No L 386/14 Official Journal of the European Communities 30.12. 89 COUNCIL DIRECTIVE of 18 December 1989 on a solvency ratio for credit institutions (89/647/EEC) THE COUNCIL OF THE EUROPEAN-COMMUNITIES, Having regard to the Treaty. establishing the European Economie Community, and in particular the first and third - sentences of Article 57 (2) thereof, Having regard to the proposal from the Commission (1), In cooperation with the European Parliament (2), Having regard to the opinion of the Economic and Social Committee (3), Whereas this Directive is the outcome of work carried out by the Banking Advisory Committee, which, pursuant to Article 6 (4) of Council Directive 77/780/EEC of 12 December 1977 on the coordination of laws, regulations and administrative provisions. relating to the taking up and pursuit of the business of credit institutions (4), as last amended by Directive 89/646/EEC (), is responsible for making . suggestions to the Commission with a view to - coordinating the coefficients applicable in the Member States; Whereas the establishment of an appropriate solvency ratio plays a central role in the supervmon of credit institutions; Whereas a ratio which weights assets and off-balance-sheet items according to the degree of credit risk is-a particularly useful measure of solvency; Whereas the development of common standards for own funds in relation to assets and off-balance-sheet items exposed to credit risk is, accordingly, an essential aspect of the harmonization necessary for the achievement of -the mutual recognition-of supervision techniques and thus the completion of the internal banking market; Whereas, in that respect, this Directive must be considered in  conjunction with other specific instruments - also harmonizing the funidamental techniques of the supcrv1s1on of credlt institutions; - Whereas this Directive must also.be seen as complementary to Directive 89/646/EEC, which lays out the broader framework of which this Directive is an integral part; (1) OJ No C 135, 25. 5. 1988,]) 2, (2) O] No C 96, 17. 4. 1984, p. 86 and OJ No C 304, 4. 12. 1984, (3) O] No C 337, 31.12. 1988, p. 8. (%) OJ No L 322, 17.12. 1977, p. 30. (%) See page 1 of this Official Journal. Whereas, in a common banking market, institutions are required to enter into direct competition with one another and whereas the adoption of common solvency standards in the form of a -minimum ratio will prevent distortions of competition .and strengthen the Community banking system; Whereas this Directive provides for different weightings to be given to guarantees issued by different financial institutions; whereas the Commission accordingly undertakes to examine whether the Directive taken as a whole significantly distorts- " competition between credit institutions and insurance companies and, in the light of that examination, to consider whether any remedial measures are justified; Whereas the minimum ratio provided for in this Directive reinforces the capital of credit institutions in the Community; whereas a level of 8% has been adopted following a statistical survey of capital requirements in force at the beginning of 1988; Whereas measurement of and' allowance for interest-rate, foreign-exchange and- other market risks are also of great importance in the supervision of credit institutions; whereas the Commission will accordingly, in cooperation with the competent authorities of the: Member States and all other bodies working towards-similar ends, continue to study the techniques available; whereas it will then make appropriate proposals for the further harmonization of supervision rules relating to those risks; whereas in so doing it will keep a special watch on the possible interaction between the various banking risks and consequently pay particular attention to the consistency of the various proposals; Whereas, in making proposals for rules for the supervision of investment services and the adequacy of the capital of entities operating in that area, the Commission will ensure that equivalent requirements are applied in respect of the level of own funds, if the same type of business is transacted and- identical risks are assumed; Whereas the specific accounting technique to be used for the calculation of solvency ratios must take account of the provisions of Council Directive 86/635/EEC of 8 December - 1986 on the annual accounts and consolidated accounts of - banks and other financial institutions (¢), which incorporates certain adaptations of the provisions of Council Directive 83/349/EEC (7), as amended by the Act of Accession of Spain and Portugal; whereas, pending transposition of .the provisions of those Directives into the national laws of the Member States, the use of a specific accounting technique for (¢) OJ No L 372, 31. 12. 1986, p. 1. () OJNo L 193, 18. 7. 1983, p. 18.