TEXTSADOPTED
1. Ownfundsofbanks
A5-0282/2000
EuropeanParliament resolution onthe evaluationofDirective 89/299/EEConthe ownfundsof
banks(2000/2207(INI))
The European Parliament,
Bdash having regard to the first Commission report to the European Parliament and the Council on the
implementationoftheownfundsDirective(89/299/EEC)(COM(2000)74),
Bdash having regard to the Commission consultation document, A Review of Regulatory Capital Require-
mentsforEUCreditInstitutionsandInvestmentFirms(1),
Bdash havingregardtotheconsultativepaperissuedbytheBaselCommitteeonBankingSupervision,ANew
CapitalAdequacyFramework,
Bdash havingregardtoRules47(2)and163ofitsRulesofProcedure,
Bdash havingregardtothereportoftheCommitteeonEconomicandMonetaryAffairs(A5-0282/2000),
A. whereastheCommissioniscurrentlyengagedinconsultationswithinterestedpartiesontherevision
oftheregulatorycapitalframeworkapplyingtocreditinstitutionsandinvestmentfirms,inviewofthe
ongoingdiscussionsintheBaselCommitteeonBankingSupervisiontofurtherrevisethe1988Capital
Accord,
B. whereastheCommission’sconsultationdocumentisafirststageinsettingouttheissuesandoptions
to be considered, and the Basel Committee is expected to bring forward further proposals in early
2001,
C. whereastheCommission’sreportontheimplementationoftheownfundsDirectiveseekstodescribe
andassessthewayinwhichtheprovisionsofDirective89/299/EEChavebeenimplementedbyMem-ber States,andpresents possiblemeasurestobe takenatEuropean levelin order toachieve a more
harmoniseddefinitionofownfunds,
D. whereastheownfundsofaninstitutionservetoabsorblosseswhicharenotmatchedbyasufficient
volumeofprofits,enable supervisory authorities toassessthe solvencyofthe institution,ensure thecontinuityoftheinstitutionandprotectsavings;while theownfundsDirective concernsthequality
and composition of capital, the focus of the Basel review is currently the amount of capital which
creditinstitutionsshouldhold,whichmayhaveimplicationsforthecompositionofcapital,
E. whereas while there are clearly issues which have arisen in the ten years since the adoption of the
ownfundsDirective,notablyduetoinnovationinthefinancialservicessectorandthedevelopmentof
newandmorecost-effectivecapitalinstruments,itseemsadvisableinviewoftheongoingBaseldis-cussionstowaitfortheresultsoftheregulatorycapitalreviewbeforeconsideringanychangestothe
frameworkforownfunds,
F. whereasitisalsoimportanttostriveforconsistencybetweenthedefinitionsofownfundsusedinthe
EU andinternationally, in order topreserve the competitive positionofEU credit institutions;whenmaking the European provisions, it should also be considered that these are binding for all credit
institutionsincluding specialised institutions,while the Baselregulations are onlyaimed atthe inter-
nationallyworkingcommercialbanksandonlyasrecommendations,
(1) MARKT/1123/99,22.11.1999.8.8.2001 EN C223/361 OfficialJournaloftheEuropeanCommunities
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G. whereastheaimofprudentcapitaladequacyprovisionistoensurethatcreditinstitutionsandinvest-
mentfirmsholdcapitalthatisproportionatetothenatureandscaleoftherisksthattheyundertake;
thereisagrowingconsensusthatthepresentframeworkfailsadequatelytocapturethefullextentof
therisksthatsomeinstitutionsareundertaking,doesnotsufficientlyrecogniseorencouragenewriskmanagementtechniquesandmayevenleadtoamisallocationofresources,
H. whereastheCommissionconsultationdocumentandtheBaselreview thereforeseektocreate areg-
ulatory capital framework which more accurately reflects the real risks undertaken by credit institu-
tions, based on the three pillar approach of minimum regulatory capital requirements, supervisoryreviewandmarketdiscipline,
I. whereasafailuretoaligncapitalrequirementsmoreclearlywithriskswillsetupanartificialregula-
toryincentive forborrowerswithwell-recognisedcreditworthinesstoavoidthebankingsystemalto-
gether, andtoborrowdirectly fromthefinancial markets,thereby leaving banksexposeddispropor-
tionatelytopoorrisks,
J. whereas withregard tothefirstpillartheCommissionproposestorefine theexistingapproachina
morerisk-sensitivedirectionbyacombinationoftheuseofinternalriskassessmentsystemsofinsti-
tutionsandamodifiedriskweightingapproachusingexternalcreditassessmentinstitutions,modifica-
tionstoconsolidationrequirements,greater recognition ofriskmitigation techniques, andthedevel-
opmentofacapitalrequirementforotherrisks,
K. whereas,undertheCommission’sproposals,subjecttoappropriaterecognitionbysupervisoryautho-
rities,allbankswillbeabletouseriskmitigationtechniquestoreducetheircapitalcharges,regardless
ofwhethertheyoptfortheinternalratingsapproachorthemodifiedstandardisedapproach,
L. whereaswithregardtothesecondpillar,theCommissiontakestheviewthatsupervisoryauthorities
musthavethepowertorequireindividualinstitutionstoholdcapitalinexcessofthebasicminimumrequirement,andinstitutionsmusthaveinplaceastrategyformaintainingcapitaladequacy,
M. whereaswithregardtothethirdpillar,theCommissionarguesthatappropriatelevelsofinformation
disclosure enable market participants to make a better judgement of an institution’s performance,
whichleadstobettermarketdiscipline,
N. whereastheCommission’sconsultationdocumentconcentratesalmostentirelyonbanks,withinvest-
ment firms mentioned only as an afterthought; this attitude is surprising, given that thousands ofinvestment firms and asset managers are covered by EU capital adequacy rules; it is vital that the
characteristics and requirements of non-banks, such as investment firms and asset managers, are
takenintoaccountinthereviewofcapitaladequacy,
O. whereas there are concerns among smallandmedium-sized enterprises (SMEs), which are reliant on
bankfinance foravery significant proportionoftheir financing, abouttheeffectoftheadoptionof
newcapitaladequacyrulesontheabilityofSMEstoobtainloanfinanceduetopotentiallyincreased
capitalchargesforhigherriskventures;theyfearthattheyareonlyconsideredriskybecausetheyhave
noexternalrating;thewidespreaduseofinternalratingsisthemainpracticalwaytoensurethatSMEs
canobtainthebenefitofamorerisk-sensitiveframework,sincesuchenterprisesarehighlyunlikelytobeexternallyrated,
P. whereas the European Financial Services industry is fundamentally different from that of the United
States,whereexistingnon-competitivepractices(i.e.governmentguaranteestogovernmentsponsored
enterprises allowing lower funding costs) put European credit institutions at a disadvantage in their
efforttoaccessglobalcapitalmarkets,
Q. whereas the European financial services industry is concerned to ensure that the European Union
shouldimplementlegislative changesrequired byarevised CapitalAccordonasimilartime-scaleto
the UnitedStates,in order toensure consistentrulesandavoidplacing theEU ata competitive dis-
advantage,C223/362 EN8.8.2001 OfficialJournaloftheEuropeanCommunities
Friday17November2000
R. whereascapitaladequacyrulesimposesignificantcostsonbanksandinvestmentfirmsand,inmoving
toamorecomplexandrisksensitiveframework,theEUshouldmakeeveryefforttoensurethatthe
rulesareassimpleaspossibleforbanksandfirmstoimplementandoperateandthatcostburdensare
notimposedunlesstheyaregenuinelynecessaryinordertoachievethetwingoalsofdepositorpro-tectionand/orenhancedsystemicstability,
S. whereastheCommissionconsultationofferstheParliamentanidealopportunitytodebatethoroughly
theprinciplesandissuesoftheregulatorycapitalreviewwhiletheBaselprocessisstillongoing,sothat
theimplementinglegislationwhenitispublishedcanbeadoptedingoodtime,
1. Believes thatthe implementationoftheownfundsDirective hasbeen broadlysatisfactory;callson
theCommissiontobringforward,inlightoftheresultsoftheBaselreview,proposalsforaninterpretative
communicationorareviseddirectivetakingintoaccountthedevelopmentofnewandmorecost-effective
capital instruments and ensuring consistency between the definitions of own funds used in the EU and
internationally;
2. BelievesthattheEU’scapitaladequacyrulesshouldbeamendedtomatchcapitalchargesmoreclo-
selywithrisk;pointsoutthatwhiletheBaselproposalsaredesignedonlyforlarge,internationallyactive
banks,theEUhasadiversebankingandinvestmentsector,andthenewrulesshouldreflectthis;welcomes
theCommission’srecognitionofthisincontemplating,inlinewiththeBaseldiscussions,amoreextensive
roleforinternalratingsthanforeseenintheBaselconsultativepaper;
3. UrgestheCommissiontomakeinternalratingsthecentrepieceofthenewregulatorycapitalframe-
workandtoensurethatinternalratingscanbeusedaswidelyaspossible,andthattherelevantminimum
criteria forrecognitionofaninternalratingcanalsobemetbysmallerinstitutions,inordertoavoid,inthis way, giving an undue competitive advantage to large sophisticated banks, provided that the institu-
tionsconcernedmeettherequiredstandards;thesestandardsshouldrequiresound,objectiveandtranspar-
entassessmentsoftheprobabilityofaloandefaultandlosstothelender,andshouldbeeasytocompare
acrossallMemberStates,sothatnobankingsystemhasanartificialregulatoryadvantageoveranother;
4. CallsontheCommission,inviewofthediversityofthebankingandinvestmentsectorintheEur-
opeanUnion,tobringforwardlegislativeproposalstransposingtheBaselAccordinawaythatfaithfully
reflectstheparticularrequirementsoftheEUMemberStatesasawhole;notesthatwhiletheBaselAccord
wasprimarilydesignedtoapplytolargeinternationalbanks,EUrulesonregulatoryownfundsapplytoa
much wider range of banking, credit and investment institutions, and calls for this diversity to be given
priorityattentioninthenewEUrules;
5. CallsontheCommissiontoensurethatbothexternalandinternalratingssystemsarerecognisedas
well as authorised by the banking supervisory authorities, and that no discrimination occurs between
them;
6. Demandsthat the new rules provide a clear road map for banksenabling them to move gradually
towardsinternalratingsastheydeveloptheappropriate systems,enablingthemtoadoptinternalratings
for partsoftheir loanportfoliosandthe modifiedstandardapproach for the remainder; further callson
the Commission and Member States to seek agreement on a sufficiently long transitional period in theBasel Committee to allow as wide a range as possible of banksto put in place the systems required for
aninternalratingsapproach;
7. Takestheview thatdecentralisedsectors,suchasfederated orcooperative banks,shouldbeallowed
tohave anappropriate systemwhich fulfilsthecriteria calledfordevelopedbyacentralbody,sothatit
canbeusedbyeverybankinthatsector;
8. Emphasisestheneedforfurtherworkondevisingobjectivecriteriafortheuseofinternalratingsby
institutionsandthemethodoflinkingthemtocapitalcharges;hopesthattheriskreductionpotentialof
assessingloansintheircontextaspartofaportfoliowillbeacknowledged;suggestsaspectrumapproach
tointernalratings,allowingtherecognitionofarangeofinternalratingssystemswithdifferentdegreesof
sophistication;8.8.2001 EN C223/363 OfficialJournaloftheEuropeanCommunities
Friday17November2000
9. UrgestheCommissiontorecognisethespecialcharacteristicsofretailportfoliosofloans;notesthat
the banking sector has been considerably successful in managing retail portfolios and has extensive and
sophisticateddata,bothondefaultprobabilities,andonlossratesforsuchportfolios;urgesboththeBasel
Committee and the Commission,in formulating the new rules, to take account of this successful recordand extensive data and to give due recognition to the potential to reduce risk by proper and prudent
managementofaportfolioofsimilarsmallretailloans;inparticular,theCommissionandtheBaselCom-
mittee should consider whether banks should be permitted, by the new rules, to set an overall internal
ratingforaportfolioinsteadofforeachindividualloanwithinit;
10. Callsforevery efforttomadetoensurethattheenforcementandimplementationoftheruleson
internal ratings are asconsistentaspossiblethroughout theEU,whilstallowing alimited degree offlex-ibilitytotakeaccountofparticularlocalconditionsandmarketpractice;
11. Observesthat,whilemethodsoffullportfoliocreditriskmodellingarecurrentlyattooearlyastage
of development for use in internal ratings, the Commissionand the Basel Committee should keep them
underreviewwithaviewtoadoptingsuchmethodsinfuture;
12. Observes that since it will never be possible for all banks to use internal ratings, an alternative
modified standardised approach is necessary, and that the Commission proposes to use the assessments
ofexternal rating agencies torefine the standardisedapproach; takesthe view thatsince external ratingsare comparatively unusual for non-financial companies in Europe, and can be costlyfor SMEs, their use
shouldbeaslimitedaspossible;
13. Notes the existence of credit registers in some Member States and anticipates that such registers
shouldplayaroleinthenewcapitaladequacyframework;
14. Believes thattherange ofriskbucketsin a standardisedapproach needstobe extended, andcau-
tiouslyacceptsthelimitedroleforexternalratingsproposedbytheCommission;however,inviewofthe
concernsregardingexternalratings,urgestheCommission,theBaselCommitteeandthebankingindustry
toexplorealternativeadditionalwaysinwhichamoregraduatedsystemofriskbucketscanbedeveloped
for this standardisedapproach; this general framework shouldbe dynamic andflexible andtake account
interaliaoftheadditionalguaranteesthatcanbeofferedbySMEsseekingfinancing;atanyevent,afurther
refinementofthestandardapproachshouldformpartofanewregulatorycapitalframeworkwhichalso
guaranteestherealandpracticablepossibilityofinternalratingsbeingappliedbyasignificantlywiderangeofbothlargeandsmallcreditinstitutions,solongasobjectivestandardsandproperprudentialsafeguards
aremet;
15. Notes that the use of external ratings in expanding the range of collateral will potentially benefit
non-rated as well as rated enterprises; the new risk mitigation proposals will involve reduced regulatory
capitalchargeswherebusinesses(whetherratedornot)offerbondsinratedcompaniesascollateral;
16. Emphasises the importance of establishing a framework to ‘rate the raters’, setting out minimum
criteriafortheaccreditationofexternalratingagenciestoensuretheircredibilityandtransparency;
17. WelcomestheCommission’sproposalstoenhancetherecognitionofcreditriskmitigationtechni-
ques,whichareinsufficientlyencouragedinthecurrentframework;recognisestheriskmitigatingimpact
of mortgage collateral and consequently calls for a thorough empirical analysis to determine the fair
weightingofmortgageloans;callsfortherecognitionoftherisk-reducingpotentialofcollateralrecognised
by banks and the banking industry as mitigating risks and notes here in particular the importance of
traditional loan-securing methods such as mortgages, which are the main form of collateral used byothersmallercreditinstitutionsinparticular,inriskmitigation;demandsthatwherebanksandinvestment
firms outsource risks, for example by insurance or the use of clearing methods,the resulting transfer of
riskshouldbereflectedinreducedcapitalcharges;
18. Callsforthenewcapitaladequacyrulestosetoutgeneralminimumcriteriawhichmustbesatisfied
beforeariskmitigationtechniquemayberecognisedforthepurposesofcapitaladequacyrules;thishori-C223/364 EN8.8.2001 OfficialJournaloftheEuropeanCommunities
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zontal approach is preferable to attempting to formulate individual legislative provisions for each risk
mitigation technique and encourages more prudent risk management whilst at the same time enabling
thelegislationandtheregulatorstoadapttomarketdevelopments;
19. Believes thateachsovereigngovernmentintheeuro-area shouldbeassessedbythefinancialmar-
ketsonthebasisofitsowncreditworthinessinlinewiththecommitmentsenteredintointhe‘nobail-out’
clauses of the Maastricht Treaty (Articles 101-103); therefore finds that the capital charges required bybankingsupervisorsonpurchasesofeuro-area governments’debtshouldbeinlinewiththenormalreg-ulatoryprovisionsdependingonwhateverobjectiveassessmentofcreditworthinessisadopted,andshouldnotbenefitfromanycompetitivedistortionprovidingfornocapitalchargeonthepurchaseofanyeuro-areasovereigngovernment’sdebt;
20. Believes that the introduction of a more risk-sensitive regulatory capital regime means that other
riskswillhavetobeconsideredmoreclosely,asthecapitalbufferswhichexistincurrentcapitalcharges
maybereduced;whileasensiblyconstructedchargetocover‘otherrisks’couldplayaroleinencouraging
prudent risk management, techniques for assessing such risks are still in their infancy; until an accuratemethodofmeasuring‘otherrisks’canbedeveloped,regulationofsuchrisksshouldcontinuetobecarriedoutqualitatively,throughprudentialsupervision,ratherthanquantitatively,throughnewcharges;
21. Opposes proposals to calculate a capital charge for other risks based on crude indicators such as
sizeoffirm,income,turnover,etc,assuchmeasurementsareinappropriateproxieswhichbearnoobvious
relationshipwith‘otherrisks’;believesthatachargebasedonsuchproxieswouldpenalisesuccessfulcom-
panies and encourage banks to manage the capital charge rather than manage risk; is particularly con-cerned at the impact of such a charge on high-volume, low-risk investment businesses such as indexfunds;believesthat,intheeventthatachargeforotherrisksisintroduced,transitionalprovisionsshouldbedevisedtoensurethatbankswhichcannotimmediatelytakeadvantageofthemorerisksensitiveinter-nalratingsapproacharenotpenalisedwithaheavyadditionalchargefor‘otherrisks’;
22. Supportstheretentionofthewaiverofcapitalrequirementsonasub-consolidatedand/orsolobasis
(currently set out in Article 3(7) of the Directive on the Supervision ofCredit Institutionson a Consoli-datedBasisandArticle7(7)oftheCapitalAdequacyDirective)butcallsfortheintroductionofharmonised
criteriafortheuseofthiswaiver;
23. CallsontheCommissiontogivecloserattentiontotherequirementsandcharacteristicsofinvest-
mentfirmsandassetmanagers;thecapitalchargesforsuchfirmsshouldbelimitedtotheriskswhichthey
incur,namely‘otherrisks’suchasoperationalrisk;investmentfirmsarealreadysubjecttoacapitalcharge
for‘otherrisks’,whichshouldbereviewediftheCommissionintroducesagenerallyapplicablechargeforotherrisksinfuture;
24. Believesthatwhilesupervisorsshouldnotseektobecomeshadowbankmanagers,theyshouldseek
toassessaninstitution’sactualhandlingofriskratherthanmerelycheckingcompliancewithformalrules;nationalsupervisoryauthoritiesshouldhavethepowertorequire institutionstoholdcapitalinexcessof
thebasicminimumrequirement;however,thisshouldbeonlyoneofarangeoftoolsusedinprudential
supervisionandshouldnotbeusedunlessthereisgoodreasontodoso;
25. Supportsthevoluntarypublicationbybanksoftheircapitalratio,ortheirmajorfinancialrisksand
theirriskmanagementtechniques,asacontributiontoenhancingmarketdiscipline;however,institutions
shouldnotbeaskedtodisclosepubliclytheindividualminimumcapitalrequirements setbysupervisors,
astodosowouldriskthetargetratiobecomingseeneffectivelyasasupervisoryrating,causingcompeti-
tivedistortions;
26. CallsontheCommissiontomakeeveryefforttoensurethatEUbanksarenotsubjectedtodiscri-
minatorytreatmentbyUSauthoritiesundertheGramm-Leach-BlileyAct,andtoseekaswiftresolutionof
thedisputebetweentheUSandtheEUonthismatter;8.8.2001 EN C223/365 OfficialJournaloftheEuropeanCommunities
Friday17November2000
27. Takes the view that, for reasons of competitive equality, all credit institutions, regardless of their
legal form, must be allowed to procure original own funds via third parties, so long as the funds so
acquiredarepermanent,abletoabsorblossesandcannotbewithdrawnbythethirdparty;
28. Demandsthateveryeffortbemadetoensurethatthenewrulesdonotmakeitmoredifficultfor
SMEstoobtainloanfinance,whilstacknowledgingthatcapitaladequacyrulesmustbedesignedtoprotect
savers andminimise systemic risk andare therefore toobluntan instrument todeal directly or compre-hensivelywithSMEfinance,whichshouldbeaddressedthroughmeasurestopromoteriskcapital;inany
event, believes that, while high risk ventures may in future be subject to a higher capital charge, which
maybereflectedinthecostofloanfinance,mostlow,mediumormoderatelyhighriskventures(making
upamajorityofSMEs)shouldfinditeasiertoobtainfinancethroughthenewrules,notablythroughthe
widerrecognitionofcollateral(includingmortgagecollateral);
29. Recognises not only the vital importance of rapid implementation of the new regulatory capital
framework,butalsotheneedforflexibilityandkeepingthelegislationuptodate;ispreparedtoconsiderproposals to review the legislative process to facilitate flexibility, rapid implementation and updating of
legislation on the new regulatory capital framework; recalls, in this respect, the joint declaration signed
byParliament,CouncilandCommissiononthecodecisionprocedure,committingallthreeinstitutionsto
cooperate in good faith with a view to reconciling their positions as far as possible so that wherever
possibleactscan be adoptedatfirst reading; isprepared toconsider newproposalsfora future revision
ofthisjointdeclarationinordertospeedupfurtherthecodecisionproceduresinformulatingandupdat-
inglegislation;
30. CallsuponParliament,CommissionandCounciltocooperateandconsultformallyandinformally
attheearlieststagesofthelegislativeprocess,andshowthepoliticalwilltoagreeonthebroadprinciples,
inordertoenablethelegislativechangesrequiredtobeadoptedasquicklyaspossible,preferablyatfirst
reading;
31. Emphasises the importance of maintaining competitive equality between the US and EU banking
and investment firms and urges the Commission and the Member States to press for a moratorium on
theimplementationoftherevisedAccordforanagreedperiodoftime,toallowBaselCommitteememberstimetoadoptimplementinglegislationandenabletheAccordtoenterintoforceonthesamedayinall
countries;
32. WelcomestheCommission’sinvitationtoestablisha‘2005Group’ofrepresentatives oftheCom-
mission,ParliamentandCouncilinordertooverseeandfacilitatethetimelyimplementationoftheFinan-cialServices ActionPlan;callsontheGrouptoconsideroptionsforfasterenactmentoftheActionPlanincluding the new Basel Accord, and to present options to be considered by the European Parliament
withinsixmonthsoftheadoptionofthisresolution;
33. InstructsitsPresidenttoforwardthisresolutiontotheCouncilandCommission.
2. Ombudsman
A5-0293/2000
European Parliament resolution on the modification of the European Parliament’s decision of
9 March 1994 on the regulations and general conditions governing the performance of the
Ombudsman’sduties
The European Parliament,
Bdash havingregardtotheTreatyestablishingtheEuropeanCommunityandinparticularArticles21,195
and279thereof,andalsoArticle20doftheECSCTreatyandArticle107doftheEAECTreaty,
Bdash having regard to its Decision 94/262/ECSC, EC, Euratom of 9 March 1994 on the regulations and
generalconditionsgoverningtheperformanceoftheOmbudsman’sduties(1),
(1) OJL113,4.5.1994,p.15.C223/366 EN8.8.2001 OfficialJournaloftheEuropeanCommunities
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