Brussels, 16/04/2008 (Agence Europe) - The European Commission has launched a consultation process on review of the so-called “Basel-II” directives (2006/48/EC and 2006/49/EC) on requirements for banks with regard to own funds. Crossborder supervision is one of the six themes likely to be the subject of legislative review. It above all suggests the systematic creation of supervisory bodies for banking establishments operating in several member states. Open till 16 June, this consultation is the first stage in review of European rules that will result in a legislative proposal in September or October this year. Recommended by the Spring European Council (see EUROPE 9623), this legislative reform is part of the work of the roadmap on financial stability set in place as a response to the international financial crisis (see EUROPE 9637).
One of the most striking proposals concerns strengthened cooperation between authorities of the home country and the host country tasked with supervising crossborder banks. Without amending the responsibilities of the control authorities, the Commission suggests that supervisory colleges should be systematically set in place. These bodies would sign written cooperation and coordination agreements on the basis of guidelines developed by the Committee of European Banking Supervisors (CEBS). The CEBS may act as a facilitator in the event of disagreement within a body. The Commission also suggests improving the information rights of supervisors from the host country concerning the most important branches of a bank, criteria being put forward to define this category of affiliate.
Consultation also covers “large exposures”, i.e. of high risk banks, with recourse to hybrid capital instruments and exemptions aimed at networks of cooperative banks. According to the Basel-II directives, exposure of banks with one and the same client must not exceed a certain percentage of its own funds. The Commission suggest that interbanking exposure, i.e. the establishment of credit to another bank, should be limited to the highest value between: - the quarter of own funds of a bank and a fixed amount. In an opinion given early April, the CEBS puts forward the sum of €150 million. Furthermore, the Commission notes that the absence of European rules leads to differentiated treatment of hybrid capital. It suggests providing a common interpretation of the main criteria allowing hybrid financial instruments to be considered as eligible for own funds of a bank and to establish quantitative limits using these financial instruments. Finally, the date as of which the cooperative banking networks can no longer, under certain conditions, be exempted from certain requirements to be met for obtaining the necessary approval for the exercise of their activities - in this case 1977 - may be removed from European legislation. (M.B.)