Banking association welcomes Basel II consensus

12 May 2004 – The Association of German Banks (BdB) welcomes the consensus achieved by the Basel Committee on Banking Supervision on the introduction of a new international capital standard (Basel II). Manfred Weber, CEO and Member of the Board of Directors of the BdB, said today that he saw this consensus as a break-through. Banks now had planning security and could start to implement the new standard that they had been preparing for for many years, investing considerable financial and technical resources in the process. Thanks to improved risk management rules, Basel II could now help to enhance the stability of the international financial system. Mr. Weber added that, all in all, Basel II was a huge step forward in financial supervision and would have far-reaching benefits both for banks and the business sector, particularly SMEs.

Mr Weber said that many banks which were preparing for implementation of the standardised or foundation internal ratings-based (IRB) approach could now apply either from 1 January 2007 onwards. The consensus also meant that banks would have a further twelve months to implement the advanced approach. This time should be used to resolve open issues such as procyclical effects, overall calibration, recognition of operational risk and the home-host problem. However, he pointed out that the staggered timetable for the introduction of Basel II was problematic. The different implementation deadlines posed practical problems and would also make simultaneous application of the new standard at international and EU level more difficult. On the other hand, Mr. Weber welcomed the progress made in cross-border cooperation between supervisors. The decision not to include explicit rules on computation of stress LGDs also accommodated a demand made by the BdB. At the same time, the proposed extension of the capital floor arrangements until 2009 would, Mr. Weber said, reduce the incentive for banks to adopt an IRB approach.