The Capital Requirements Directive (CRD) is a European Union regulation aimed at ensuring that banks and financial institutions maintain adequate capital reserves. This is crucial for promoting financial stability and protecting depositors. The directive sets out rules on the amount of capital banks must hold against their risk-weighted assets, which helps to mitigate the risk of insolvency. The CRD is part of a broader framework known as the Capital Requirements Regulation (CRR), which works alongside it to enhance the resilience of the banking sector. Together, they implement the international standards established by the Basel Committee on Banking Supervision, ensuring that banks operate safely and soundly within the financial system.