Looking to Europe

Editorial Letter

Yes, the FSA enforces the rules. But increasingly it does not make them. It is the European Commission that does and they are then OKd by the European parliament and council. Indeed, the UK FSA’s Basel II framework is going to simply be a ‘copy-out’ of the final Capital Adequacy Directive (CAD) produced in Brussels. So, it is to Brussels that op risk managers should be turning their eyes.

Most folk don’t know much about the EU. In the UK, the June EU parlimentary elections saw a voter turnout of merely 38.2%. The national mood towards the EU waivers between tepid acceptance of the reality of the political situation and a desire to exit completely – as exemplified by the rise in the number of votes for the UK Independence Party, which advocates withdrawal. But op risk managers would be very wrong to dismiss Brussels’ impact.

So, while the CAD might be a slog to get through, op risk managers should read it, and make their views heard, either through their trade association, or MEP.

Op risk managers outside the EU should also study the CAD – it is crucial to understanding how the international playing field will shape up in years to come.

So, make fun of Eurocrats. But when it comes to Basel II, ignore them at your peril.

By Ellen Davis, Editor