Regulators are trying to “fix” the problems of a burdensome law. Changes are proposed. But they do not go far enough, say critics - By Melvyn Westlake

Some say it’s a breakthrough, others are less sure. But a risk-based solution to a long-standing gripe could be on the cards.

CEA, the Brussels-based European insurance and reinsurance federation, has estimated that $50 billion (€39 billion) in collateral in the form of letters of credit or government bonds, for instance, is held in the US by foreign reinsurers, most of it accounted for by Europeans. The cost to European Union reinsurers of complying with the collateral requirements is calculated at around $500 million a year, according to CEA estimates. The annual bill for the Lloyd’s market is reckoned to be in the region of $150 million.

Travails of US rulemaking (3)

US politicians plan further scrutiny of regulator plans for implementing new bank capital rules as the new Congress awaits a special report that lawmakers commissioned on Basel II.

Lack of clear agreement among the primary supervisors of international banks about the implementation of the Basel II capital adequacy rules “is a matter of significant concern,” one leading global banking group has told US regulators in comments on the latest proposals for bringing Basel II into effect in America.

The simpler standardised approach to assessing credit risk is “the best of an unappealing set of options” under the Basel II capital rules, according to an independent group of academics and other experts that analyses regulatory trends.

Four of the biggest US banks met staff from the National Economic Council, which advises the US president on economic issues, in early January to voice their concerns about the unfairness of the federal regulators\' Basel II proposals, according to US press reports.

BRUSSELS – Many of the capital instruments that are eligible for prudential purposes in the European banking and insurance industries are similar in the two sectors even if they are labelled differently. However, one type of instrument that receives different regulatory treatment in each sector is the increasingly popular hybrid, a capital market instrument that raises difficult questions about its place in the capital structure of financial institutions because it combines both equity and debt features

PARIS – The first report on whether the major credit rating agencies in Europe are meeting the international code of conduct for their industry has given the agencies fairly good marks. Last year, the European Commission, in Brussels, decided that it would not regulate the credit rating agencies (CRAs) operating in the EU – at least for the time being. Instead, it would give them a chance to demonstrate that they would comply with a code of business conduct developed by the International Organistion of Securities Commissions (IOSCO), the Madrid-based body representing over 100 securities regulators around the world.