On December 5, 2014, the Basel Committee published a report assessing the European Union's implementation of the Basel capital framework. The EU regulatory capital framework came into force on January 1, 2014 and comprises the Capital Requirements Regulation and the Capital Requirements Directive, together known as "CRD IV". The Basel Committee's assessment of CRD IV is that eight of the fourteen components are compliant, four components (definition of capital and calculation of minimum requirements, the Standardized Approach for credit risk, the securitization framework and the Standardized Measurement Method for market risk) are largely compliant, the Internal Ratings-Based approach for credit risk is materially non-compliant and the counterparty credit risk element is non-compliant.
The European Commission published a statement on December 5, 2014, in response to the Basel Committee's assessment. The European Commission confirms that all 20 of the banks that participated in the Basel Committee assessment have capital above the required minima as verified by the recent stress tests.
The Basel Committee report is available at: http://www.bis.org/bcbs/publ/d300.pdf and the European Commission's statement is available at: http://europa.eu/rapid/press-release_STATEMENT-14- 2403_en.htm.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
