Follow Us

Follow us on Twitter  Follow us on LinkedIn
 

27 July 2001

EACB Position Paper on Basel II




-
This EACB position paper outlines a number global comments on the second consultative paper on Basle II. Next to others the main findings were:

  • The EACB considers it to be very important for the consultation process to be extended beyond 31 May 2001 in the form of an open, constructive dialogue on these issues.
  • The requirement for market and counterpart risks should be effectively and explicitly lowered from 8% to 6% so that account can be taken of new risks incorporated into the minimum requirement which is being maintained at 8%. Equity capital requirements for retail banking should be set at least half as low as those for wholesale banking.
  • Capital cover rules in the IRB approach are incorrectly calibrated. The multiplicity of security buffers, haircuts, and so forth occur simultaneously and to the full extent. Maturity, weighting and inappropriate granularity rules compound the problem, so that capital cover can only be avoided through a cap regulation. The EACB also recommends replacing the quantitative thresholds for retail portfolios within the IRB by tighter qualitative criteria.
  • The EACB suspect that a ratio of 20% for operational risk would definitely be too high and should be lowered considerably. Only on the basis of a wide basis of collected loss data and the results of Quantitative Impact Studies will it be possible to identify operational risk precisely and to develop reliable methods for calculating and calibrating appropriately.
  • Any collateral accepted by banks in the course of ordinary business should be validated for the purposes of risk mitigation. Moreover, co-operative banks argue that it would be highly desirable to extend the scope of the risk mitigation techniques to all guarantees/collateral used up to and including their own internal solidarity schemes.

    The full paper can be found on the EACB website

    © EACB - European Association of Co-operative Banks


  • < Next Previous >
    Key
     Hover over the blue highlighted text to view the acronym meaning
    Hover over these icons for more information



    Add new comment