24 May 2004
Today the Committee of European Banking Supervisors (CEBS) released a consultation paper on the application of the Supervisory Review Process under Pillar 2 of the new capital adequacy framework (Basel II).
The chairman of CEBS, José-María Roldán noted that:
"These High Level Principles (HLPs) on the Supervisory Review Process represent the current thinking of CEBS regarding the implementation of Pillar 2. Industry representatives have been asking for more detailed guidance on this for some time and I am pleased that CEBS can deliver a contribution to this debate. CEBS has designed these principles in order to deliver an appropriate degree of convergence and to underpin the legal texts being developed in the draft EU Directive. The HLPs have been developed considering existing best practices and agreed new practices to take account of the new elements of the Basel II framework. They should form the basis for common standards across the EU. It is important to view them within the overall context of risk-based prudential supervision and to consider their evolutionary character."
The consultation paper is structured in five sections and sets out principles on the overall Supervisory Review Process (SRP) and its two elements, the Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP). The paper describes what the supervisory authority will expect from institutions in their own assessment of the adequacy of their financial resources (ICAAP), and also contains principles regarding the supervisory authority's obligations under the SREP and how these might be performed. Since the Directive text is still under discussion and development, the HLPs and the terminology used within them may need to be amended in future to reflect any subsequent changes introduced in the final Directive text. However, CEBS considers it important to consult interested parties already at this stage, in order to encourage a dialogue and to promote transparency in the debate between supervisors and institutions on this issue.
CEBS invites comments on this consultation paper by 31 August 2004 ( CP03@c-ebs.org ). The received comments (unless the respondent requests otherwise), as well as a reasoned explanation addressing all major points raised, will be published on the CEBS website (www.c-ebs.org).
1. CEBS was established by a Decision of the European Commission  and took up its duties on 1 January 2004.
2. CEBS will fulfil the functions of Level 3 Committee for the banking sector in the application of the "Lamfalussy" Process. Its tasks are to:
a) Advise the Commission, in particular as regards the preparation of draft implementing measures in the field of banking activities;
b) Contribute to the consistent implementation of Community Directives and to the convergence of supervisory practices;
c) Enhance supervisory co-operation, including the exchange of information.
3. CEBS is comprised of high level representatives from the banking supervisory authorities and central banks of the European Union. The EEA countries which are not members of the EU will participate as observers.
4. The Committee is chaired by Mr José-María Roldán (Banco de España, Spain). The Chair is supported by a Vice-Chair and a "Bureau", comprising 3 Members of the Committee. The Committee's Secretariat will be based in London, UK.