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The Benefits and Challengesof Implementation of Basel II
in Europe
Jos Mara Roldn|27 ept 2!!"
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Jos Mara Roldn e tem#er 2!!" 2
$utline
Basel II% Basel II and finan&ial sta#ilit'
% Three (illars of Basel II ) triple prote&tion
% Enhan&ed ris* management )+ In&enti,es
% uper,isor' re,ie- pro&ess .(illar 2/
Implementation in the E0
% Role of CEB
% The &hallenges and CEB1 response% or* programme
% (u#li&ations on CR3
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Basel II and finan&ial sta#ilit'
5 Basel II6 Rules for #an*s tohold suffi&ient &apital to &o,er
their ris*s and prote&t
depositors
5 Enhan&ed dialogue #et-een
the industr' and super,isors5 -indo- of opportunit' in
promoting &onsisten&' and
super,isor' &on,ergen&e
8e,el pla'ing field
9inan&ial sta#ilit'
Enhan&ed ris*management
in #an*s
(rudentialsuper,ision and
s'stemi& ris*
:e- &apitalframe-or*
9inan&ialsta#ilit'
Con,ergen&e insuper,isor'pra&ti&es
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Jos Mara Roldn e tem#er 2!!" ;
Three pillars of Basel II6 triple prote&tion
5 Basel II6 three pillars -ith&he&*s and #alan&es
5 Ea&h pillar has ,alue on itso-n< #ut together the' aree,en more potent
5Comple= in detail #ut &learpurpose and ar&hite&ture
5 Based on the #est pra&ti&es ofthe industr' )+ effi&ientregulation from an e&onomi&perspe&ti,e
5 9le=i#le frame-or* for smalland #ig #an*s
5 uita#le for emerging andde,eloping mar*ets
3 pillars
MinimumCapital
Requirements
Regulatoryview
Supervisoryreview andevaluation
(SREP)+Banks internalview (!C""P)
Marketdis#ipline
Market view
Credit riskMarket risk$perational
risk
Supervisory%udgment
&is#losurerequirements
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Jos Mara Roldn e tem#er 2!!" "
Enhan&ed ris* management6 In&enti,es
5 Re&ognises anden&ourages de,elopments
in ris* management and
super,isor' pra&ti&es
5 In&enti,es to adopt more
sophisti&ated approa&hes
5 good #usiness tool -ith
#usiness ,alue .not >ust
&osts?/
5 More than @!! &ountriesplan to adopt Basel II
Basel !! requirements
!nternal#ontrols'
reporting' audit
and #ontingen#yplanning
e *oardand senior
management
Risk management
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Jos Mara Roldn e tem#er 2!!" A
Enhan&ed ris* management6 (illar 2
5 Supervisory review pro#ess (Pillar )
5 Criti#al and integral part o, te new #apital
,ramework
5 $*%e#tives o, Pillar are to-
Ensure institutions ha,e adeuate &apital to support all ris*s in their #usiness
En&ourage institutions to manage ris*
9oster an a&ti,e dialogue #et-een institutions and super,isors
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Implementation in the E0
58egal instrument to transposeBasel II to European legislation6
proposed Capital Reuirements
3ire&ti,e .CR3/D
5 8egislation to implement Basel II
as &ommon frame-or* a&ross all2" E0 &ountries .and 4 EE
&ountries/D
5 Importan&e of the s&ope6 The
dire&ti,e -ill appl' to all #redit
institutionsand investment,irmsD
5 CEB guidelines
Basel II % a glo#al agreement
The CR3 % European legislation
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Implementation in the E06 Role of CEB
5CEB % Committee of European Ban*ing uper,isors% Fi,es te&hni&al ad,i&e to the European Commission
% (romotes &onsistent implementation of Communit' legislation and &on,ergen&e
in super,isor' pra&ti&es
% Enhan&es super,isor' &ooperation and e=&hange of information
5CEB mem#ers ha,e a po-erful ,oi&e% Gigh le,el representati,es of super,isor' authorities and &entral #an*s
5CEB is a part of the legal frame-or* in the E0% 9leshing out the te&hni&al details in #an*ing regulations
5CEB -or* affe&ts the #an*ing #usiness% Main tools6 standards and guidelines
% Mem#ers &ommit to implement on national le,el
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The Challenges CEB response
Consistent implementation
Con,ergen&e in super,isor'
pra&ti&es
treamlining the super,isor'
pro&ess for &ross#order groups
Effe&ti,e &onsultations
&&ounta#ilit'
uper,isor' 3is&losure
Common reporting reuirements
Model ,alidation
uper,isor' re,ie- pro&ess
Fuidelines to enhan&e &o
operation and e=&hange of
information #et-een authorities
3ialogue and intera&tion -ith
mar*et parti&ipants and endusers< Consultati,e (anel
Transparen&'< nnual Report