Brussels, 19th December 2001
Commission welcomes Basel Committee's review of the impact of new Capital Accord
The European Commission has welcomed the announcement by the Basel Committee on Banking Supervision of a revised process for finalising the new Capital Accord. This process will incorporate an additional review of the overall impact of the new Accord before publication of a third consultative document.
Internal Market Commissioner Frits Bolkestein said: "In view of the progress that has been made, it makes good sense for the Committee to take some additional time now to assess the overall impact of the new Accord without losing the existing momentum towards finalisation. This should enhance the quality of the final package and help make the consultation period an even more productive one. For its part the Commission will reschedule publication of its own consultative package in line with the Basel Committee's calendar."
Significant advances have been made towards the completion of a new risk-sensitive international framework which incorporates a range of options for the calculation of minimum capital requirements. These include developments in the calibration of the new regime to ensure that average levels of regulatory capital remain approximately the same as under the current Accord.
The Commission strongly supports the Basel Committee's commitment to ensuring an appropriate capital treatment for exposures to small and medium-sized enterprises. Significant progress is being made on this issue.
The Commission also welcomes the Committee's efforts towards developing operational risk proposals that deliver a capital charge appropriate and proportionate to the risks involved.
The Commission maintains its commitment to the development of a new capital adequacy regime for the EU within the existing timeframe finalisation of the new Accord in 2002 with implementation of the new framework in 2005. This framework, which should be as clear and flexible as possible, should be consistent with Basel but differentiated where necessary to take account of features specific to the EU, including the wider range of institutions to which it will apply.
In view of the Basel Committee's decision to change the date of its third consultation exercise, the Commission has decided to reschedule publication of its own consultative document originally planned for early in 2002. This will allow the consultative package to be consistent with the emerging international framework. It will also enable the Commission to take advantage of the adjusted workplan to develop further its dialogue with interested parties in the EU. This will help ensure the optimal quality of the proposed legislation and its timely implementation in Member States.
This consultative document, which will set out in detail the suggested contents of the new EU framework, will be published shortly after the Basel Committee's third consultative document.
The European Commission participates in the discussions of the Basel Committee and its working groups as an observer. Nine EU Member States are represented on the Committee Belgium, France, Germany, Italy, Luxembourg, the Netherlands, Spain, Sweden, and the United Kingdom. The European Central Bank also participates as an observer.
Development of the new capital adequacy framework forms part of the European Commission's Financial Services Action Plan. The Action Plan adopted in May 1999 by the European Commission, spells out the EU´s overall policy for achieving integrated financial markets. The European Councils in Lisbon and Stockholm endorsed the Action Plan, setting 2005 as the deadline for the integration of the financial markets and 2003 as target date for integration of the securities markets.
The approach of both the Commission and the Basel Committee is based on minimum capital requirements, a supervisory review process and an emphasis on market discipline. Like the Basel Committee rules, new EU capital standards will aim to align regulatory capital requirements more closely with underlying risks and to provide institutions with incentives to improve risk management. This approach is driven by a common need for a new global capital framework that ensures greater stability of the international financial system by better reflecting the enormous changes in financial markets over the last decade.
The new framework will apply to all credit institutions and investment firms in the EU. It must be as clear and flexible as possible so as to meet the needs of this diverse range of institutions. It must be able to respond quickly to market developments and regulatory innovation so as to support enhanced efficiency and competitiveness in the EU financial services industry.
For further background information, see MEMO/01/15 and the Europa website at: