Basel II

Basel II

Basel II comprises the recommendations for capital adequacy of banks and financial institutions, issued by the Basel Committee on Banking Supervision (BCBS) in proceedings starting 1988.  According to the EC-directive 2006/49/EC the member countries of the European Union are obligated to apply these regulations by  January 1,  2007.

Erste Group Bank AG complies with the disclosure regulations of the Basell II-framework by the publication of qualitative and quantitative information since January 1, 2007.

Disclosure

Disclosure pursuant to the Disclosure Regulation as of 31 December 2011 [pdf; 1.6 MB]
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Development and Implementation of Basel II

In 1988 the Basel Committee on Banking Supervision introduced a credit risk framework  (Basel I) defining capital standards to limit banks´ business risks and to strengthen the financial system. In order to meet the requirements of ongoing developments in the banking sector, these regulations have been revised and in June 2004 a new capital accord (Basel II) was published.  As a consequence the European Union drew up directives aiming to increase the stability of the international financial system by introducing more risk-sensitive minimum capital requirements for exposures, explicit consideration of operational risks, reinforcement of the financial market supervision and increasing market transparency.

The objectives of  this „three pillars“-framework are: a more risk sensitive capital allocation (Pillar 1 – Minimum Capital Requirements), a more detailed regulatory assessment of risks associated with credit exposure (Pillar 2  - Supervisory Review Process) and increased market transparency (Pillar 3 – Market Discipline).

In June 2006, the European Commission published the two directives (2006/48/EC, 2006/49/EC) that transpose the new capital requirements (Basel II) into European law in the Official Journal of the European Union. After the implementation of these new regulations throughout the EU, member states are to apply the directives from January 1, 2007.

In Austria the implementation of the Basel II requirements was effected by amendments of the Austrian Banking Act (BWG) and also by two Financial Markets Authority (FMA) regulations (solvency regulation - SolvaV, disclosure regulation - OffV). The amendments of the Austrian Banking Act and other relevant supervisory laws for the new capital requirements for credit institutions and investment firms (Basel II) were published in the Austrian Official Journal. These mostly take effect from January 1, 2007.

Directive 2006/48/EC [pdf; 892.9 KB]
Directive 2006/49/EC [pdf; 318.0 KB]
Bankwesengesetz (german)
Solvabilitätsverordnung (german)
Offenlegungsverordnung (german)
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The three pillars of Basel II

The objectives of  this „Three Pillars“-framework are: a more risk sensitive capital allocation (Pillar 1 – Minimum Capital Requirements), a more detailed regulatory assessment of risks associated with credit exposure (Pillar 2  - Supervisory Review Process) and increased market transparency (Pillar 3 – Market Discipline).

Pillar 1 – Minimum Capital Requirements: The first pillar deals with minimum capital requirements in respect of credit, market and operational risk. Each of which has to be calculated using an approach which is suitable and sufficient for the individual bank. 

Pillar 2 – Supervisory Review Process: Pillar 2 requires the banks to have procedures for the evaluation and assurance of an adequate capitalisation in relation to the risk profile as well as of a strategy concerning the preservation of the level of own funds (Internal Capital Adequacy Assessment Process – ICAAP). Compared to the regulatory capital requirement according to Pillar 1, Pillar 2 targets the financial internal point of view. Otherwise, Pillar 2 furthermore requires the regulator to subject all banks to an evaluation process. Based on this evaluation regulatory measures are taken where required.

Pillar 3 – Market Discipline: Taking account of execution of Pillar 1 (Minimum Capital Requirements) and Pillar 2 (Supervisory Review Process), Pillar 3 aims to increase market transparency by providing information on the scope of application, regulatory capital, risk positions, risk measuremenet approaches equity, risk positions, the IRB-Approach and as a result the capital requirements of a bank.

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