European Parliament Draft Report on Basel II and revision of the Capital Requirements Directives (CRD IV)
28 May 2010
The Committee’s proposal aims to improve the quality of the capital base, extend and strengthen the coverage of the capital framework. The Committee also intends to introduce a leverage ratio, other supplementary countercyclical measures such as capital buffers, and standards on liquidity management
Rapporteur Othmar Karas (AT/EPP) is convinced, that the crisis has set a clear case for an in depth revision of the current regulatory framework. And therefore welcomes the efforts of the Basel Committee to upgrade the framework in general.
Despite his general support to reform the framework, the rapporteur is strongly concerned about visible shortcomings of the negotiation process on the revised framework, and that the framework, as currently presented, clearly puts the European economy at competitive disadvantage.
The main reason for this report is therefore a call of the European Parliament on the Basel Committee to be included in the appropriate way in the ongoing negotiations and a call to make necessary adjustments to the framework so that the European industry and economy are not disadvantaged.
The European Parliament must play an active role and strongly influence the revision of the rules already in the process of negotiations in the Basel Committee. The rapporteur believes that, as the European Parliament is the democratically elected European body who will later on co-legislate on the Commission proposal of the Capital Requirements Directive (CRD 4 Directive), should be involved in the negotiations process at an early stage, and asks the Basel Committee and the Commission to take necessary steps in this respect.
Although there is a strong international commitment to revise the Basel framework, it is important that such revision strikes the right balance between various business models, investment and traditional retail banking, different legal forms and predominant financing of corporate sector through bank lending in Europe. While the American economy is mainly financed through the capital market, the European corporate sector relies on the lending capacity of the banking sector. 80% of investment and lending in Europe is based on bank credits. The revised rules should take into account such differences without penalising certain markets or business models. Otherwise, there is a risk of harming the European economy and industry.
The rapporteur agrees with the importance of international level playing field as regards Basel II revised framework under condition that such framework does not put the European Economy at competitive disadvantage.
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