ECOFIN 10 November: Solvency II formally adopted and CRD "general approach" agreed
11 November 2009
ECOFIN formally adopted 'Solvency II' for EU insurance companies and agreed a general approach to the CRD proposals on strengthening capital requirements for trading and re-securitisation, as well as remuneration policies in the banking sector.
Solvency II: new solvency rules for EU insurance companies: link
The Council today adopted a directive setting new solvency rules for insurance companies.
Given that existing solvency rules are well out of date, the directive is aimed at strengthening the supervision of insurance companies and prudential regulation.
It also establishes a new framework for EU regulation through the recasting of 14 existing insurance directives into a single legal text.
Strengthening of capital requirements and remuneration policies in the banking sector:
Pending the European Parliament's opinion on first reading, the Council agreed a general approach to a draft directive aimed at strengthening disclosure and capital requirements for the trading book and re-securitisation instruments in the banking sector and preventing remuneration policies which generate unacceptable levels of risk.
Reuters reports that the agreement to significantly increase the capital which financial institutions are required to retain to cover their high-risk trading activities. The reform will also prevent bank pay policies "that generate unacceptable levels of risk".
EU states and the European Parliament have the final say on the reform. Finance ministers also asked EU president Sweden to start talks with parliament with a view to final adoption of the reform at first reading.
"The Council (of EU finance ministers) agreed on a general approach on a draft directive aimed at strengthening disclosure and capital requirements for the trading book and resecuritisation instruments in the banking sector," an EU statement said.
The reform will also prevent bank pay policies "that generate unacceptable levels of risk," the statement added.
The measure was proposed by the EU's executive European Commission in July to strengthen the bloc's bank capital requirements rules (CRD) by applying lessons from the worst financial crisis in decades.
It is part of wider, global efforts spearheaded by the G20 group of leading countries to force banks to top up their capital and liquidity levels and lessen the likelihood that huge taxpayer-backed bailouts of banks will be needed in the next crisis. Supervisors will be able to punish breaches, for example, by forcing a bank to top up its capital requirements.
© Reuters
