The Basel Committee and European financial regulation

The Basel Committee was created in 1974 by the heads of both central banks and the organisations in charge of the banking regulation and supervision of the main industrialised countries. Its name comes from the fact that it is based in Basel with the Bank of International Settlements (BIS). Its mission is to encourage the implementation of stricter supervision and regulation of the banking system, in five main areas:

- Levels of regulatory capital requirements
- Standards for the management and supervision of bank liquidity
- Improved risk control and management
- Greater transparency
- Cross-border cooperation with regard to supervision.

The Basel Committee publishes regular recommendations under the aegis of the BIS. European governments and organisations are in charge of transferring these recommendations into European and national law. It is these recommendations that resulted in the adoption of the CRD (Capital Requirement Directive) and the second Basel Agreement, otherwise known as Basel II.

The consequences of the financial crisis and the undertakings made at G-20 meetings

In the wake of the financial crisis, measures were taken at international level to adjust financial regulation, with a consultation of the Basel Committee that finished in April 2010. At European level, there was a public consultation at the European Commission on changes to the CRD that incorporated the recommendations and conclusions of the Basel Committee with a view to presenting legislative changes in the second half of 2010 (i.e. Basel III).

There is a lot at stake in this reform, not only for the banking sector and the stability of the financial markets but also for the economy as a whole. The measures adopted at the end of 2010 will have to combine strengthening regulatory supervision whilst also preserving a financial system and a banking industry capable of supporting robust and lasting recovery.