《Basel II and Basel 1A- New Capital Rules on Track》.pdf

Capital Requirements Basel II and Basel IA: New Capital Rules on Track, but Still a Long Trip Ahead By Dwight C. Smith III Full implementation of Basel IA has been deferred to 2012. he last week of September and the fi rst week been a sense that these standards are insuffi ciently of October saw three signifi cant regulatory sensitive to differences in credit risk and that a more Tdevelopments for a wide swath of the U.S. sophisticated capital analysis is appropriate, particu- banking industry. The federal banking regulators larly for large and complex banks able to support pushed back full implementation of Basel II by such an approach. an additional two years, until 2012, while making In 2004, the Basel committee issued a new and clear that the leverage ratio and prompt corrective substantially more complicated capital adequacy action (“PCA”) rules will survive. The regulators framework, the “International Convergence of Capi- also proposed signifi cant reforms to the risk-based tal Measurement and Capital Standards: A Revised capital rules for all other U.S. banks, a set of reforms Framework,” or “Basel II,” many of the details of known as Basel IA. The Federal Deposit Insurance which had been known for some time. In addition Corporation (FDIC) voted, with the support of the to providing for the calculation of risk-based capital Offi ce of the Comptroller of the Currency (OCC), charges, Basel II provides for an additional capital to provide state banks greater parity with national charge for an institution’s overall operational risk, banks on several regulatory issues. The fi rst two and it imposes certain disclosure requirements. The developments respond in part to increasingl