A topical subject given the state of financial markets.

It was suggested that if Basel II had been fully implemented in the States then the current crisis may have been prevented. However it was meant to be fully implemented in Europe in January 2008 but the current problems have still occurred. One worrying observation was that some banks are now too large to rescue.

A regulatory paradign shift is required. Pillar 1 relies on internal management which failed. Fully implementing pillars II and III should help although a call for a flexible approach to Pillar II was made. Urgent work is also required between Basel II and the accounting framework.

Banks are not run on models they run busineses. A model has to take account of a correlation of risks which would come up with a much higher level of capital however this is also no guarantee of security.

The Commission has asked for more work on Pillar III but there is caution about too much reliance on it.

In other industries there would be a call for public prosecutions. There is confessed ignorance of the rules making them a blunt instrument. The complexity is so great it is impossible to apply and difficult for supervisors to understand.

In Denmark the banks are funded by deposits and they have no failures. However that was not considered viable in the current market place.

The present system requires more than fine tuning. It is extraordinary the system works at all. The Commission is extremely weak in law enforcement. The Commission should act through regulators and parliament put pressure on and sell politically.

The CRD is affected due to areas of national discretion. It may seem technical but could be meaningful.

There was some disagreement on the solution and differences of view expressed. It will take time to resolve.