Highlights:

• The proposed guidance applies only to banking organizations that would implement the proposed Basel II framework.
• The proposed guidance highlights regulatory standards that are primarily principles-based to enable flexibility in implementation, with more direction provided in instances where prudential issues or industry standardization is of paramount importance.
• The proposed IRB guidance is intended to provide banks with a clear description of the essential components and characteristics of an acceptable IRB framework.
• The proposed AMA guidance identifies supervisory standards that banks should follow to implement and maintain an acceptable AMA framework for regulatory capital purposes.
• The proposed Pillar 2 guidance addresses the three fundamental objectives in the supervisory review process under Pillar 2: the comprehensive supervisory assessment of capital adequacy, a bank's compliance with regulatory capital requirements, and a bank's implementation of an internal capital adequacy assessment process (ICAAP).
• The publication of these documents should not be construed as the agencies' predisposition of the Basel II Notice of Proposed Rulemaking (NPR).

Distribution:
FDIC-Supervised Banks (Commercial and Savings)

Suggested Routing:
Chief Executive Officer
Chief Financial Officer
Chief Risk Officer

Related Topics:
Risk-Based Capital Rules
12 CFR Part 325
Basel II

Attachment:
Proposed Supervisory Guidance on Internal Ratings-Based Systems for Credit Risk, Advanced Measurement Approaches for Operational Risk, and the Supervisory Review Process (Pillar 2) Related to Basel II Implementation - PDF 1,184k (PDF Help)

Contact:
Pete Hirsch, Chief, Large Bank Supervision,
phirsch@fdic.gov or (202) 898-6751 (IRB)

Mark S. Schmidt, Regional Director,
maschmidt@fdic.gov or (678) 916-2189 (AMA)

Bobby R. Bean, Chief, Capital Markets Policy
Section, bbean@fdic.gov or (202) 898-3575
(Pillar 2)

Printable Format:
FIL-20-2007 - PDF 38k (PDF Help)

Note:
FDIC financial institution letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/news/financial/2007/index.html.

To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html.

Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-275-3342 or 703-562- 2200).