Basel II in the EU: problems and issues ahead

For most observers, the Basel II process is over: the final version of the New Accord was issued about a year ago, the Commission proposed its capital requirements directives in July 2004, and the EU Council came to a provisional agreement in November 2004. For others, the process is only beginning and the problems related to it can be expected to lead to delays, and possibly to some changes, in the application of the New Accord. Karel Lannoo from the Centre for European Policy Studies focuses on the role of the European Parliament, the home-host issues in the implementation of the Accord, and the issue of supervisory convergence.

European Parliament’s role

The new regulatory procedure for financial services legislation, the so-called Lamfalussy approach, has still not been fully digested in the European Parliament. In these circumstances, it is imprudent of the other two European institutions, the European Commission and the Council, to be reluctant to share information and to insist on a rapid adoption of the capital requirements directives by the European Parliament. Moreover, the treatment of the trading book is still not finalised, and this may need to be added to the draft directive when it is almost agreed upon.