Brussels, 11 October 2005
The European Commission has welcomed the agreement by the Council of Economic and Finance Ministers to the European Parliament’s legislative resolution on the Capital Requirements Directive for credit institutions and investment firms. The Directive, generally known as the Capital Requirements Directive but technically comprising two Directives, will introduce a state of the art supervisory framework in the European Union which reflects the Basel II rules on capital measurement and capital standards agreed at the G-10 level. The Commission proposed the Directive on 14 July 2004 (see IP/04/899, MEMO/04/178) and it was approved by the European Parliament on 28 September 2005 in a form to which the Council has now agreed, without the need for a second reading by either the Parliament or the Council
Internal Market and Services Commissioner Charlie McCreevy said: “This important legislation will benefit consumers, businesses and Europe’s economy as well as increasing financial stability. “I congratulate the UK Presidency on the rapid progress that has been made with this proposal. This demonstrates that the EU is capable of acting quickly and effectively. Now we need to make sure it is implemented in a coherent way across Europe”.
Excellent co-operation between Parliament, Council and Commission has led to this major step forward in the framework for prudential supervision. The Directive, which is one of the outstanding measures required to complete the EU Financial Services Action Plan, will modernise the existing framework to make it more comprehensive and risk-sensitive and to foster enhanced risk management amongst financial institutions. This will maximise the effectiveness of the framework in ensuring continuing financial stability, maintaining confidence in financial institutions and protecting consumers. Improved risk-sensitivity in the capital requirements will facilitate more effective allocation of capital, contributing to boosting the competitiveness of the EU economy.
A key aspect of the new framework is its flexibility. This provides institutions with the opportunity to adopt the approaches most appropriate to their situation and to the sophistication of their risk management.
The new regime is also designed to ensure that the capital requirements for lending to small- and medium-sized enterprises (SMEs) are appropriate and proportionate.
Member States are to apply the Directive from the start of 2007, with the most sophisticated approaches being available from 2008. This is in line with the planned global introduction of the Basel II rules.
For further details on EU policy on capital requirements see: http://ec.europa.eu/internal_market/bank/regcapital/index_en.htm