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Saturday, October 01, 2005

Banking Agencies Announce Revised Plan for Implementation of Basel II Framework

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 announced their revised plans for the U.S. implementation of the “International Convergence of Capital Measurement and Capital Standards: A Revised Framework,” otherwise known as Basel II.

The agencies previously announced on April 29, 2005 that they were delaying issuance of a notice of proposed rulemaking (NPR), pending additional analysis of the quantitative impact study (QIS4) submissions.  The agencies intend to move forward with an NPR for domestic implementation of Basel II, but plan to introduce additional prudential safeguards in the NPR to address concerns identified in the analysis of the results of the QIS4 conducted with the industry.

The agencies expect that the U.S. Basel II proposal will be available in the first quarter of 2006.  The agencies expect to propose a revised implementation timeline for Basel II.  Under this revised timeline, the first opportunity for a U.S. banking institution to conduct a parallel run would be January 2008.

In addition, U.S. institutions adopting the Basel II-based capital rules would be subject to a minimum three-year transition period during which the agencies would apply limits on the amount by which each institution’s risk-based capital could decline with the application of Basel II.  These limits would be implemented through floors that are intended to be simpler in design and more conservative in effect than those set forth in Basel II. 

The agencies anticipate that there will be further revisions to the U.S. Basel II-based capital rules prior to the termination of the floors.

http://bankinfosecurity.com/node/2606

Posted on 10/01
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