The four federal banking agencies (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)
today agreed that additional analysis is needed before publishing a notice of
proposed rulemaking (NPR) with respect to the U.S. implementation of the
“International Convergence of Capital Measurement and Capital Standards: A
Revised Framework,” generally known as the Basel II Framework.
The agencies had intended to publish the NPR at midyear
2005, but agreed to a delay to better assess the results of a recently
completed quantitative impact study (QIS4).
The agencies agreed to issue the NPR at the earliest possible date after
considering issues raised by the QIS4 results.
In a Joint Release published on June 26, 2004, the agencies
described U.S. efforts to implement the Basel II Framework through revisions to
our existing Capital Adequacy regulations.
Among the key features in that implementation plan was an assessment of
the implications of the Framework on U.S. regulatory capital requirements
through QIS4 and the solicitation of public comments on necessary revisions to
existing capital adequacy regulations through an NPR. The QIS4 process was designed to provide the agencies with a
better understanding of how the implementation of the Basel II Framework might
affect minimum required risk-based capital within the U.S. banking industry
overall, at consolidated U.S. institutions, and for specific portfolios. The agencies believe that the QIS4 results
are critical inputs in the assessment of (1) the implications of Basel II for
the safety and soundness of the banking system and (2) the competitive effects
of adopting the Basel II Framework. Both are fundamental to the formulation of
the NPR.
The agencies have received QIS4 submissions from
participating institutions and have completed a preliminary analysis of those
materials. The agencies have determined
that additional analysis beyond that previously contemplated is necessary
before publication of an NPR. The QIS4
submissions evidence material reductions in the aggregate minimum required
capital for the QIS4 participant population and significant dispersion
of results across institutions and portfolio types. Additional work is necessary to determine
whether these results reflect differences in risk, reveal limitations of QIS4,
identify variations in the stages of bank implementation efforts (particularly
related to data availability), and/or suggest the need for adjustments to the
Basel II Framework.
The agencies remain committed to moving forward with the
implementation of Basel II while retaining Prompt Corrective Action and
leverage requirements. The delay in
issuing the NPR is intended to ensure that any proposed changes to the
risk-based capital framework are consistent with safety and soundness, good
risk management practices, and the continued competitive strength of the U.S.
banking system. The agencies encourage
institutions that seek to adopt Basel II-based rules at their inception to
continue with their implementation efforts.
The agencies continue to target the existing implementation timeline for
Basel II. However, the additional work
noted above may cause the agencies to revisit this timeline. The agencies will provide additional
information on the timing and other aspects of Basel II implementation as it
becomes known.
Media Contacts
Federal Reserve Dave
Skidmore (202) 452-2955
FDIC Frank Gresock (202) 898-6634
OCC Kevin Mukri (202)
874-5770
OTS Kevin Petrasic (202) 906-6677