26 April 2005

ECON discussion on Capital Adequacy Directive

The Economic and Monetary Affairs Committee held a first discussion on the proposed Capital Adequacy Directive. The rapporteur, Mr Radwan, said that he envisages to finalize the Committee work within one reading. With regard to consolidated supervision he stated that supervision at the consolidated level of the parent undertaking should be possible and proposes a revision clause in connection with the assessment of an extension of the provisions of Article 69 to European subsidiaries.

With regard to the treatment of cross-group lending to EU subsidiaries the rapporteur said that the application of Article 80(7) should follow the principle of treating the same risks in the same way. An extension of the more favourable treatment of cross-group lending to EU subsidiaries cannot be endorsed at present, on the grounds of risk. However, it is proposed that a revision clause be inserted into Article 156 calling on the Commission to examine the possibility, in five years' time, of extending the zero weighting of internal group lending to European institutions which belong to groups.

Mr Radwan also made clear that the definition of default chosen is too strict, and that he will apply the 180 days rule as the basic rule not only granted for a transitional period. He also calls for a review in five years' time. The discussion on the trading book was postponed as further clarifications are expected by end May / beginning June. The Committee will therefore discuss this issue before the plenary vote in September.

The deadline for amendments is 11 May. A discussion in Committee will take place on 24 May. Vote in Committee is planed for 15 June, vote in Plenary will take place after the summer break in September.

Report and amendments

Background
In the explanatory statement Mr Radwan states that the Commission proposal basically envisages single-institution supervision. Article 69 provides for the possibility that national supervision of subsidiary credit institutions within a banking group may result in single-institution supervision being waived if certain requirements are met, in which case the capital of the domestic subsidiaries may be held at the level of the group parent.

The rapporteur takes the view that if the stringent requirements, in particular with regard to short-term transferability of own funds, are met the abolition of discretion should be considered. However, a revision clause, whereby the preconditions for the extension of Article 69 are to be reviewed by the Commission after a certain period, is desirable.

With regard to the treatment of internal group lending the rapporteur takes the view that the principle should be that of treating the same risks in the same way, and that this should be a matter for the judgment of the national supervisor. A critical view should be taken of the possible extension of the rule to EU subsidiaries. A review of circumstances in five years' time is advocated.

Article 129 strengthens the position of the supervisory authority responsible for consolidation (home country supervisory) vis-à-vis the host country supervisor by comparison with the current arrangements. The rapporteur takes the view that the provisions of Article 129 should basically be retained. The prerequisites for an extension of the powers of home country supervisors include a harmonised investment protection system, common administrative law and clarification of the issue of lender of last resort. Since progress is to be expected in these areas within the next few years, the revision clause proposed by the Council is to be welcomed.

© European Parliament