Michael Alix, chair of the Securities Industry Association’s Risk Management Committee and senior managing director, Bear Stearns, told the House of Representatives Financial Services’ Subcommittee on Financial Institutions and Consumer Credit that Basel II is a good thing.
The CSE framework will, according to Alix, provide a means for the major US investment banks to demonstrate consolidated supervision on an equivalent basis to the standard required under the European Union’s Financial Conglomerate Directive (FCD). In addition, it will permit securities firms registered under it to determine the regulatory capital for their broker-dealers by means of approved Value-At-Risk models.
Alix emphasized the importance of obtaining an EU determination that the CSE’s form of consolidated supervision is “equivalent” to that required by the FCD. Another vital step is global coordination and cooperation among all regulators on implementation issues involving Basel II/CSE. Calling Basel II “crucial not only to U.S. financial market participants but also to financial firms throughout the world,” Alix encouraged the subcommittee to ensure adequate funding for SEC oversight of the CSE firms.