MyCIMA

Changes to Capital Requirements Directive

Posted: Tuesday 02 March 2010 by Nick Topazio
Replies : 4
Keywords: Banks, capital
 

The European Commission has launched a public consultation on further possible changes to the Capital Requirements Directive (CRD) aimed at strengthening the resilience of the banking sector and the financial system as a whole.

The Commission proposals amending the CRD, relate to seven specific policy areas, most of which reflect commitments made by G20 leaders at summits in London and Pittsburgh during 2009. These commitments included building high-quality capital, strengthening risk coverage, mitigating pro-cyclicality and discouraging leverage, as well as strengthening liquidity risk requirements and forward-looking provisioning for credit losses. All interested stakeholders are invited to reply to the consultation by 16 April 2010, indicating what impact the potential changes would have on their activities. The results will feed into a legislative proposal scheduled for the second half of 2010.

The seven areas of potential action are as follows:

- Liquidity standards: Introducing liquidity standards that include a liquidity coverage ratio requirement underpinned by a longer-term structural liquidity ratio.

- Definition of capital: Raising the quality, consistency and transparency of the capital base.

- Leverage ratio: Introducing a leverage ratio as a supplementary measure to the Basel II risk-based framework based on appropriate review and calibration.

- Counterparty credit risk: Strengthening the capital requirements for counterparty credit risk exposures arising from derivatives, repos and securities financing activities.

- Countercyclical measures: A countercyclical capital framework will contribute

to a more stable banking system, which will help dampen, instead of amplify, economic and financial shocks.

- Systemically important financial institutions: The Commission is consulting

on appropriate measures to deal with the risk posed by such institutions.

- Single rule book in banking: The Commission is consulting on areas where more stringent requirements might be necessary. In addition, the Commission is consulting on the appropriate prudential treatment of real estate lending. This is part of the Commission's commitment to create a single rule book in Europe

CIMA is considering its response to this consultation and I would welcome your views. 

 

Ethics!

Posted by Adrian Rutter on Tuesday 02 March 2010 18:18

So the horse bolts, kicks over a lamp on its way out and burns down the stable, and the regulator's response is to produce a set of rules for building better stable doors. Great.

It was bankers' behaviour that caused the problem, compounded by regulators and investors who just kept quiet and counted their share of what they thought were the profits. 

I suggest CIMA's response should be to ask the EU to call for a robust ethical framework governing bankers', directors' and shareholders' behaviour, with a clear, sustainable and transparent reward system and an equally clear, sustainable and transparent system to penalise deliberate transgression.

Adrian is right - well said

Posted by Cliff Moggs on Wednesday 03 March 2010 19:29
CIMA's executive need to ask the question of itself, does it have the guts to tell it as it is? How many times do those that are in 'power' need to be told. The FRC is no better, try to find in its proposed new Governance Code, the word 'ethics'. Has anyone heard of 'Corporate Integrity'? Why isn't this 'first on the list'? Regards Cliff Moggs

Ethical behaviour is critical

Posted by Danielle Cohen on Thursday 04 March 2010 13:49

CIMA actually convened a group of experts with senior experience in business, ethics and sustainability to discuss the future of business ethics in the wake of the banking sector crisis. I'd really encourage you to look at our latest report on the insights that emerged. It focuses on why businesses need to integrate ethics into decision making and gives practical recommendations as to how finance professionals will help this happen.

There is also a shorter summary of the panel's views on how we should be ensuring the current crisis is not repeated, in which they stress the need for a change in behaviour and strong ethical leadership.

Who were from the 'banking sector'?

Posted by Cliff Moggs on Thursday 04 March 2010 19:15
Danielle, I think the point was, does the 'banking sector' behave with respect to a code of 'corporate integrity'? In the pursuit of a 'worthwhile purpose' how is this explained? What did the particpants from the 'banking sector' say? Best regards Cliff Moggs