CONSULTATION ON NEW EU CAPITAL ADEQUACY DIRECTIVE

The Treasury today published a consultation document on the European Commission’s draft proposals for a new Capital Adequacy Directive (CAD3) which will convert the proposed new Basel Accord into European law.

Financial Secretary Ruth Kelly said :

“The Treasury welcomes the Basel Committee’s objectives in updating the existing Basel Accord and the work undertaken by the European Commission to prepare for implementation of Basel II. A more modern and risk-sensitive approach to setting prudential capital requirements should bring significant benefits. However the proposals are complex and it is therefore important that all interested parties engage in the consultation process.”

CAD3 is expected to extend the scope of the new Basel regime to all credit institutions and investment firms, while taking into account issues specific to the EU, which were beyond the scope of the Basel Review. The consultation document lays out key questions and issues which we would welcome comments on, along with any other matters relating to CAD3.

The closing date for responses to the consultation is 5 March 2004.

Notes to Editors

1. The Basel Accord is a non-binding agreement among the G-10 central banks and supervisory authorities to apply common minimum capital standards to their internationally active banks.

2. The new Basel Accord, updating the existing 1988 Accord, will provide increased risk sensitivity in the calculation of regulatory capital requirements for internationally active banks within the G-10. It will remove distortions identified with the existing Accord and will help improve financial stability within the banking sector.

3. The new Accord is expected to be finalised by mid 2004 and to be implemented from 31 December 2006.

4. The current prudential capital regime for EU credit institutions and investment firms is contained within the Capital Adequacy Directive (1993/6/EC) and the Banking Consolidation Directive (2000/12/EC).

5. The consultation paper can be found online on the Treasury website

6. Responses to the consultation should be sent to:

Simon Fish
Capital Markets and Governance Team
4/22
HM Treasury
1 Horse Guards Road
London SW1A 2HQ

7. Email: simon.fish@hm-treasury.gsi.gov.uk

8. Media enquiries should be addressed to Simon Moyse at the Treasury press office on 020 72704420.

9. Non-media enquiries should be addressed to the Treasury Public Enquiry Unit on 020 7270 4558.

10. This press release and other Treasury publications and information are available on the Treasury website at www.hm-treasury.gov.uk. If you would like Treasury press releases to be sent to you automatically by e-mail you can subscribe to this service from the press release site on the website.

Press notices July to December 2003 index