US hopes to make October statement on Basel II; Basel I revision proposals expected soon

WASHINGTON, September 26 (Global Risk Regulator) – The US banking supervisory agencies hope to make "a public communication" sometime in October on how the process of implementing the Basel II bank safety rules will proceed in the US, Federal Reserve Board governor Susan Schmidt Bies said today.

And details of an advanced notice of proposed rulemaking, known as an ANPR, relating to the revision of the current Basel I capital adequacy rules should be available very soon, Bies told a breakfast meeting with the Institute of International Bankers, the organisation that represents the international banking community in the US.

The complex, risk-focused Basel capital rules are envisaged as applying only to the very largest US banks, expected to number 20 or so but representing the bulk of the nation’s banking assets, from January 2008. The rest of the US banking system comprising thousands of regional and smaller banks will operate under the revised Basel I rules, which are already variously dubbed Basel 1A or Basel 1.5.

Bies said the agencies had learned some valuable information from the follow-up work pertaining to the fourth quantitative impact study (QIS4) of the likely effects of Basel II on US banks. The agencies have delayed issuing further details of their implementation plans for Basel II, in the form of a notice of proposed rulemaking, while they study some worrying results from QIS4. The findings showed that the capital held by the 26 participating banks as a buffer to absorb losses from the risks they face could fall significantly under the proposed Basel II formulas, compared with the capital they’re required to hold under Basel I.

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