Banking association welcomes draft directive on Basel II

14 July 2004 – The Association of German Banks (BdB) welcomes the draft directive issued by the European Commission to implement the recently adopted Basel Accord (Basel II) in Europe. Hans-Joachim Massenberg, deputy chief executive officer of the BdB: “By presenting the draft directive, the Commission has achieved its aim of ensuring that Basel II is applicable by all European banks, while taking due account of the specific features of the European market.”

The Commission’s decision to couple the Basel Committee’s staggered implementation timetable with an option for banks was right, Mr Massenberg said. The BdB also endorses the provision stipulating that the procyclical effect of the new capital rules has to be regularly analysed by the European Central Bank and that counter-measures must be proposed if necessary.

“By improving banks’ credit risk management, the draft directive helps to strengthen financial stability in Europe. However, to create a level playing field for all European banks, the numerous national options need to be reduced”, Mr Massenberg added. The BdB criticises in particular the Commission’s decision to allow member countries to choose for themselves at which levels of a banking group they apply the new capital rules.

During the consultation process between the European Parliament and the Council of Ministers that now follows, it should be ensured that the directive can be adapted flexibly to take account of changes in the Basel Accord. “Basel II must be translated into European law on a ‘one-to-one’ basis”, Mr. Massenberg said. Also, recognition of internal risk models had to be pushed in Basel and Brussels in the future. Only then was consistency between prudential requirements and internal risk management at banks possible. Mr Massenberg acknowledged in this context the good cooperation so far between the Commission and the banking industry and said that the BdB would continue to play an active part in this constructive dialogue in the future.