Revision of the Capital Requirement Directive (CRD)
Monday 25 January 2010 CEBACKGROUND: a new capital requirements framework, based on the
'Basel-II' revised international capital framework,
was adopted in June 2006 as the Capital Requirements Directive
('CRD'): this comprises Directive 2006/48/EC relating to the taking
up and pursuit of the business of credit institutions (recast) and
Directive 2006/49/EC on the capital adequacy of investment firms
and credit institutions (recast). There is widespread recognition
that further regulatory reform is needed to address weaknesses in
the regulatory capital framework and in the risk management of
financial institutions that contributed to the turmoil in global
financial markets. The present proposal is one of the several
measures that the Commission has already taken to implement an
ambitious programme of financial services reform. IMPACT
ASSESSMENT: altogether, fourteen different policy options have been
assessed. The preferred option is as follows: Trading Book:
with respect to capital requirements for bank trading books, the
following targeted amendments, aligned with what is envisaged by
the Basel Committee, will be introduced.
Re-securitizations: : in line with the approach developed by the Basel Committee, re-securitization positions would be assigned a higher capital requirement than other securitisation positions to reflect the higher risk of unexpected impairment losses. For particularly complex re-securitizations, the proposals reinforce both the due diligence requirements and the supervisory process to enforce them.
Disclosure requirements : these changes will improve investor understanding of banks' risk profile and, by enhancing transparency, reinforce banks' risk management. The incremental administrative burden for the EU banking industry is estimated at EUR 1.3 million per year and is expected to fall mostly on larger institutions with more advanced approaches to risk management.
Supervisory Review of Remuneration Policies: the proposed amendments will impose oblige credit institutions and investment firms to have remuneration policies that are consistent with effective risk management. The relevant principles will be set out in the CRD, but will be closely aligned with those set out in Commission Recommendation on remuneration policies in the financial services sector.
See the Legislative observatory webpage to view the
current status of the revision procedure
Read the Proposal for a
Directive of the European Parliament and of the Council
amending Directives 2006/48/EC and 2006/49/EC as regards capital
requirements for the trading book and for re-securitisations, and
the supervisory review of remuneration policies SEC(2009) 974 final
SEC(2009) 975 final.
Re-securitizations: : in line with the approach developed by the Basel Committee, re-securitization positions would be assigned a higher capital requirement than other securitisation positions to reflect the higher risk of unexpected impairment losses. For particularly complex re-securitizations, the proposals reinforce both the due diligence requirements and the supervisory process to enforce them.
Disclosure requirements : these changes will improve investor understanding of banks' risk profile and, by enhancing transparency, reinforce banks' risk management. The incremental administrative burden for the EU banking industry is estimated at EUR 1.3 million per year and is expected to fall mostly on larger institutions with more advanced approaches to risk management.
Supervisory Review of Remuneration Policies: the proposed amendments will impose oblige credit institutions and investment firms to have remuneration policies that are consistent with effective risk management. The relevant principles will be set out in the CRD, but will be closely aligned with those set out in Commission Recommendation on remuneration policies in the financial services sector.
See the Legislative observatory webpage to view the
current status of the revision procedure Read the Proposal for a
Directive of the European Parliament and of the Council
amending Directives 2006/48/EC and 2006/49/EC as regards capital
requirements for the trading book and for re-securitisations, and
the supervisory review of remuneration policies SEC(2009) 974 final
SEC(2009) 975 final.