A Comparative Assessment of Basel II III and Solvency II

In the course of creating a single European market for financial services and in the wake of
two financial crises, regulatory frameworks in the financial services industry in the
European Union have undergone significant change. One of the major reforms has been
the transition from static rules-based systems towards principles-based regulation with the
intent to better capture the risk situation of an undertaking. For insurance companies, the
regulatory framework Solvency II is being finalised and is scheduled for implementation
after 2013. At the same time, the regulatory regime for banking, Basel II, has been revised
in response to the financial crisis; the new version is Basel III. The aim of this paper is to
conduct a comprehensive and structured comparative assessment of Basel II/III and
Solvency II in order to detect similarities and differences as well as the benefits and
drawbacks of both regimes, which might be profitably addressed. The comparison is
conducted against the background of the industries’ characteristics and the objectives of
regulation.