The European Parliament and the Council of the European Union have agreed to a provisional political agreement on a set of new banking reforms to reduce risks in the industry.

The new set of reforms aims to increase the resilience of European Union (EU) banks by introducing new capital requirements. It will ensure stable capital buffers among banks as well as reduce risks associated with lending.

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European Commission vice-president Valdis Dombrovskis said: “I am delighted that the European Parliament and the Council found a political agreement on the banking package, after months of very complex and technical discussions.

“This very important risk-reducing package complements the progress that has already been achieved over the past years, and lays the basis for further progress on strengthening the Banking Union.”

EU banking reforms details:

In 2016, the European Commission proposed the banking reforms and an agreement was reached following two years of deliberations.

Now the technical details of the agreement will be finalised. Subsequently, the final agreement will be signed after the consent from the Permanent Representatives Committee (COREPER) of the Council of Ministers and the European Parliament.

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Building on existing rules, the new banking reforms addresses challenges to the financial stability. It also implements international standards and devises a post-crisis regulatory agenda.

The reforms amends the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD). Adopted in 2013, these regulations encompass rules on governance and supervision over banks.

The Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR), adopted in 2014, were also revised while formulating new reforms.

BRRD and SRMR include rules on recovery of failing institutions and forming a single resolution mechanism.