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Subject: Risk-Based Capital – Basel II Standardized Approach
Date: July 29, 2008
To: Chief Executive Officers of National Banks, Department and Division Heads, Examining Personnel, and Other Interested Parties
Description: Notice of Proposed Rulemaking – Request for Comments
This bulletin briefly summarizes an interagency Notice of Proposed Rulemaking (NPR) for a U.S. implementation of the standardized approach of the Basel II Capital Accord. The NPR was published today in the Federal Register by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision (the agencies). The agencies seek comments on all aspects of the proposal.
The NPR proposes a more risk-sensitive capital regime relative to the existing Basel I-based capital rules (general risk-based capital rules). In addition to proposing increased risk sensitivity in determining risk-based capital requirements for credit risk, the proposal also includes a risk-based capital requirement for operational risk – the basic indicator approach – and disclosure requirements.
The proposed capital regime would provide an alternative approach for national banks that are not required to use the advanced approaches risk-based capital rules. The proposal would permit eligible banks to choose to remain under the general risk-based capital rules or opt into the standardized approach capital framework as described in this NPR. However, a bank that chooses to opt in must adopt all aspects of the framework including the operational risk capital charge and disclosure requirements. Additionally, if one bank of a corporate group decides to apply the standardized approach, then all related banks and the bank holding company would be required to comply with the framework unless the primary federal supervisor of a related bank approves a request of that bank to remain under the general risk-based capital rules.
The NPR seeks to increase the risk sensitivity of the general risk-based capital rules by:
You may direct questions or comments to Margot Schwadron, Senior Risk Expert, Capital Policy Division, at (202) 874-6022; Ronald Shimabukuro, Special Counsel; or Carl Kaminski, Attorney, Legislative and Regulatory Activities Division, at (202) 874-5090.
Timothy W. Long
Because of its length, the NPR is not attached to this bulletin, but can be accessed at the link below.