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With the current consultations on the new Basel Capital Accord many important modifications to the supervisory rules for credit institutions are to be expected. Due to the ongoing consultation process, these modifications are not clearly defined, nor has their impact been sufficiently analysed. This will certainly influence the quality of the new rules. Any such double regulation may cause serious distortions and may negatively affect the competitiveness of the EU Financial Services Industries. For this reason, the Directive should not be adopted before a new Capital Accord has been agreed and its impact has been analysed. We therefore recommend postponing the project.
EACB is questioning the general approach in the directive, which presumes that cross-sector activity automatically implies double gearing and risk cumulation, and thereby imposes capital requirements on conglomerate level or will oblige banks to deduct holdings in insurance undertakings of more than 10%. The proposal does not consider diversification aspects at all.
The methods for calculating capital requirements and supervisory capital on conglomerate level, seem to be arbitrary and will not reflect risk on conglomerate level. EACB disagrees with the idea that a 10% stake-holding in an insurance undertaking requires its deduction from the relevant capital. Furthermore, this approach does not fit in with the concept of the directive: the deduction requirement would put a heavy burden on many banks holding insurance participations. To be “in” or to be “out ”would be a question of considerable cost and therefore impact on competition very seriously.
The full statement can be found on the EACB website