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The proposed new framework would consist of three different approaches allowing financial institutions to choose the approach most suited to them. The directive prescribes which part of the capital banks and investment firms should reserve to cover risks and with it protect depositors. The simple and intermediate approaches would be available by end 2006 (but banks could still opt to apply the current rules until end 2007) and the most advanced approaches from end 2007.
Mr McCreevy said: “This Directive implements (the Basel II Accord) in a way that suits the EU. That in turn means European financial institutions will be more efficient, safer and more competitive. It is expected that the European Parliament will commence it’s in depth work on this proposal early in the new year”.
Document
CAD Council agreement 1.12.04
CAD Council agreement addendum 7.12.04