October 6, 2005
Comptroller Dugan Initiates Process to Improve Risk-Based Capital Rules
WASHINGTON— Comptroller of the Currency John C. Dugan approved today an advance notice of proposed rule making (ANPR) seeking public comment on a proposal intended to improve risk-based capital rules for U.S. institutions without the expense and complexity of the Basel II framework.
The U.S. banking agencies plan to address implementation of the Basel II framework in a separate rulemaking.
"Our primary goal is to increase the risk sensitivity of our domestic risk-based capital rules without unduly increasing regulatory burden," Comptroller Dugan said. "This is no small challenge and we cannot easily accomplish that goal without substantial input from the banking industry and other interested parties."
Current risk-based capital rules are the same for all banks. The OCC has heard concern voiced by a number of banks and industry groups that banks operating under Basel II might gain a competitive edge over banks that would not be governed by the Basel II framework.
"It is almost a certainty that the level of risk sensitivity we hope to achieve under Basel II is not possible in a simpler risk-based capital regime," Mr. Dugan said. "However, we need to be very mindful of competitive equity issues, and we will endeavor to reduce gaps between the two frameworks as much as possible given our overarching priority to ensure that both frameworks move in the direction of greater risk sensitivity."
The improvements, which are also being considered by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision, would apply to banks, bank holding companies and savings associations. The ANPR will be published shortly in the Federal Register and comments are requested within 90 days of publication.
Comptroller Dugan urged commenters to let regulators know if there are areas where the proposal could more closely align capital requirements with risk, or areas where the benefits of increased risk sensitivity are outweighed by regulatory burden or increased complexity.