The European Union proposes to revise its rules on bank capital through a new Directive and Regulation, collectively known as the Capital Requirements Directive 4 (CRD4).
CRD4 would translate into European laws the international standards agreed at G20 level (Basel III). The official goals of the legislation are to “strengthen the resilience of the EU banking sector while ensuring that banks continue to finance economic activity and growth”.
In addition to the implementation of the Basel III agreement, CRD4 also introduces a single rulebook in order to reduce national divergences in legislation. The proposal includes the Basel recommendations from December 2010 on Credit Value Adjustments and Counterparty Credit Risk. The Basel recommendation for additional requirements for large international banks (“SIFI surcharge”) will most likely be inserted through further amendments to the CRD in 2012.
The CRD4 proposal was published by the European Commission in July 2011, and the European Parliament and European Council are currently forming their opinion. If an agreement is reached by the summer of 2012, the rules will start to have an effect by the end of 2013.
European Parliament rapporteur Othmar Karas (EPP, Austria) is working on his draft report, which he aims to complete by 20 January 2012. His colleagues in the European Parliament’s Economic and Monetary Affairs Committee on will then have until 27 February 2012 to table amendments. In the European Council, meetings at attaché and expert level continue with a view to adopting an ECOFIN General Approach in the Spring of 2012.
Full details of the proposals and supporting documents can be found on the Commission’s Regulatory Capital webpage.
(text updated 19 December 2011)
11 October 2011: Finance Watch Secretary General, Thierry Philipponnat, gave evidence on the effects of CRD4 to the European Parliament’s ECON Committee for Economic and Monetary affairs. A copy of his speech is available here. To see a video of the hearing, click here and scroll forward to 15.56 to see Thierry speak.
