Magazine article American Banker

Basel II Qualifiers to Get the Word Sometime in '07

Magazine article American Banker

Basel II Qualifiers to Get the Word Sometime in '07

Article excerpt

Federal regulators plan to inform banks and thrifts sometime in 2007 which of them may participate in Basel II.

The timeline was given Thursday by the Federal Reserve Board, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, and Office of Thrift Supervision. It was in the most detailed guidelines issued so far on qualifying for the new capital rules, set to take effect in Jan. 1, 2008.

"The intent of this document is to provide a measure of transparency about what we expect so as to permit banks to have a much more cogent planning process about what they need to do," said Kevin Bailey, the OCC's deputy comptroller for capital and regulatory policy.

International regulators began developing Basel II in 1998 to update rules written 10 years earlier. Bankers said the original Basel accord did not account for how they allocated risk. Regulators agreed on the framework of Basel II in June and are working on its domestic implementation.

Because the new capital standards require banks to store massive amounts of risk data and loss history, regulators are waiting until less than one year before Basel II will be in place to officially sign off on each bank. But by ensuring that banks know in advance what regulators are expecting of them, there is less of a chance there will be last-minute confusion, Mr. Bailey said.

"What we don't want," he said in an interview, "is sometime in 2007, a supervisor sending a letter to a bank saying 'Surprise, you didn't make it.' "

The eight-page guidelines issued Thursday said banks and thrifts need to assess how close they are to meeting the Basel II requirements and develop a written plan for satisfying the new rules. Banks and thrifts also have to show their regulator how they have budgeted for the resources they need to comply.

Ten of the country's largest banking companies, such as Citigroup Inc. …

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