Translating Basel into Brussels Michel Martino European Commission

BASEL - BRUSSELS International convergence of capital measurement and capital standards – a revised framework Proposal for a Directive amending directives 2000/12/EC & and 93/6/EC on the capital adequacy of banks and investement firms (recast) Brussels, COM(2004)

« SPOT THE DIFFERENCE »

Proposal for a Directive of the European Parliament and of the Council amending directives 2000/12/EC & and 93/6/EC on the capital adequacy of banks and investement firms (recast) Directive of the European Parliament and of the Council amending directives 2000/12/EC & and 93/6/EC on the capital adequacy of banks and investement firms (recast)

KEY ISSUE: CONSOLIDATING ‘LEAD’ SUPERVISOR

KEY ISSUE: LEVEL OF APPLICATION / WAIVERS Capital requirements apply to all individual banks BUT w aivers if criteria satisfied Capital requirements & internal processes by every ‘group’ at country level Disclosure requirements apply at EU level

KEY ISSUE: IMPLEMENTATION DATE SA/FIRB/BIA/SA available end 2006 AIRB/AMA available end 2007

TRADING BOOK Counterparty credit risk? Double default & Maturity Adjustment? Trading Book/Banking Book?

INSTITUTIONAL PROCESS: THE COUNCIL

INSTITUTIONAL PROCESS: EUROPEAN PARLIAMENT

Main Entry: con·ver·gence Pronunciation: k&n-'v&r-j&n(t)s Function: noun Date: : the act of converging and especially moving toward union or uniformity; especially : coordinated movement of the two eyes so that the image of a single point is formed on corresponding retinal areas 2 : the state or property of being convergent 3 : independent development of similar characters (as of bodily structure or cultural traits) often associated with similarity of habits or environment

60% US banking system : Basel 2 30 banks Basel 1 'plus' 1O% capital 6% tier 1 leverage ratio New: more risk buckets ?