| In a speech to the Institute of International Bankers in Washington, US Federal Reserve Governor, Susan Schmidt Bies has said the United States development on Basel II is "still several years away from full implementation".
With the US currently following a parallel path to amend current Basel I rules for the vast majority of US financial institutions, how many years the US intends to delay on a full implementation of Basel II is unclear. They have already decided to implement only the advanced approaches of Basel II, making it compulsory for only the largest, internationally-active banks which is estimated to number around 20 institutions representing the main proportion of US banking assets.
Recent US jitters on Basel II have come as a result of the fourth Quantitative Impact Study (QIS4) conducted by the Basel Committee on Banking Supervision that examined the effects of the new Basel Framework on banks’ minimum capital requirements. Analysis of results from the US study shows a wide dispersal and a larger than expected overall drop in regulatory capital requirements from the previous study.
The study therefore raised concerns that insufficient capital would be held in reserve by US banks to cover unexpected losses and prompted the delay of the US' proposed rule making (NPR) for Basel II implementation which was originally scheduled for summer 2005. However, in a recent report by their central bank counterparts, the German Bundesbank found no evidence of the problems encountered by the US. A further Quantitative Impact Study (QIS5) has been scheduled by the Basel Committee to take place between October and December 2005.
The comments on Monday by Governor Bies were followed later in the week with an announcement by the European Parliament to adopt the Capital Requirements Directive (CRD) which will be used to implement Basel II across the EU's 25 member states. The uncertainty on Basel II in the US will raise concerns within the EU that the US supervisory agencies may depart significantly from the new Basel framework. A statement by the US on the next stage of their process is expected sometime in October.
The full text of Governor Bies comments, "Basel II Developments in the United States" is available from the US Federal Reserve website. |
