has enacted rules and regulations in 1988 which had the goal of limiting business risks for banks and strengthening the entire banking system. The Committee started reviewing and updating these provisions again in 1999 in order to keep up with the increasing requirements and developments in the banking sector and published the provisions as the Basel-II Accord in June of 2004. In response, the European Union has enacted guidelines that have the goal of strengthening the stability of the international financial system by introducing an increased sensitivity to risk.

Basel II is based on three pillars that supplement each other. The three pillars represent the minimum capital requirements (Pillar 1), supervisory review (Pillar 2) and market discipline (Pillar 3).

The European Commission published two guidelines in June of 2006 (2006/48/EG and 2006/49/EG) which have been mandatory for all member countries since January 1, 2007. These guidelines have transposed the new equity requirement into European Law.

In Austria, Basel II was complemented by an Austrian Banking Act Amendment and two ordinances of the Financial Market Authority, the Solvability Ordinance and the Disclosure Ordinance. Additional changes in the Austrian Banking Act and supervisory laws were announced in the Federal Law Gazette (Federal Law Gazette I. No. 141/2006), and most of them became effective as of January 1, 2007.

Further action toward further development of the provisions for minimum equity requirements through Basel II is still necessary due to the financial crisis. In this regard, the European Union and the Basel Committee for Banking Supervision have introduced a process that represents the next step for Basel II. The defined goal of revising and updating the provisions includes the improvement of reconciliation of the risk tolerance of banks (this can be evaluated by the amount and quality of equity capital) with their respective risks. Furthermore, the risk provisions and liquidity of banks will be defined within the scope of the ongoing project as well.