What's happening and when

Basel II

• The final version of the Basel II Accord was published by the Basel Committee on Banking Supervision (BCBS) on June 26. Implementation of the BIA and STA is due at the end of 2006, while the deadline for AMA was recently extended until the end of 2007.

• In July the BCBS published Implementation of Basel II – practical considerations, outlining issues supervisors should consider when contemplating implementating Basel II in their jurisdictions. Also at the end of July, the Financial Stability Institute published Implementation of the new capital adequacy framework in non-Basel Committee member countries, which contained the results of a survey on implementation.

• In mid-May, the BCBS published Principles for the home-host recognition of AMA operational risk capital, outlining group allocation issues. The Accord Implementation Group is launching an op risk workshop this autumn, which will become a sub-group in 2005 on the subject. Also, the AIG recently launched a series of case studies of model approval frameworks at a number of institutions. Lastly, a compendium of national discretion items in G–10 jurisdictions is expected in the autumn.

• The Joint Forum and the International Organization of Securities Commissions produced a consultation paper, Outsourcing in the Financial Services at the beginning of August.


• The Financial Services Authority (FSA) announced in June that the draft text for the AMA waiver pack will not be available until January 2005. It published the credit risk application pack in late July, along with a general description of the regulator's approach to application approval. It is available at: http://www.fsa.gov.uk/international/1_caf.html

• The FSA has again delayed production of draft rules and guidance for the EU Capital Adequacy Directive (CAD) implementation in the Prudential Sourcebook, this time until January 2005. The FSA plans to consult once and publish final text in summer 2005. The FSA has indicated that it expects the final text to be a 'copy out' of the EU Capital Adequacy Directive text, and that it will provide little additional guidance.

• The FSA plans to publish Developing FSA policy on financial crime – feedback statement to discussion paper 26 in the third quarter this year.


• The European Commission (EC) published the results of a new study on the impact of the Capital Adequacy Directive on investment firms in July. This follows a study of the impact that the proposed Capital Adequacy Directive will have on all types of firms within the EU in mid-April.

• The EC published the final draft text of the Capital Adequacy Directive in mid-July.

• The European parliament is expected to have the first reading on the proposal for implementing Basel II in September. It is possible the legislation will pass on the first reading, but in any case, it should be passed by summer 2005. However, sources in the parliament say there will be delays, and that a more realistic implementation deadline would be January 2008.

• A third money-laundering directive was published by the European Commission in late June for comment. At the same time, the European Commission has stepped up efforts to impose the second directive on member states.

• In late April, the European Commission adopted a communication that considers the need for EU-level actions to improve clearing and settlement in the European Union. The communication is based roughly on the first and second Giovannini reports on cross-border clearing and settlement. Comments are due on July 30.


• The Securities and Exchange Commission (SEC) finalised its framework for capital adequacy for investment banks and broker dealers in mid-April. The proposed framework was originally published at the end of October 2003.

• Regulators issued an advance notice of proposed rule-making in early July 2003, along with draft supervisory op risk guidance. Comments have been posted on the Federal Reserve's website. All guidance will be finalised before the second quarter of 2005, and joint examination procedures will be published around mid-2005. The notice of proposed rule-making is expected some time in the fourth quarter of 2005.

• A US quantitative impact survey (QIS4) will be issued to participating banks in October, with responses due back in January 2005. Regulators are currently conducting an informal benchmarking exercise, and visits for this exercise are expected to be completed in December, with a report published in the first quarter of 2005.

• A sound practices guide and new rules for op risk, designed for banks remaining on Basel I, are being drafted by US banking supervisors jointly, but no publication date has been set. The guidelines will bring the US regulatory framework for non-Basel banks into line with the Basel Sound practices for the supervision and management of operational risk document.

• A conference, Agency problems and conflicts of interest in financial intermediaries, is being jointly sponsored by the Federal Reserve Bank of New York, the Journal of Financial Economics and the Dice Center for Research in Financial Economics of Ohio State University on December 3–4. The event will explore various conflict-of-interest issues in financial institutions. OpRisk

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