Brussels, 18/11/2002 (Agence Europe) - The European Commission published on Monday a working paper on the new capital requirements framework for banks and investment firms. The review of this framework, which is part of the EU Financial Services Action Plan, is meant to modernise the existing mechanism, to make it more comprehensive and risk-sensitive and to promote improved risk management.
The new EU framework must enter into force at the same time as the new Basel Accord, namely at the end of 2006. The current agreement, which dates from 1988, constitutes the international benchmark for the G-10 banking supervisors in the Committee on Banking Supervision of the Bank for International Settlements (known as the Basel Committee). A major aspect of the new framework is its flexibility based on a range of approaches, giving institutions the opportunity to adopt the one most appropriate to their situation and to the sophistication of their risk management. Further, the new regime is also designed to ensure that capital requirements for lending to small- and medium-sized enterprises are appropriate and proportionate. The publication of the Commission working paper, which is accompanied by a cover document providing an explanation and guide, marks the start of an "enhanced dialogue" with representative bodies and trade associations from the financial services and other sectors. At the EU level, this dialogue will be conducted directly by the Commission services, while at national level it will be co-ordinated by the relevant supervisory bodies. The period of the Structured Dialogue will run until the end of January 2003. It will be recalled that the review of capital adequacy requirements by the Commission services is taking place in parallel with that of the Basel Committee on Banking Supervision, in which the Commission and the European Central Bank participate as observers (the paper is available on the Europa site: http: //europa.eu.int/comm/ internal_market/en/finances/capital adequacy/index.htm).