Basel II concerns must be addressed, says US Comptroller

PALM DESERT, California, September 26 (Global Risk Regulator) – The US must have a clear plan to address the concerns raised by the test of the risk-focused Basel II bank safety rules that showed a significant reduction in protective capital across banks, Comptroller of the US Currency John Dugan said today.

Some of the concerns may be more readily understood and resolved through the more rigorous implementation and supervisory process that would come with a more definitive Basel II proposal, Dugan said. He was speaking at the annual convention in Palm Desert, California of the American Bankers Association, the trade association that represents a broad spectrum of large and smaller US banks.

"But other prudential safeguards may also be necessary to prevent significant reductions in capital," said Dugan of the minimum capital that banks need to absorb surprise losses from the risks they face. Last month Dugan became head of the Office of the Comptroller of the Currency (OCC), the federal agency that supervises US national banks – banks that are federally, not state, chartered.

The four federal banking supervision agencies have delayed issuing further details, in the form of a notice of proposed rulemaking, or NPR, of their plans for implementing Basel II while they study the results of the test, known as the fourth Basel II Quantitative Impact Study (QIS4). The study also forecast significant variations in capital among banks that appear to have similar exposures to risk.

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