Association of German Banks welcomes the adoption of Basel II

26 June 2004 – The Association of German Banks welcomes the adoption by the Basel Committee on Banking Supervision of the new capital adequacy framework (Basel II). “This is a landmark achievement in financial supervision. The new framework succeeds in aligning banking supervisory rules with modern methods of risk management and will have far-reaching benefits both for banks and the entire business sector, particularly SMEs”, said Manfred Weber, the Association’s Chief Executive Officer. The improved risk management rules would also enable Basel II to help strengthen the stability of the international financial system, he added. “The banks have prepared for Basel II and been intensively involved in the consultation process for many years, investing considerable financial and technical resources in the process. These have now proved their worth.”

The Association of German Banks appreciates the Basel Committee’s close co-operation with the banking industry throughout the lengthy evolution of Basel II. “We welcome the Committee’s commitment to continue the constructive dialogue on the points that remain open and will take an active part in these discussions”, said Weber. The German banking industry was confident that during the transitional phase, in particular, where a number of implementation issues had to be dealt with, supervisors would work together with the banks in a flexible and co-operative manner.

The key question now was how Basel II would be translated into EU law, with the phased introduction of the new framework agreed by the Basel Committee at the beginning of May likely to pose particular problems. Against this background, the Association of German Banks believes that, when Basel II is implemented in Europe, the banks should be able to decide themselves whether to start applying the new rules at the beginning or the end of 2007.

Mr Weber paid especial tribute to the role played in the negotiations by the German delegation. Many important results had been achieved, not least for small and medium-sized companies.