EU Parliament agrees Basel II law after deal on Commission powers

STRASBOURG, France, September 28 (Global Risk Regulator) – Europe’s Parliament today approved the law that will give effect to the Basel II bank safety rules in the European Union, after cutting a last-minute deal on the European Commission’s rule-making powers under the law.

The deal makes it virtually certain that the law, generally known as the Capital Requirements Directive (CRD) but technically comprising two directives, will pass the EU legislative process on a single reading, EU sources said. It’s expected to be law by the beginning of 2006, they said. Formal approval by the Council of Ministers from the 25 EU member states, Parliament’s co-lawmaking body, is expected within weeks, they said.

The CRD transposes the complex, risk-focused Basel II capital adequacy framework designed by the Basel Committee on Banking Supervision into legal form. The law will apply to all EU banks and investment firms in two stages, starting in January 2007.

MEPs (members of the European Parliament) and officials from both the Council of Ministers and the Commission, the EU’s executive arm that’s responsible for initiating financial regulation, agreed to a two-year “sunset” clause relating to the Commission’s powers. The final talks took place in Strasbourg, France –Parliament’s alternative to Brussels, the EU capital, as the site of its sittings.

The compromise means comitology powers can be used by the Commission to implement and update the CRD for a maximum of two years until April 1, 2008. After that date the powers can only be renewed with the agreement of the three institutions. In the meantime, the bodies will review the system used for such implementing provisions.

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