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The two most important elements relate to the establishment of Colleges of Supervisors and the mandatory exchange of information between supervisors, Commissioner McCreevy said introducing the Commission proposal.
The proposal will restrict banks in lending beyond a certain limit to any one party, while national supervisory authorities will have a better overview of the activities of cross-border banking groups.
Proposed amendments include that banks will be restricted in lending beyond a certain limit to any one party. Banks will not be able to lend or place money with other banks beyond a certain amount, while borrowing banks will effectively be restricted in how much and from whom they can borrow.
Colleges of Supervisors will be established for banking groups that operate in multiple EU countries. For banking groups that operate in multiple EU countries, their liquidity risk management will also be discussed and co-ordinated within 'colleges of supervisors'.
Furthermore, firms that re-package loans into tradable securities will be required to retain some risk exposure to these securities, while firms that invest in the securities will be allowed to make their decisions only after conducting comprehensive due diligence. If they fail to do so, they will be subject to heavy capital penalties.
Finally, there will be clear EU-wide criteria for assessing whether 'hybrid' capital is eligible to be counted as part of a bank's overall capital.
In addition to the above proposal, the Commission also plans certain technical changes that were approved by the European Banking Committee and have been submitted to the European Parliament for scrutiny.
Draft comitology measures
Amendments to Directive 2006/48/EC
Amendments to Directive 2006/49/EC