The Capital Adequacy Directive was a European directive that aimed to establish uniform

capital requirement A capital requirement (also known as regulatory capital, capital adequacy or capital base) is the amount of capital a bank or other financial institution has to have as required by its financial regulator. This is usually expressed as a capital ad ...

s for both banking firms and non-bank securities firms, first issued in 1993 and revised in 1998. These was superseded by the

Capital Requirements Directive The Capital Requirements Directives (CRD) for the financial services industry have introduced a supervisory framework in the European Union which reflects the Basel II and Basel III rules on capital measurement and capital standards. Member St ...

s starting in 2006.

History

The original 93/6/EEC (CAD1) directive was amended by 98/31/EEC (CAD2), to incorporate banks' own estimate of capital using

value-at-risk Value at risk (VaR) is a measure of the risk of loss for investments. It estimates how much a set of investments might lose (with a given probability), given normal market conditions, in a set time period such as a day. VaR is typically used by ...

techniques. Annex 1 models were virtually unchanged by CAD2, so there has been no change in the CAD1 regime. A third revision of the directive 2006/49/EC was issued on 14 June 2006 and would use the new name of

(CRD) . This came into force together with recast of a related banking directive on 20 July 2006. The main change was the adoption of

Basel II Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. It is now extended and partially superseded by Basel III. The Basel II Accord was publ ...

guidelines into the directive. In 2009, 2010, and 2013, three further revisions were issued known as CRD II, CRD III, and CRD IV. The legislation on this matter current is known as the CRD IV package (

Capital Requirements Regulation and Directive The Capital Requirements Regulation''(EU) No. 575/2013is an EU law that aims to decrease the likelihood that banks go insolvent. With the Credit Institutions Directive 2013 the Capital Requirements Regulation 2013 (CRR 2013) reflects Basel III ...

References

{{reflist

External links

For further information see the

European Commission The European Commission (EC) is the executive of the European Union (EU). It operates as a cabinet government, with 27 members of the Commission (informally known as "Commissioners") headed by a President. It includes an administrative body o ...

web site
Free movement of services / Financial Services / Banking / Regulatory Capital
Banking in the European Union Financial regulation European Union directives Capital requirement