As the Basel Committee
on Banking Supervision is approaching the final phase of discussion
on the New Capital Accord, the Commission Services are initiating
the process of transposing the Accord into a new Directive.
A first draft of the Directive, commonly known as CAD3 (Capital
Adequacy Directive 3), was released on 18 November 2002 to
provide a basis for a structured dialogue with representative
organisations at both the EU and national levels. A new Working
Document, including a revised Directive proposal, is expected
to be issued in June.
In the November 2002 document, the Commission wholly endorses
the objectives of the Capital Accord reform, in particular
the need for modernising the existing capital adequacy framework,
developing more risk sensitive capital requirements, and providing
a spectrum of approaches suitable for use by institutions
of varying sizes and sophistication. The Directive thus aligns
closely with the contents of the New Accord.
The Commission however acknowledges that some differentiation
might be necessary to take account of EU specificities,
notably the wider scope of application of the proposed EU
framework (including investment firms, asset managers and
other financial institutions) and the legislative nature
of the instrument employed to transpose the Basel rules
in the Union.
Various representative bodies actively participate in the
structured dialogue initiated by the Commission, with a
view to ensuring (i) a consistent and parallel implementation
of the New Accord; (ii) the flexible future adaptation of
the capital rules; and (iii) the appropriate recognition
of EU specificities.
The Commission is expected to submit a Directive proposal
to Parliament in early 2004. The New Accord is due for implementation
by financial institutions at the end of 2006.
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