WASHINGTON In testimony before two House subcommittess of
the Committee of Financial Services, acting Comptroller of the Currency Julie
L. Williams discussed the impact of the recent results of the fourth
qualitative impact study (QIS-4) on the implementation of the Basel II
Framework and the bank regulatory agencies commitment to modernize the current
Basel I capital rules for those banks that will not be governed by the Basel II
rules.
Ms. Williams said in testimony before the Subcommittee on
Financial Institutions and Consumer Credit, and the Subcommittee on Domestic
and International Monetary Policy, Trade and Technology that in 2004, the U.S.
banking agencies undertook QIS-4 with the specific goal of gaining a better
understanding of how Basel II might affect minimum risk-based capital within
the U.S. banking industry, before its adoption.
In brief, the QIS-4 submissions evidence both a material
reduction in the aggregate minimum required capital for QIS-4 participants and
a significant dispersion of results across institutions and portfolio types,
Ms. Williams said. Aggregating over
the QIS-4 participants, the decrease in effective minimum required capital was
17 percent, while the median decrease among participants was 26 percent.
Ms. Williams noted that the dispersion in resultsboth
across institutions and across portfolioswas much wider than the agencies
anticipated or than can be readily explained.
She pointed out that changes in effective minimum required capital for
individual institutions ranged from a decrease of 47 percent to an increase of
56 percent. She also added the
caution that these calculations do not imply that any particular institution
would need to actually increase its capital in order to be capital-compliant,
since individual institutions in fact hold capital in excess of regulatory
minimums.
Based on this preliminary assessment of QIS-4 results, the
agencies concluded that a delay in the notice of proposed rulemaking was the
only responsible course of action available to us, Ms. Williams said. For that reason, on April 29th, we
announced that we would not publish an NPR on the schedule that we had
previously forecast.
Ms. Williams told the subcommittees that the agencies would
conduct a more complete assessment of the QIS-4 results that will clarify the
steps that need to be taken in order to make Basel II a reality for U.S.
financial institutions. If we believe
that changes in the Basel II framework are necessary, we have consistently said
that we will seek to have those changes made by the Basel Committee, she
said.
The Acting Comptroller also said that the U.S. banking
agencies have undertaken a separate but related effort to update and revise
existing, domestic risk-based capital rules for those institutions not
subject to Basel II-based rules. The
agencies are developing these two regulatory capital regimes in tandem, to
ensure that appropriate risk sensitivity and consideration of competitive
effects are factored appropriately into each proposal, she said.
Ms. Williams also addressed H.R. 1226 and said she shared
the desire of the bills sponsors to ensure consistency among the
banking agencies in their approach to Basel II. She expressed her confidence that the close cooperation of the
banking agencies since the beginning of the process that led to the adoption of
the Basel II process in resolving differences and reaching consensus will
continue, and expressed her belief that legislation is not needed to achieve
the intended results.
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The
Office of the Comptroller of the Currency was created by Congress to charter
national banks, to oversee a nationwide system of banking institutions, and to
assure that national banks are safe and sound, competitive and profitable, and
capable of serving in the best possible manner the banking needs of their
customers.