In what looks like a (near) total victory for the US Federal Reserve, agreement has been reached between the various US regulators on the final implementation of Basel II in the US.
The elements of the deal:
- The risk insensitive capital floors (flaws) have been dropped, replaced with a gradual (5%p.a.) maximum drop in capital over the first 3 years;
- Basel IA has disappeared as an option;
- Basel II Standardised becomes an option for US banks; and
- Basel II Advanced will be implemented “and should be technically consistent in most respects with international approaches”
All I can say about this is: Excellent. Amongst many others, I have long been a critic of the stupid
questionable US approaches. I am very glad the Fed held their line and,
apart from a fig leaf of a review at the end of year 2, they have been
vindicated.
Well done.
2 comments
3 April, 2008 at 17:58
Hridesh
Hi Andrew, the final rules qualify the “core banks” as eligible for implementation of the advanced approaches. Also there will be some opt-in banks allowed to implement the advanced approaches. The list they say is about 20 banks.
Is there any place I can get my hands on this list of “core banks” and the opt-in banks, effectively the list of 20 banks.
Thanks in advance.
4 April, 2008 at 08:23
Andrew
Hridesh,
The Fed seems to have left this list a bit fluid – and probably deliberately. If you look here though, you can calculate the list. Based on the 250bn / 10bn test they would be:
JPMORGAN CHASE & CO
BANK OF AMER CORP
CITIGROUP
WACHOVIA CORP
WELLS FARGO & CO
BANK OF NY MELLON CORP
STATE STREET CORP
NORTHERN TR CORP
BANK OF AMER CORP
HSBC NORTH AMER HOLD (foreign owned anyway)
which is only 10. The rest will be open to interpretation.