March 14, 2005
Acting Comptroller Williams Tells International Bankers Of Challenges Ahead
WASHINGTON – Acting Comptroller of the Currency Julie L. Williams said today in a speech before the Institute of International Bankers that the greatest challenges in the Basel process lie ahead. "After so many years of debating the theoretical side of regulatory capital and dealing with the complex Basel formulations, we are at the point where we must come to grips with how Basel II will work with the realities and practicalities of bank supervision."
Over the next 15 months, she said, regulators must confront a daunting list of challenges, from analyzing data from the fourth Quantitative Impact Survey (QIS 4) to issuing proposed rules, supervisory guidance and a final rule.
"I know of only one way for supervisors to accomplish these aggressive objectives," she said. "Given the unusual sequence of the rulemaking and implementation processes, we must undertake these efforts with an unprecedented level of transparency, engaging in an open dialogue with the banking industry and with all interested persons, on all aspects of the proposal, to ensure that interested parties are aware of our current plans for implementation as early as possible."
Ms. Williams stressed that the integrity of the rulemaking process pertaining to the Basel II Capital Accord demands that all interested parties be given a fair chance to be heard and to influence the outcome, even if that results in changes to the proposed framework.
"We are quite aware that some thoughtful and knowledgeable bankers and policymakers have expressed misgivings about Basel II's models-based approach and its complexity, and about particular components of the Basel II approach," she said.
"If we don't have good answers to good issues that are raised in the rulemaking process, appropriate revisions to the proposal must be made," she added.
Ms. Williams said it also is possible that Congress could become involved in the process, noting that Basel-related legislation was introduced just last week in the U.S. House of Representatives.
Ms. Williams noted that the most pressing and immediate regulatory deadline is the Notice of Proposed Rulemaking that has been targeted for issuance by the middle of this year. Once comments have been fully considered, the agencies expect to publish the final Basel II rules and supervisory guidance by mid-2006.
"But again, let me stress, that we are – indeed we must be – committed to the integrity of the U.S. rulemaking process," she said. "There is no "done deal" here; much could change based on information developed in QIS 4 and the public comment process."
Ms. Williams encouraged the banking industry, Congress, and other interested parties to be fully engaged in the dialogue with regulators, and to respond each time the agencies solicit comment. She said that institutions contemplating adoption of Basel II-based regulations should discuss their plans with their primary supervisor early in the planning process.
"Supervisors, institutions, and the public share a common goal in the implementation of Basel II—the development of a prudentially sound, risk-sensitive, risk management, regulatory, and supervisory regime that does not introduce unacceptable regulatory burdens or externalities," the acting Comptroller said. "We need to work together in this effort."