Review of CRD expected by September 2008

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BRUSSELS – The European Banking Committee is discussing plan to amend the Capital Requirements Directive (CRD), albeit only in limited specific areas. Under Article 156 of the Directive, the European Commission is required to review and report on the scope of its application by January 2012. This latest review is part of that process.

Proposals for changes to the CRD will include: new rules to limit the risk stemming from large exposures, harmonisation of the definition of hybrid capital, capital requirements for default risk in the trading book, a definition of the significance of risk transfer, technical changes to the securitisation framework and a series of changes to ease the administrative burden.

As operational risk accounts for only around 4% of the CRD, any changes to op risk issues will be strictly targeted, therefore this review will not result in any large-scale amendments to the directive. That said, the areas targeted for change concern national discretions and late additions to directives such as outsourcing and other risk mitigants, which can be difficult to understand.

The Commission is hoping to adopt a proposal by October 2008.