EU spells out pillar 2 powers

BRUSSELS – The European Commission seems to have spelled out how it sees the second pillar – supervisory review – of its new bank capital rules in greater detail than global banking regulators have so far done for the Basel II accord, banking industry analysts said.

The commission in November issued a working paper on progress in developing the new rules. The rules in effect will implement the provisions of the complex Basel II capital adequacy accord in the European Union from late 2006. Both the commission’s capital adequacy rules and the Basel II accord are based on a three-pillar structure. Minimum capital charges are set under pillar 1, while supervisory review takes place under pillar 2. Pillar 3 imposes market discipline on banks by requiring