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Chairman King, Congresswoman Maloney and members of the ...
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Short Description: mechanisms, audit processes, data systems and other internal bank processes. ... implement sensible capital regulation. I believe we must avoid the tendency ...
Content Inside: Statement of John D. Hawke, Jr. Comptroller of the Currency Before The Subcommittee On Domestic and International Monetary Policy, Trade and Technology of the Committee on Financial Services of the United States House of Representatives February 27, 2003 Chairman King, Congresswoman Maloney and members of the Subcommittee, I am pleased to have this opportunity to present the views of the OCC on the Basel Committee's proposed revisions to the 1988 Capital Accord. It is essential that Congress have the opportunity to express its views on any regulatory changes that could affect the operations and competitiveness of our banking system, and the Subcommittee is to be commended for its initiative in this regard. For the past few years, the Basel Committee, of which the OCC is a permanent member, has been working to develop a more risk sensitive capital adequacy framework to replace the 1988 Basel Accord. The Committee has established a target of December 2003 for adoption of a revised Accord (Basel II). Accordingly, the OCC and the other U.S. banking agencies have already begun the process of considering revisions to the current U.S. capital regulations through our domestic rulemaking process. That means publishing proposed revisions for public comment and carefully considering the comments we receive. Let me assure the Subcommittee that the OCC, which has the sole statutory responsibility for promulgating capital regulations for national banks, will not sign off on a final Basel II framework until we have determined through this notice and comment process that any changes to our domestic capital regulations are reasonable, practical and effective. Despite the enormous effort and great progress made by the Basel Committee, serious questions remain about some aspects of the Basel II framework. I would like to highlight four such issues for the committee issues that must be resolved before Basel II can be considered as final. The first issue is complexity. One of the goals of Basel II is to encourage financial institutions to improve their own ability to assess and manage risk, and for supervisors to make use of bank self-assessments in setting regulatory capital. But before we can do that, banks have to demonstrate that their systems and the capital determinations that flow from them are reliable. Thus, Basel II sets detailed and exacting standards for rating systems, control mechanisms, audit processes, data systems and other internal bank processes. This has led to a proposal of immense complexity greater complexity, in my view, than is reasonably needed to implement sensible capital regulation. I believe we must avoid the tendency to develop Document OutlineThe first issue is complexity.The second issue is competitive equality.CalibrationConclusion
