US regulators have confirmed that they will go ahead with their expected confirmation of Basel II implementation plans despite the fact that the US Congress intends to proceed with a hearing into these plans just nine days later.
September 5th has been planned for some time (see CC News: "Basel II – US Congress intervenes, regulators hesitate") as the date on which the powerful board meeting of the US regulators is expected to approve the final proposals for the implementation of Basel II. This approval would result in a formal "notice of proposed rulemaking" (NPR) which, in turn, kicks off a 40 day consultation period. According to Global Risk Regulator (29th August) this date has been confirmed as going ahead although no one at the regulators was prepared to confirm that the proposals would be as previously formulated. This is basically the plan to go ahead with only a top 20 group of US banks having to conform with Basel II, but these having to stick to the highest level of complexity regarding approaches to capital calculations.
The announcement of the meeting on the 5th must be galling to the lawmakers in government who last month announced a congressional hearing to discuss the Basel II implementation plans. There is still a strong cultural fear in the USA, with strong memories of 1929, of anything that could lessen capital protection levels in American banks. Coupled with this, a significant grouping of top US banks has criticised the requirement to have to use the most complex capital approaches, saying there is little or no benefit in it for them.
Have the regulators been in discussion with the congressional committee and are there to be changes to the already published draft NPR which satisfy, or at least, mollify the critics? Or are the regulators confident enough of their position to continue unchanged – and willing to fend of congressional criticisms? Next Wednesday may give us some idea of the next steps in Basel II's yellow-brick road to US implementation.
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