The European Commission requires banks to hold significantly more capital to cover the risks associated with re-securitisations. Banking regulators now have the power to impose sanctions on banks.

Banks are also obliged to provide more information on their exposure to complex products and to change the way they assess risks in their trading book to ensure that they fully reflect the potential losses from adverse market movements.

Lastly, banks are obliged to implement a remuneration policy that no longer encourages or rewards excessive risk-taking by mangers and traders.

This proposal by the European Commission is in line with new measures published by the Basel Committee.

The proposal will now pass to the European Parliament and Council of Ministers for consideration. It amends the Capital Adequacy Directive20.