The Basel 2 framework, which makes improvements to the alignment of capital requirements to underlying risks taken, has been adopted in the EU through the capital requirements directive (CRD), The Treasury worked closely with the FSA and industry on EU negotiations on the CRD. That directive came into force on 1 January 2008. The Financial Services Authority has maintained a number of industry standing groups to deal with any issues arising from the implementation of the directive.
In October last year the G7 asked the Financial Stability Forum (FSF) to analyse the underlying causes of the ongoing turbulence in the world's financial markets. The FSF reported to G7 Finance Ministers in April, who endorsed the report. The FSF's recommendations included enhancements to the prudential oversight of capital, liquidity and risk management, including strengthening the prudential framework for financial institutions' securitisation and off-balance sheet activities under Basel 2.
The Chancellor maintains a close dialogue with the financial services sector on a wide range of issues.