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Federal Reserve Bank of Dallas
2200 N. PEARL ST.
DALLAS, TX 75201-2272

May 6, 2005
Notice 05-24
TO: The Chief Executive Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District

SUBJECT
Additional Analysis Before Issuing Notice
of Proposed Rulemaking Related to Basel II
DETAILS
The four federal banking agencies (the Office of the Comptroller of the Currency, the
Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation,
and the Office of Thrift Supervision) have agreed that additional analysis is needed before
publishing a notice of proposed rulemaking with respect to the U.S. implementation of the
International Convergence of Capital Measurement and Capital Standards: A Revised
Framework, generally known as the Basel II Framework.
ATTACHMENT
Attached is a copy of the agencies’ joint press release dated April 29, 2005.
MORE INFORMATION
For more information, please contact Andrew Williams, Board of Governors, (202) 4522955. Paper copies of this notice or previous Federal Reserve Bank notices can be printed from
our web site at www.dallasfed.org/banking/notices/index.html.

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012;
Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

Joint Press Release

For immediate release

Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
Office of Thrift Supervision

April 29, 2005

Banking Agencies To Perform Additional Analysis Before Issuing Notice of Proposed
Rulemaking Related To Basel II
The four federal banking agencies (the Office of the Comptroller of the Currency, the Board
of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and
the Office of Thrift Supervision) today agreed that additional analysis is needed before
publishing a notice of proposed rulemaking (NPR) with respect to the U.S. implementation of
the "International Convergence of Capital Measurement and Capital Standards: A Revised
Framework," generally known as the Basel II Framework.
The agencies had intended to publish the NPR at midyear 2005, but agreed to a delay to better
assess the results of a recently completed quantitative impact study (QIS4). The agencies
agreed to issue the NPR at the earliest possible date after considering issues raised by the
QIS4 results.
In a Joint Release published on June 26, 2004, the agencies described U.S. efforts to
implement the Basel II Framework through revisions to our existing Capital Adequacy
regulations. Among the key features in that implementation plan was an assessment of the
implications of the Framework on U.S. regulatory capital requirements through QIS4 and the
solicitation of public comments on necessary revisions to existing capital adequacy regulations
through an NPR. The QIS4 process was designed to provide the agencies with a better
understanding of how the implementation of the Basel II Framework might affect minimum
required risk-based capital within the U.S. banking industry overall, at consolidated U.S.
institutions, and for specific portfolios. The agencies believe that the QIS4 results are critical
inputs in the assessment of (1) the implications of Basel II for the safety and soundness of the
banking system and (2) the competitive effects of adopting the Basel II Framework. Both are
fundamental to the formulation of the NPR.
The agencies have received QIS4 submissions from participating institutions and have
completed a preliminary analysis of those materials. The agencies have determined that
additional analysis beyond that previously contemplated is necessary before publication of an
NPR. The QIS4 submissions evidence material reductions in the aggregate minimum required
capital for the QIS4 participant population and significant dispersion of results across
institutions and portfolio types. Additional work is necessary to determine whether these
results reflect differences in risk, reveal limitations of QIS4, identify variations in the stages of
bank implementation efforts (particularly related to data availability), and/or suggest the need
for adjustments to the Basel II Framework.
The agencies remain committed to moving forward with the implementation of Basel II while

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retaining Prompt Corrective Action and leverage requirements. The delay in issuing the NPR
is intended to ensure that any proposed changes to the risk-based capital framework are
consistent with safety and soundness, good risk management practices, and the continued
competitive strength of the U.S. banking system. The agencies encourage institutions that seek
to adopt Basel II-based rules at their inception to continue with their implementation efforts.
The agencies continue to target the existing implementation timeline for Basel II. However, the
additional work noted above may cause the agencies to revisit this timeline. The agencies will
provide additional information on the timing and other aspects of Basel II implementation as it
becomes known.
Media Contacts:
Federal Reserve Dave Skidmore
FDIC
Frank Gresock
OCC
Kevin Mukri
OTS
Kevin Petrasic

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202-452-2955
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