Capital Requirements Directives (CRD)

The Capital Requirements Directives (CRD) are European Union regulations that set out the capital adequacy requirements for financial institutions, particularly banks, to ensure that they have sufficient capital to cover potential losses. The directives are designed to promote financial stability and reduce the risk of bank failures. The CRD includes rules on the minimum amount of capital banks must hold, risk management practices, and governance standards.

Example

A bank operating in the EU must comply with the CRD by holding a minimum level of capital that is proportional to its risk-weighted assets, ensuring that it can absorb potential losses and maintain financial stability.