21 January 2003

FBE Comments on the QIS 3 Technical Guidance Note

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The European Banking Federation (FBE) is concerned about the number and scope of national discretions proposed in the Accord. FBE believes that this will result in an unlevel playing field. If national discretions cannot be removed at this stage, the impact of the discretions should be kept under review. Regulators should explain publicly how national discretions are being used to ensure transparency. Over time, the majority of national discretions should be removed by consensus.

The introduction of the supervisory review process under Pillar 2 will be a major innovation for some banks and also for some supervisory authorities. It is likely that Pillar 2 will be critical in determining the impact of the Accord on individual banks. For some, the impact could be substantial.

The FBE understands that additional proposals have been added to Pillar 2, including potential capital requirements for residual risk, concentration risk and pro-cyclicality. However, the form and scale of any required Pillar 2 adjustment is not known. The FBE is also concerned about the impact of stress-testing in practice. The FBE urges the Committee to consult on the requirements of Pillar 2 before publication of CP3.

FBE Paper

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