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Basel II - Advanced Approaches

In June 2006, the Basel Committee on Banking Supervision (BCBS) published the "International Convergence of Capital Measurement and Capital Standards: A Revised Framework" (Basel II or the Basel II framework). Basel II includes several options for calculating risk-based capital for credit risk and for operational risk. Basel II set forth a "three pillar" framework encompassing risk-based capital requirements for credit risk, market risk, and operational risk (Pillar 1); supervisory review of capital adequacy (Pillar 2); and market discipline through enhanced public disclosures (Pillar 3).

On December 7, 2007, the Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation (FDIC), and Office of Thrift Supervision (OTS) issued a final rule implementing the Basel II framework's advanced internal ratings-based approach for credit risk and the advanced measurement approach for operational risk in the United States. The U.S. final rule identifies two types of U.S. banking organizations that will use advanced approaches: those for which application of the rules is mandatory (core banks), and those that voluntarily apply the rules (opt-in banks). In general, the advanced approaches rule defines a core bank as a bank that has consolidated total assets of $250 billion or more, has consolidated on-balance sheet foreign exposure of $10 billion or more, or is a subsidiary of a core bank.

Resources available at the Bank for International Settlements (BIS):

  • Publications
    Access fact sheets, press releases, speeches, working papers, newsletters, and more

  • Basel II Framework
    Access up-to-date information on framework development

Related News and Issuances
Publish DateIdentifierTitle
12/16/2014  NR 2014-169, Agencies Announce Rules to Reflect the ISDA Resolution Stay Protocol in Regulatory Capital and Liquidity Coverage Ratio Rules
11/18/2014  NR 2014-159, Agencies Propose Technical Corrections and Clarifications to the Capital Rules Applicable to Advanced Approaches Banking Organizations
09/26/2014  OCC 2014-47, Regulatory Capital - Supplementary Leverage Ratio: Final Rule