EU seeks to double cost of banks’ bets

The European Commission proposed on the 13 July 2009 a further revision of EU rules on capital requirements for banks that is designed to tighten up the way in which banks assess the risks connected with their trading book; impose higher capital requirements for re-securitisations; increase market confidence through stronger disclosure requirements for securitisation exposures; and require banks to have sound remuneration practices that do not encourage or reward excessive risk-taking.

Under the new rules, banks will be restricted in their investments in highly complex re-securitisations if they cannot demonstrate that they have fully understood the risks involved, while national supervisory authorities will review banks' remuneration policies and have the power to impose sanctions if the policies do not meet the new requirements. The proposal, which amends the existing Capital Requirements Directives, represents part of the EU's response to the financial crisis, and reflects consultation with Member States, banking supervisors and industry.

European Commission: Press Release: IP/09/1120: Commission proposes further revision of banking regulation to strengthen rules on bank capital and on remuneration in the banking sector http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/1120&format=DOC&aged=0&language=EN&guiLanguage=en

European Commission: DG Internal Market and Services: Banking: Regulatory capital http://ec.europa.eu/internal_market/bank/regcapital/index_en.htm

EurActiv, 14.7.09: EU mulls fining banks for risky bonus policy http://www.euractiv.com/en/financial-services/eu-mulls-fining-banks-risky-bonus-policy/article-184060

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