidence rather than a gap in the research.

The figures in circulation come from different contexts and are not comparable. An EBA exercise from 2019 put the average increase for the original calibration at around 81 per cent, with very wide dispersion between institutions. The derivatives industry association, in an assessment dated 31 July 2026, cites increases of roughly 89 per cent under a full standardised approach and roughly 30 per cent for a mix of internal models and the standardised approach. Those figures concern the proposal in the United States rather than the position in the Union, and they mark one point in a range that varies considerably with model usage.

For the European implementation from 2027 with the multiplier, capital neutrality is the stated objective. An institution that needs a number has to calculate it in-house.

Recommendations