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01 Sep 2005

The New Capital Requirements Directive: What pieces are still missing from the puzzle?

Rym Ayadi

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After almost seven years of hard work to produce a new substantive piece of legislation updating the current banking regulation for European credit institutions and investment firms – the Capital Requirements Directive (CRD) – it looks like its timely adoption is still uncertain. The main problem is the dissatisfaction of Parliament with its limited role in the Lamfalussy process in general and in the CRD in particular, which has led it to suspend ‘temporarily’ the comitology provisions of the CRD, casting doubt over the future ability to amend the legislation. The European Constitution addresses Parliament’s concern about ensuring democratic accountability in the comitology process in Art. 36. The pause for reflection on the Constitution prompted by the no-votes in the French and Dutch referenda has re-ignited the issue and is forcing EU institutions to seek a new inter-institutional agreement on this issue.
As a result, one undesirable scenario could materialise concerning the adoption of the new Directive. Unless a formal inter-institutional agreement is reached with respect to comitology, there is a high risk that the CRD will be unduly pushed towards a second reading, which in turn puts a question mark over its timely implementation.
The objectives of this Policy Brief are threefold: first, it examines the role of the European Commission in the CRD legislative process; second, it identifies the main scenarios expected in the adoption episode; and third, it offers recommendations with respect to some outstanding issues in the key provisions of the forthcoming Directive.