DEVELOPMENTS IN EC AND INTERNATIONAL CAPITAL ADEQUACY REGULATIONS
| Pages | 314-322 |
| Date | 01 April 1994 |
| DOI | https://doi.org/10.1108/eb024818 |
| Published date | 01 April 1994 |
| Author | MATTHEW ELDERFIELD |
| Subject Matter | Accounting & finance |
DEVELOPMENTS IN EC AND INTERNATIONAL CAPITAL
ADEQUACY REGULATIONS
Received: 13th July, 1994
MATTHEW ELDERFIELD
MATTHEW ELDERFIELD
IS
AN ASSISTANT DIRECTOR AT THE BRITISH
BANKERS' ASSOCIATION, WHERE HE IS
PRIMARILY INVOLVED IN BANKING
SUPERVISION MATTERS, INCLUDING CAPITAL
ADEQUACY REGULATION. HE IS CLOSELY
INVOLVED IN THE BANK OF ENGLAND'S
IMPLEMENTATION OF THE CAPITAL
ADEQUACY DIRECTIVE AND WROTE THE BBA'S
RESPONSE TO THE BASLE MARKET RISK
PROPOSALS.
ABSTRACT
The paper
analyses
the
current
two main
initiatives in capital
adequacy regulation
for
banks:
the
EC
Capital Adequacy
Direc-
tive (CAD) and the Basle
Committee
on
Banking Supervision market risk propo-
sals.
The main
elements
of the CAD are
reviewed,
problem areas are identified
and
differences
with the Basle
proposals
are
noted.
Finally,
the paper sets
out the
likely
impact
of the
CAD
and
the
Basle proposals
on
UK
banks.
INTRODUCTION
In January 1996 the Capital Ade-
quacy Directive (CAD)1 will come
into force throughout the European
Union, bringing about a dramatic
change to capital adequacy regula-
tions for European banks and invest-
ment firms. In a parallel
development, the Basle Committee
on Banking Supervision is itself con-
sidering new capital rules for the
market risks undertaken in bank
trading activities.2 Consultation on
initial proposals concluded at the
end of last year, and the Committee
is presently preparing a further
paper for comment at the end of the
year. The exact timing of any final
Basle rules is as yet unclear.
This paper reviews the main ele-
ments of the CAD, pointing to the
key questions that must be faced in
implementation, and contrasts the
directive with the Basle proposals. In
conclusion, the impact of the two
initiatives on UK banks is consid-
ered.
314
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