US regulators have received notice that there will be a Congressional hearing to discuss the implementation of Basel II in the US including the request from a group of US banks (see Regulatory News of August 8th) to drop the requirement that only the highest level of capital calculation methodology be adopted.
The hearing, as reported on Dow Jones (see Morningstar for a publicly available transcript), is said to be scheduled for September 14th, although no confirmation has yet been given. It is expected to discuss the growing opposition to the way that US regulators are planning to implement Basel II. Chief amongst these is the complaint that, by forcing the top 20 banks to adopt the most complex approaches to calculating capital adequacy, and by coupling this with excessive restrictions on capital savings, the regulators are creating a situation with few benefits. This is supported by the American Bankers Association. In a Congressional letter, the US regulators are asked not to make any final decisions until after the hearing.
The regulators had already delayed the Federal Deposit Insurance Corporation (FDIC) board meeting with the probable date being September 5th. This meeting was, with the support of the heads of other US regulators who sit on the FDIC board, expected to have approved a final version of the necessary Notice of Proposed Regulation (NPR) on Basel II prior to its release for the necessary four month public consultation period. In an interview with Dow Jones, Sheila Bair, the FDIC Chairman, said “I think everybody can show some flexibility because we aren't making the decision at this point, we're just going out for comment on a proposed rule, both for Basel II and Basel IA.” (Basel 1A is the alternative strategy proposed for US banks not in the top 20.)
The approval process for Basel II in the US has already hit several delays due to disagreements between the four US regulators. Bair said “I think it's really important for us to speak with a unified position. That would be optimal." But she said it still was not clear "whether we could do that or not." The September 5th meeting has yet to be confirmed.
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