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Speaking before the European Parliament in Strasbourg, Commissioner McCreevy outlined that the recent US sub-prime mortgage crisis and its potential impact on Europe makes the Commission's regulatory dialogues with the US and other jurisdictions even more critical. “We certainly need to look closely at the mechanisms at play (i.e. the role of conduits and special purpose vehicles) and their relevance for European banks”, McCreevy said.
With regard to Basel II and Solvency II, he said that “more work will be needed on the capital calibration of complex products and on banks' ability to identify potential problems in crisis conditions, including potential concentration of risk in certain areas.”
Although hedge funds have been particularly active in the structured credit markets “the crucial thing is that hedge fund failures do not appear to have spilled over to the wider financial system”, the Commissioner said. “Investment fund rules (UCITS) have held up.”
“Potential conflicts of interest of Credit Rating Agencies is another concern”, he said. “The role of credit rating agencies needs to be clearer. I am following up on these issues with CESR and I intend raising them also with our international partners.”