Commission suggests 'possible further changes' to CRD

BRUSSELS - Possible further changes to the Capital Requirements Directive (CRD) are the subject of a new consultation paper released by the European Commission, potentially adding to the two sets of revisions already announced.

The fresh revisions would come on top of amendments agreed by member states and the European Parliament in April, and a proposal adopted by the Commission on July 13.

The new proposals follow on from commitments made in the Commission's March 4 announcement at the Spring European Council, which included addressing pro-cyclicality through counter-cyclical provisioning; removing national discretions to limit legislative differences across borders; and addressing leverage or liquidity risk through "supplementary measures" to existing risk-based requirements - including future consultation on a leverage ratio.

The Commission has set an unusually short deadline for responses of September 4. This, it states, is justified because the amendments are part of its ongoing response to the financial crisis, and the Commission has a short timetable to come forward with a legislative proposal by October.

A separate legislative proposal will be released "soon" - no specific has been deadline set - that the Commission says will aim to "restrain excessive and unsustainable balance-sheet growth through a leverage ratio measure".

The earlier proposals made on July 13 aimed specifically to improve banks' capital, requiring higher capital holdings for re-securitisations, tightened disclosure requirements for securitisations, and a reappraisal of risks in trading books in stressed conditions, also leading to heightened capital levels.

The legislative paper stipulated improvements to remuneration structures, saying supervisors will have new powers to impose sanctions on banks whose pay policies are found to be incompatible with sound risk management - potentially leading to fines or higher capital charges.

Click here to read the new consultation paper.

Click here to read the July 13 proposal