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Institute Comments on EU Proposed Capital Adequacy Standards
Washington, DC, May 30, 2001 - The Institute has submitted comment letters both to the Basel Committee on Banking Supervision and to the European Union Commission expressing the concerns of the investment company industry regarding a proposed capital adequacy framework for banks, banking groups, and holding companies that are parent organizations to banking groups.
On January 16, 2001, the Basel Committee on Banking Supervision undertook its second round of consultations on the revised capital adequacy framework. The Committee proposed to impose capital requirements for operational risk for the first time and to calculate those requirements based on operational risk of each business line, including asset management. In connection with the Basel Committee proposals, on February 5, 2001, the Commission of the European Union also launched a second round of consultations on a new capital adequacy framework.
The Commission’s revised capital adequacy standards would complement the work of the Basel Committee and would apply to banks and investment firms in the European Union. The revised Capital Adequacy Directive (CAD) also may affect management companies of UCITS funds for the first time if the UCITS amendments that reference the requirements for capital charges based on expenditures in the CAD are adopted.
The Institute comment letter expresses a concern that the proposed new capital standards that would take operational risks of asset management into consideration could have the unintended consequence of setting a capital adequacy standard for the asset management industry generally.