» ECSA INTERNAL SHIPBUILDING The discussions between the EU and Korea on shipbuilding policy have as yet not given concrete results. At the Industry Council in June 2002 it was decided that unless an agreement was reached with Korea on unfair competition of Korean yards by the end of September 2002 the EU would start WTO proceedings against Korea. At the same time a revised temporary defence mechanism of 6 % aid of the contract value would be allowed in the EU for container vessels, product and chemical tankers. LNG carriers would also be included if the Commission study confirmed unfair competition from Korea on such vessels. Meanwhile, discussions between the EU and Korea are continuing. As expressed previously, ECSA strongly hopes that a wider agreement, designed to eliminate shipbuilding subsidies as far as possible, can be reached on a global basis between all parties involved, including China and the former-East Block Countries. Willingness to enter into such discussions was expressed by OECD countries and China, Poland, Romania, Russia and Ukraine at an OECD Meeting held in April 2002. BASEL CAPITAL ACCORD Under the auspices of the Bank for International Settlement (BIS) the special “Basel Committee” has been working since the late nineties on a review of the capital requirements for the banking sector. The aim is to bring the measurement of credit risk in the capital regulations more closely into line with the actual risks. At the basis will be a continued 8% capital ratio, but with operational risks being added to credit and market risk. Although no final conclusions have been drawn, it is expected that under the “standard method”, making use of external ratings, an additional much increased risk weighing factor will be introduced. As an option an “Internal Rating Based” (IRB) approach has been developed, based on its borrower’s balance sheet and the overall ongoing operations; this can only be used if the bank satisfies certain operational and quantitative requirements. Consideration is further being given to rules for Object Financing, usually involving a special purpose vehicle; risk measuring would then be IRB based and relate exclusively to the capacity to generate cash flow from the use of the subject single asset. After the consultation procedures and publishing of the new Basel Capital Accord, the European Commission will follow the recommendations in a Directive. Many ships are financed by a mortgage, but although this offers security to the bank, the ship or part value thereof is thus far not recognised as collateral under Basel Committee rules. However, under the new rules ships will most likely be recognised as collateral, possibly even making ship mortgaging attractive to banks. On the other hand, the risk assessment and weighing factors approaches may prove an adverse development, subject to the financial and operational standing of the borrower of course. A third impact assessment exercise on the proposed new rules will start in October 2002 and further developments will be closely monitored by ECSA.