Basel II amendments expected in October

EU Basel II update will include reactions to liquidity crisis

BRUSSELS – EU internal market and services commissioner Charlie McCreevy has confirmed that amendments to Basel II will be issued no later than October this year.

Taking into account the lessons learned from Northern Rock and the current volatile market conditions, the amendments will cover issues including liquidity risks, risks from large exposures and strengthening the requirement to provide information to supervisors of a bank's branches, says David Wright, deputy director general of the European Commission's internal market division.

The Commission’s announcement comes on the heels of the latest round of Basel II bashing in the press, which has increased since the UK House of Commons Treasury Committee published its report on the run on Northern Rock.

Industry commentators are questioning the effectiveness of Basel II capital requirements, because it appears that issues surrounding liquidity, not capital, caused the run Northern Rock, the first on a bank in a decade. The liquidity issue was related the US subprime crisis. The amendments intend to look into this issue, which was omitted when the original Basel II Accord was conceived.