FDIC Board Approves Start of Rulemaking Process on Basel II -A

Basel IIFederal Deposit Insurance Corporation (FDIC)Risk Management

The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) today approved an interagency advance notice of proposed rulemaking (ANPR) to solicit comments on the way that the vast majority of banks and thrifts in the U.S. calculate their minimum capital requirements. This framework is sometimes referred to as Basel I-A because it is anticipated to apply to banks that do not adopt the international Basel II Capital Accord. That standard, which is expected to only cover the largest and most complex banks and thrifts in the U.S., is moving through a separate rulemaking process, with a proposed rule targeted to become available the 1^st quarter of 2006.

The Basel II standard is intended to strengthen the regulation of large, complex banking companies by making their capital requirements more sensitive to changes in risk. The prospect of reductions in risk-based capital requirements under the Basel II standard has given rise to competitive equity concerns among smaller banks and thrifts. The ANPR that the Board approved today is intended, in part, to provide these institutions an opportunity to comment formally about these competitive issues, and what the federal banking regulators should do about them.

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