Magazine article American Banker

Group: Basel II Should Take Cues from Industry

Magazine article American Banker

Group: Basel II Should Take Cues from Industry

Article excerpt

While U.S. regulators continue to clash over the Basel II capital plan, a lending and risk management trade group weighed in Wednesday with recommendations on how to resolve some of the major sticking points.

The Capital Working Group of RMA-the Risk Management Association wrote in a letter that regulators should follow industry best practices -- not create new standards -- when setting requirements for credit card accounts and securitized credit card balances.

The letter was drafted by representatives of 16 banking companies, including Bank of America Corp., J.P. Morgan Chase & Co., Capital One Financial Corp., and Wachovia Corp.

When the Basel Committee for Banking Supervision began meeting in 1998 to update international capital requirements, the treatment of credit cards and securitized card balances were just two of the dozens of issues international regulators had to tackle. But with regulators creeping even closer to their self-imposed deadline -- May or June -- the two issues stand out, because American regulators still have not reached a consensus on them.

International regulators reportedly wanted answers by the end of the month, but Comptroller of the Currency John D. Hawke Jr. said last week he wanted to make sure the industry had a chance to weigh in.

The RMA group's letter, sent to the four federal banking and thrift agencies, followed extensive meetings the group held last month with the regulators.

The group began the letter by saying a key figure in the Basel II plan -- the likelihood that a group of credit card borrowers would simultaneously default -- was too high. …

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