| Federal Reserve Board to consult on Basel II The US Federal Reserve Board has decided to issue an interagency advance notice of proposed rulemaking (ANPR) seeking public comment on the implementation of the New Basel Capital Accord in the United States. The Board has also decided to seek comment on draft interagency supervisory guidance on internal-ratings based systems for corporate credits and draft guidance on advanced measurement approaches (AMA) for measuring operational risk. The ANPR, developed by the Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision, presents an overview of the proposed implementation in the United States of the advanced approaches to determining capital requirements for credit risk and operational risk. The agencies anticipate that comments will be useful in shaping further refinements to the framework as the Basel Committee completes its work on the New Accord and, after that, in developing a Notice of Proposed Rulemaking to implement the New Accord in the United States. "The proposed accord would be dramatically more risk sensitive and transparent and would provide a higher degree of market discipline. It would thus contribute to a safer and sounder banking system here and abroad," said Board vice chairman Roger W. Ferguson, Jr. "Though it has been in development for some time, it is not cast in stone. I hope the industry and public will provide the US agencies with rigorous comments that can help us think through the remaining issues and, possibly, simplify an admittedly complex framework." Specifically, the ANPR provides that large, internationally active banking organisations that meet certain size or foreign-exposure thresholds would be required to meet rigorous supervisory standards and implement the advanced internal ratings-based (A-IRB) approach for credit risk and the AMA for operational risk. It describes the A-IRB approach to credit risk and its application to particular portfolios of credit exposures (wholesale, retail, and equity) as well as the A-IRB approach to credit risk mitigation and for securitization exposures. The ANPR also provides guidance and supervisory standards for the AMA for operational risk, outlines the proposed approaches for supervisory review and disclosure (Pillars 2 and 3 in the New Accord), and seeks comment on certain competitive considerations. The draft supervisory guidance on internal ratings-based systems for corporate credits describes the essential components and characteristics of an acceptable A-IRB framework, including rating assignment, validation, quantification, data maintenance, and oversight and control mechanisms. The draft supervisory guidance on the AMA for operational risk sets forth expectations for banking organisations for calculating operational risk exposure under the proposed framework and outlines requirements for governance, measurement, monitoring, and control of operational risk. Comment on the ANPR and two interagency guidance pieces is requested within 90 days of publication in the Federal Register, expected shortly.
•Date:
16th July 2003 • Region: N.America
•Type: Article •Topic:
Operational
risk
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