|
Basel II |
|
Bank for International Settlements |
| Background |
| Pillar 1: Regulatory Capital |
|
Credit risk |
| Pillar 2: Supervisory Review |
| Pillar 3: Market Disclosure |
| Business and Economics Portal |
The Capital Requirements Directive (CRD) for the financial services industry will introduce a supervisory framework in the EU which reflects the Basel II rules on capital measurement and capital standards.
Member States have to transpose, and firms of the financial service industry have to apply, the CRD from January 1, 2007. Institutions can choose between the current basic indicator approach, that increases the minimum capital requirement in Basel I approach from 8% to 15% and the standardized approach that evaluates the business lines as a medium sophistication approaches of the new framework. The most sophisticated approaches, Advanced IRB approach and AMA or advanced measurement approach for operational risk will be available on the beginning of 2008. From this date, all EU firms will apply "Basel II".
Contents |
Think-tanks such as the World Pensions Council have argued that European powers such as France and Germany pushed dogmatically and naively for the adoption of the so-called “Basel II recommendations”, adopted in 2005, transposed in European Union law through the Capital Requirements Directive (CRD). In essence, they forced European banks, and, more importantly, the European Central Bank itself, to rely more than ever on the standardized assessments of “credit risk” marketed aggressively by two US credit rating agencies- Moody’s and S&P, thus using public policy and ultimately taxpayers’ money to strengthen an anti-competitive duopolistic industry. Ironically, European governments have abdicated most of their regulatory authority in favor of a non-European, highly deregulated, private cartel.[1]