In the last year the Committee of European Banking Supervisors (CEBS) has been involved, through the Group de Contact’s Subgroup on Operation Networks (SON), in collecting and analysing the Basel II implementation issues that are the most challenging from a cross-border perspective. Some of the issues have been raised directly by the Industry Platform on Operational Networks; other issues have been raised by supervisors within SON.

CEBS has now published a paper entitled Range of practices on some Basel II implementation issues. The paper sets out a range of practices with respect to various implementation issues relating to the Capital Requirements Directive which have specific cross-border relevance. The issues are classified into three groups:

Supervisory process for model validation. This section looks at:

  • Delegation/division of tasks between home and host supervisors.
    • Local and central models.
    • Portfolio classification.
    • Use test for new models.
    • Supervisory assessment of group-wide models.
    • Language of IRB/AMA application.
  • Pillar 1 technical issues. This section looks at:
    • Definition of default.
    • Downturn LGD.
    • Estimation and validation of risk parameters in low-default-portfolios.
    • Project finance.
  • Pillar 2 issues. This section looks at:
    • Scope of application of ICAAP.
    • Requirements imposed for ICAAP.

View Range of practices on some Basel II implementation issues, 12 August 2008