Statement of John Reich, Director Office of Thrift Supervision concerning the New Basel Capital Accord before the Committee on Banking, Housing and Urban Affairs

Basel IIOffice of Thrift Supervision (OTS)General Information
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Good morning, Chairman Shelby, Ranking Member Sarbanes, and Members of the Committee. Thank you for the opportunity to discuss the views of the Office of Thrift Supervision (OTS) on the recently proposed Basel II capital framework and to update you on risk-based capital modernization in the U.S.

When I testified before this Committee nearly a year ago, I discussed my views on the development of the Basel II framework as of November 2005. I expressed concern about what we had just learned from the quantitative impact study, QIS-4. In particular, I noted that if we applied the emerging U.S. Basel II standard to the portfolios of some of our largest banks, there could be a potentially significant drop in their capital levels and a wide dispersion of capital requirements between banks. I also stated that even beyond these concerns, we had yet to resolve difficult policy issues in the modernization of our risk-based capital standards.

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