01 December 2008

ECON draft report on CRD - Banks may face stronger capital requirements

Banks may face a minimum of 10 percent retention rate where they have no involvement in the origination. Rapporteur Othmar Karas also calls for a decentralised European System of Banking Supervisors.

According to the European Parliament draft report on the capital requirements directive  banks may face a minimum of 10 percent retention rate where they have no involvement in the origination, double the size mentioned in the Commission proposal (see also ECON workshop here).

 

Rapporteur Othmar Karas proposes to distinguish between securitisations, where the originator or sponsor retains an interest in the underlying assets and originates those assets, and securitisations, where the originator or sponsor has no such involvement. In the former case the interests of the originator or sponsor and the investors are already aligned, so that the rationale for much of the Commission proposal falls away. In the latter case the rationale applies and the retention should be more substantial at 10 per cent to be an effective deterrent.

 

With regard to supervisory arrangements, the Mr Karas states that colleges of supervisors are ‘a temporary step towards a new architecture of supervision’ and calls for a decentralised European System of Banking Supervisors building on the model of the European System of Central Banks. To this purpose the Commission should come up with appropriate proposals by January 1, 2010.

 

“The Council ambitions still seem to remain below those of the Commission”, Karas commented the Council position on the Commission draft proposal. “Regarding market supervision and securitisations in particular, there is a clear need for improvement”, he said.

 

Draft report

 

© Graham Bishop