The Combined Impact of the CRD Amendments and the new Liquidity Regulations

Frederic Gielen, Partner, avantage, moderated the session which was attended by large international banking groups as well as small and medium-sized banks operating in London.

Mr. Kai Spitzer, Policy Co-ordinator, European Commission, outlined the key characteristics of the European Commission's public consultation on further possible changes to the Capital Requirements. Kai Spitzer noted that the proposed changes, known as 'CRD IV', following two earlier Commission proposals amending the CRD, relate to seven specific policy areas, most of which reflect commitments made by G20 leaders, i.e.:

• Liquidity standards: Introducing liquidity standards that include a liquidity coverage ratio requirement underpinned by a longer-term structural liquidity ratio;
• Definition of capital: Raising the quality, consistency and transparency of the capital base;
• Leverage ratio: Introducing a leverage ratio as a supplementary measure to the Basel II risk-based framework based on appropriate review and calibration;
• Counterparty credit risk: Strengthening the capital requirements for counterparty credit risk exposures arising from derivatives, repos and securities financing activities;
• Countercyclical measures: A countercyclical capital framework will contribute to a more stable banking system, which will help dampen, instead of amplify, economic and financial shocks;
• Systemically important financial institutions: The Commission is consulting on appropriate measures to deal with the risk posed by such institutions; and
• Single rule book in banking: The Commission is consulting on areas where more stringent requirements might be necessary.

Mr. Spitzer outlined the key characteristics of Section I, Liquidity Standards for Credit Institutions and Investment Firms noting the key differences with the Consultative Document issued by the Basel Committee on Banking Supervision last December.

Mr. Simon Hills, Executive Director, Prudential Capital, Risk and Regulatory Relationships, British Bankers' Association, commented on the introduction of CRD 2 and CRD 3 in the UK, including FSA Consultation Paper 09/29, Strengthening Capital Standards 3. Mr. Hills also commented on the proposals included in CRD 4.

You can download a copy of Simon Hills' presentation here.

The session was then rounded off with a lively question and answer session facilitated by Frederic Gielen, Partner, avantage.