06 November 2003

FBE comments on Consultation on Capital Requirements

The FBE supports the Commission’s intention to apply the new EU capital adequacy framework to all credit institutions and investment firms in the European Union and accepts an exemption from the scope of the framework for limited licence investment firms. However, there is strong disagreement with the “potential way forward” proposed for the treatment of investment business.

The FBE is concerned that its initial form, the Supervisory Review concept suggested that it was the responsibility of the firm to assess its own capital needs with the supervisor’s role. However, there is now a divergence from this concept, caused by a blurring of the boundary between Pillars 1 and 2 with the introduction into Pillar 2 of elements that are intended to be applied in a prescriptive and quantitative manner.

Therefore, the FBE, the International Swaps and Derivatives Association (ISDA) and the London Investment Banking Association (LIBA) prepared a proposal for a revised Supervisory Review framework

Next to a proposal for a supervisory disclosure regime, this response includes:

a practical lead supervisor model based on a college of supervisors to deliver effective supervision consistent with the delivery of single market objectives;

a proposal for amendment of the consolidation requirements in the Commission’s Working Document;

a proposal which clarifies the objective of the Pillar 2 Supervisory Review Process, specifies eight high-level principles and a process for delivering these in practice.

Full response

© FBE