Bank Regulators Need to Improve Transparency and Overcome Impediments to Finalizing the Proposed Basel II Framework

Basel IIGovernment Accountability Office (GAO)Risk Management

What GAO Recommends

With safeguards, it is appropriate for U.S. banking regulators to proceed with finalizing Basel II and begin the transition period. GAO recommends that they (1) clarify some aspects of the Notice of Proposed Rulemaking (NPR); (2) issue a new NPR if material differences from the current NPR, or a U.S. standardized approach option, are planned for the final rule; (3) issue periodic public reports on progress, results, and any needed adjustments; and (4) at the end of the transition period, reevaluate the appropriateness of Basel II as a long-term framework for setting regulatory capital. The Federal Reserve said it agreed with our recommendations and the other banking agencies said they will consider them as part of the rule-making process.

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