Temporary treatment of unrealised gains and losses measured at fair value through other comprehensive income

Will the temporary treatment under Article 468 be extended beyond 2025, by either amending the applicable factor (f) for 2026 or with a transitional period of implementation?

Article 468 allows a temporary derogation from Article 35 until 31 December 2025 to remove from the Common Equity Tier 1 (CET1) items the amount A, that is determined by multiplying the amount of unrealised gains and losses accumulated since 31 December 2019 accounted for as ‘fair value changes of debt instruments measured at fair value through other comprehensive income’ in the balance sheet as prescribed by Article 468(1) by the factor for each reporting year during the period of temporary treatment. Article 468(2) only provides for the factor to applied during 2025 which is deemed to be the period of temporary treatment.  In light of ongoing market volatility and persistent geopolitical and macroeconomic uncertainty, regulators should consider extending this temporary derogation beyond 31 December 2025. Although the COVID-19 crisis has formally subsided, its aftershocks continue to drive fluctuations in the fair value of sovereign and other debt instruments held at FVOCI. Without an extension, the reduction in institutions' CET1 capital due to unrealised losses will not reflect long-term credit risk or actual cash flow deterioration. This could lead to deleveraging or reduced lending at a time when the economy still requires robust credit support to navigate uncertainty and transition toward sustainable growth. This temporary derogation has proven effective in preserving capital stability without compromising transparency or risk sensitivity. Extending it, possibly even in a tapered or targeted form, would provide continuity, reduce regulatory cliff effects, and align with the broader CRR III objective of ensuring a resilient and adaptable banking sector.