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The Benefits and Challengesof Implementation of Basel II

in Europe

Jos Mara Roldn|27 ept 2!!"

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$utline

Basel II% Basel II and finan&ial sta#ilit'

% Three (illars of Basel II ) triple prote&tion

% Enhan&ed ris* management )+ In&enti,es

% uper,isor' re,ie- pro&ess .(illar 2/

Implementation in the E0

% Role of CEB

% The &hallenges and CEB1 response% or* programme

% (u#li&ations on CR3

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Basel II and finan&ial sta#ilit'

5 Basel II6 Rules for #an*s tohold suffi&ient &apital to &o,er

their ris*s and prote&t

depositors

5 Enhan&ed dialogue #et-een

the industr' and super,isors5 -indo- of opportunit' in

promoting &onsisten&' and

super,isor' &on,ergen&e

8e,el pla'ing field

9inan&ial sta#ilit'

Enhan&ed ris*management

in #an*s

(rudentialsuper,ision and

s'stemi& ris*

:e- &apitalframe-or*

9inan&ialsta#ilit'

Con,ergen&e insuper,isor'pra&ti&es

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Three pillars of Basel II6 triple prote&tion

5 Basel II6 three pillars -ith&he&*s and #alan&es

5 Ea&h pillar has ,alue on itso-n< #ut together the' aree,en more potent

5Comple= in detail #ut &learpurpose and ar&hite&ture

5 Based on the #est pra&ti&es ofthe industr' )+ effi&ientregulation from an e&onomi&perspe&ti,e

5 9le=i#le frame-or* for smalland #ig #an*s

5 uita#le for emerging andde,eloping mar*ets

3 pillars

MinimumCapital

Requirements

Regulatoryview

Supervisoryreview andevaluation

(SREP)+Banks internalview (!C""P)

Marketdis#ipline

Market view

Credit riskMarket risk$perational

risk

Supervisory%udgment

&is#losurerequirements

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Enhan&ed ris* management6 In&enti,es

5 Re&ognises anden&ourages de,elopments

in ris* management and

super,isor' pra&ti&es

5 In&enti,es to adopt more

sophisti&ated approa&hes

5 good #usiness tool -ith

#usiness ,alue .not >ust

&osts?/

5 More than @!! &ountriesplan to adopt Basel II

Basel !! requirements

!nternal#ontrols'

reporting' audit

and #ontingen#yplanning

e *oardand senior

management

Risk management

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Enhan&ed ris* management6 (illar 2

5 Supervisory review pro#ess (Pillar )

5 Criti#al and integral part o, te new #apital

,ramework

5 $*%e#tives o, Pillar are to-

Ensure institutions ha,e adeuate &apital to support all ris*s in their #usiness

En&ourage institutions to manage ris*

9oster an a&ti,e dialogue #et-een institutions and super,isors

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Implementation in the E0

58egal instrument to transposeBasel II to European legislation6

proposed Capital Reuirements

3ire&ti,e .CR3/D

5 8egislation to implement Basel II

as &ommon frame-or* a&ross all2" E0 &ountries .and 4 EE

&ountries/D

5 Importan&e of the s&ope6 The

dire&ti,e -ill appl' to all #redit

institutionsand investment,irmsD

5 CEB guidelines

Basel II % a glo#al agreement

The CR3 % European legislation

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Implementation in the E06 Role of CEB

5CEB % Committee of European Ban*ing uper,isors% Fi,es te&hni&al ad,i&e to the European Commission

% (romotes &onsistent implementation of Communit' legislation and &on,ergen&e

in super,isor' pra&ti&es

% Enhan&es super,isor' &ooperation and e=&hange of information

5CEB mem#ers ha,e a po-erful ,oi&e% Gigh le,el representati,es of super,isor' authorities and &entral #an*s

5CEB is a part of the legal frame-or* in the E0% 9leshing out the te&hni&al details in #an*ing regulations

5CEB -or* affe&ts the #an*ing #usiness% Main tools6 standards and guidelines

% Mem#ers &ommit to implement on national le,el

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The Challenges CEB response

Consistent implementation

Con,ergen&e in super,isor'

pra&ti&es

treamlining the super,isor'

pro&ess for &ross#order groups

Effe&ti,e &onsultations

&&ounta#ilit'

uper,isor' 3is&losure

Common reporting reuirements

Model ,alidation

uper,isor' re,ie- pro&ess

Fuidelines to enhan&e &o

operation and e=&hange of

information #et-een authorities

3ialogue and intera&tion -ith

mar*et parti&ipants and endusers< Consultati,e (anel

Transparen&'< nnual Report