Risk Europe 2003: Industry worried about ‘level playing field’ implementation of Basel II

Bankers and their banking associations are increasingly concerned that the new bank capital Accord Basel II and its European equivalent CAD3 may not be implemented in a consistent manner in different national jurisdictions. These fears were expressed during a plenary panel at Risk Europe, Risk magazine’s eighth annual European conference, in Paris today.

While most bankers agree that the majority of work on Pillar 1 of Basel II is complete – with some notable exceptions in areas such as undrawn commitments and credit mitigation – concern is growing that national regulators may adopt different lines with regard to Basel II’s implementation under Pillar 2 of the Accord. “Even the supervisors recognise this as a major issue,” said Herman Mulder, senior executive vice-president at ABN Amro in the Netherlands. “[It’s] a big problem,” echoed Peter Goshawk, managing director and head of capital planning, treasury group, at Barclays in London. Goshawk was also concerned that the drafting of CAD3 could be “too open” in terms of national regulator implementation.

Responding to concerns that the apparent decision in the US to apply Basel II only to a limited number of around a dozen banks could spark calls for a two-tier implementation of the new Accord in the EU, ex-British Bankers Association director John Thirlwell said: “It would not surprise me at all.” He added that such calls could grow once members of the European Parliament have to vote to enshrine the new Accord into European law next year.

While Goshawk and Mulder, along with many delegates attending the conference, criticised Basel II for being too complex, Thirlwell said: “The industry brought it upon itself by seeking consistency.”

Panellists also expressed fears that the transparency requirements for Basel II under Pillar III were being drafted too late. “We have still not seen anything [on this], amazingly,” said Thirlwell.Basel II is due for implementation in late 2006.