The Framework is available on the Basel
Committee’s website at www.bis.org, the Office of the
Comptroller of the Currency’s (OCC) website at www.occ.treas.gov, the Federal
Reserve Board’s (Federal Reserve) website at www.federalreserve.gov,
the Federal Deposit Insurance Corporation’s (FDIC) website at www.fdic.gov, and the Office of
Thrift Supervision’s (OTS) website at www.ots.treas.gov.
U.S. Implementation Plans
As noted, the Framework will form the basis upon
which the Agencies develop proposed revisions to their existing
risk-based capital adequacy regulations. As previously announced, the
Agencies expect that only a small number of large, internationally
active U.S. banking organizations would be required to use the
Framework, and that those institutions would use only the most
advanced approaches for determining their risk-based capital
requirements.
Application of the Framework’s advanced approaches to other
qualifying U.S. banking organizations would be at the banking
organization’s option.
The Agencies have developed a comprehensive plan
to incorporate the advanced risk and capital measurement
methodologies of the Framework into regulations and supervisory
guidance for U.S. institutions. This plan will ensure that
U.S. implementation efforts are consistent with the Framework;
reflect the unique statutory, regulatory and supervisory processes
in the United States; and appropriately seek and consider comments
on individual aspects of the plan from all interested
parties.
Prior to implementation, it is expected that
institutions using Framework-based regulations and guidance will
first be subject to a year of “parallel running;” i.e.
application of the advanced approaches in tandem with the current
risk-based capital regime, beginning in January 2007. The Agencies anticipate that
the Framework would become fully effective in the United States in
January 2008. The
Agencies plan to apply prudential floors to risk-based regulatory
capital calculations in the two years immediately after adoption of
the Framework.
Qualified institutions that opt in to the Framework
subsequent to the initial implementation period would be subject to
a similar phase-in schedule (i.e. parallel running and
floors).
Given the investments needed to qualify for the
advanced approaches of the Framework, the Agencies believe that it
would be prudent for banking organizations that expect to adopt the
Framework on or near the effective date to begin planning their
implementation efforts.
In order to facilitate such efforts, the Agencies have
described below the significant milestones in the development of
Framework-based regulations, guidance, and policies. Additional information on
these activities will be forthcoming.
Supervisory Guidance
The Agencies are developing supervisory guidance
for various portfolios and risk exposures addressed by the
Framework. This
guidance is intended to provide U.S. institutions and supervisors
with a clear description of the essential components and
characteristics of the measurement and management structure for
these risks and to describe relevant supervisory expectations for
banking organizations adopting a Framework-based process for the
determination of minimum regulatory risk-based capital
requirements.
The Agencies have previously published for notice
and comment draft supervisory guidance on Internal Ratings-Based
Systems (IRB) for Corporate Credit and on the Advanced Measurement
Approaches (AMA) for Operational Risk. See 68 Fed. Reg.
45949 (August 4, 2003).
The Agencies expect to publish for notice and comment draft
supervisory guidance on IRB Systems for Retail Credit in the third
quarter of 2004. Over
the course of the next year, the Agencies will publish for comment
additional guidance on other aspects of IRB Systems.
Institutions that expect to adopt the Framework
are encouraged to consider the supervisory standards articulated in
the guidance in developing their implementation plans for the
adoption of Framework-based systems. Specifically, institutions
should begin to self-assess the extent to which their systems and
processes comply with or differ from proposed supervisory
standards. The Agencies
expect to publish additional information regarding the process that
will be used to assess individual institutions’ efforts to meet IRB
and AMA qualifying standards.
Additional Quantitative Impact
Study
Later this year, the Agencies will conduct a
fourth Quantitative Impact Study (QIS-4) to evaluate the potential
effects of a U.S. implementation of the Framework. QIS-4 will assist banking
organizations and their supervisors in better understanding the
implications of this proposal on the regulatory capital requirements
of individual institutions and may provide some insight with regard
to the competitive implications of the new rules. A full or partial
recalibration of the Framework may be considered based on the
results of the QIS-4 exercise.
Although other countries may undertake joint or
independent reviews similar to QIS-4, the forthcoming study, as
implemented in the United States, will be tailored to the domestic
interests of the Agencies and will focus on the effect of the
proposal on U.S. banking organizations, especially those large
internationally active institutions that the Agencies have proposed
to require to conform to Framework-based regulations. Other institutions that
anticipate adhering to Framework-based regulations on a voluntary
basis may also participate in the study in order to understand
better the nature of the internal risk measurement information that
the new rules would require and to estimate their resulting capital
requirements.
As before, the Agencies will request that
participants submit requested information by completing a series of
computerized spreadsheets – the Agencies will ensure consistency in
responses through detailed instructions, questionnaires, and
supervisory oversight.
The Agencies expect to finalize and distribute survey
materials to participating institutions in October 2004 and to
request that institutions complete and return the survey results by
mid-January 2005.
Institutions that want to participate in the study should
discuss the project with their federal supervisor(s) by the end of
July 2004.
Revision of Capital Adequacy
Regulations
In August of 2003, the Agencies published for
notice and comment an advance notice of proposed rulemaking (ANPR)
discussing possible revisions to U.S. risk-based capital adequacy
regulations relating to an earlier iteration of the Framework. See 68 Fed. Reg.
45900 (August 4, 2003).
With the publication of the Framework, the Agencies will
continue this rulemaking process.
As provided in the ANPR, the Agencies expect that
some U.S. banking organizations would use the most advanced
approaches set forth in the Framework to determine their risk-based
capital requirements, while others would continue to apply the
existing capital rules.
As a result, the United States would have a bifurcated
regulatory capital framework.
In conjunction with the assessment of U.S. risk-based capital
adequacy regulations relating to the Framework, the Agencies are
assessing possible changes to capital regulations for U.S.
institutions not subject to Framework-based regulations.
Importantly, all U.S. banking organizations would
continue to be subject to a leverage ratio requirement under
existing regulations, and Prompt Corrective Action (PCA) legislation
and implementing regulations would remain in
effect.
The Agencies expect that a notice of proposed
rulemaking on possible revisions to risk-based capital adequacy
regulations relating to the Framework will be published in
mid-2005. After fully
considering all comments, the Agencies expect to be in a position to
publish final rules on this proposal in the second quarter of
2006. Possible changes
to capital regulations for U.S. institutions not subject to the
Framework-based regulations will be considered and addressed in this
same general timeframe.
# # #
Media Contacts:
FDIC:
David
Barr
(202)
898-6993
OCC:
Robert
Garsson (202)
874-5770
OTS: Erin
Hickman
(202) 906-6677
Federal Reserve:
Susan.K.Stawick
(202) 452-2955