European regulators consult on advanced approach validation; key meetings of EU lawmakers and Basel Committee this week

LONDON, July 12 (Global Risk Regulator) – European banking supervisors aim to streamline the process for approving the use by banks and investment firms of the more sophisticated approaches to assessing credit and operational risks under the European version of the global Basel II bank safety rules.

The Committee of the European Banking Supervisors, or CEBS, has issued a consultation paper, one aim of which is to streamline the approval process, especially for cross-border groups. CEBS says this will contribute to a level-playing field for firms using the more advanced risk measurement approaches. The guidelines, which are open for comment until October 30, should also further enhance the use of advanced risk management systems by firms, says CEBS.

The consultation paper was issued as a key committee of the European Parliament meets this week in Brussels to vote on amendments to the Capital Requirements Directive (CRD), the law that will apply the complex, risk-focused Basel II bank capital adequacy rules to all banks and investment firms in the 25-nation European Union bloc in two stages from January 2007.

The Basel Committee on Banking Supervision, the body of top banking supervisors from North America, European and Japan that designed the Basel II rules, is also holding a regular meeting this week in Krakow, Poland. Industry analysts expect the Committee to announce the final version of the Basel II treatment of bank trading book issues, as well as new guidelines on accounting for loan losses.

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