§ Mr. Tim SmithTo ask the Secretary of State for Trade and Industry what progress has been made in negotiations on the terms of the capital adequacy directive; and what issues remain to be determined.
§ Mr. RedwoodThe Commission proposal for a directive to establish minimum capital adequacy requirements for investment firms and credit institutions conducting investment business was submitted to the Council in June. Negotiations are now under way in the Council working group. The directive as drafted represented a major improvement on earlier, unpublished drafts but it is clear that a number of member states favour higher minimum initial capital requirements. The Government's immediate concerns are to resist any increase in these initial requirements, to agree a satisfactory treatment of independent financial intermediaries, and to agree a satisfactory definition of those illiquid assets which must be deducted from the capital of investment firms. The Government's overall objective remains to negotiate a directive which genuinely relates capital requirements for individual firms to the risks to which those firms are exposed, and maintains the international competitiveness of the European Community.