In exceptional cases, where all other supervisory measures have been insufficient to improve a banks’ systems and controls they are useful. Institutions should expect capital add-ons as an ultimate supervisory measure. However, by no means there should be an automatism stating the amount of additional capital to hold, if for example Pillar 2 capital exceeds the amount of regulatory capital according to Pillar 1.
I am now turning to the corresponding rules of the draft EU directive. Although the EU document for most aspects poses no additional requirements but mainly translates the Basel II framework paper into EU law, there is an important difference regarding the circles of addressees.