BERLIN --
Comptroller of the Currency John D. Hawke, Jr. said today that while the U.S. remains
committed to completing work on the Basel II capital accord by mid-2004, many
complex issues must still be worked out before the agreement can be
implemented.
There is a
staggering amount of work confronting both us and our banks before Basel II can
be implemented, and I am absolutely confident, based on past experience, that
as we move into the implementation phase we will uncover a myriad of issues not
previously thought of or addressed, the Comptroller said in a speech to the
American Academy.
Mr. Hawke expressed
concern that the monumental level of prescriptiveness in the proposed accord
does not mesh well with the traditional approach to bank supervision in the
U.S.
Not only do we place substantial importance on the expert
judgments of experienced bank examiners, but, under legislative mandate, we
have grounded our system of supervision on the concept of prompt corrective
action that is, we place very heavy emphasis on supervisory actions that
force restoration of capital well before real net worth turns negative, Mr.
Hawke said.
To this end, we have attributed significant importance to
the maintenance of a specified minimum leverage ratio a practice that is not
common in many other supervisory regimes.
Basel II is not grounded in a similar requirement for prompt corrective
action, and it remains to be seen how a more formulaic approach will fit with
our traditional approach, he added.
Mr. Hawke said there is also a risk that homogenized
capital rules could do serious damage to some markets in which U.S. banks
particularly national banks -- have
been world leaders, such as credit cards and securitizations.
We have to exercise great caution that we do not, in the
name of achieving international uniformity, needlessly disrupt settled banking
practices and established, well-functioning markets, he said.
The Comptroller said the proposal that has emerged from
the Basel Committee is mind-numbing in its complexity and said some aspects of
it, such as the formulas for securitizations, are so complex that the mere
visual depiction of them has been cause for ridicule, which serves only to
undermine public regard for the committee.
In addition, Mr. Hawke said, banks in the U.S. are examined
more frequently than institutions in other countries. Large banks may have as
many as 40 full-time, year-round examiners assigned to them, and the U.S. has
by far the lowest ratio of banking assets per supervisory staff members of any
G10 country.
Can anyone reasonably assume that a mandate of the
complexity of Basel II will be applied with equal forcefulness across such a
broad spectrum of supervisory regimes? he asked.
The Comptroller said criticism of the U.S. decision not to
apply the proposed rules to small institutions is simply uninformed.
Smaller banks in the U.S. are both better capitalized and
more robustly regulated than their counterparts anywhere else in the world
indeed, they are generally better capitalized than our larger banks, Mr. Hawke
said. They already bear substantial cost burdens imposed by the extensive
complex of laws and regulations under which they operate, and we see absolutely
no useful purpose to be served in adding to the burdens of our community banks
by subjecting them to the complexities of Basel II.
Mr. Hawke noted that the OCC had concurred in the Basel
Committees announcement that it would work toward resolving outstanding issues
by the middle of next year, but said that commitment does not mean that substantial
issues should be ignored.
It is far more important to get the new Accord right
than to get it done on some predetermined schedule, he said.
The Comptroller also renewed his pledge to maintain the
integrity of the rulemaking process by carefully considering comments received
from banks and other interested parties, and said the U.S. would not move ahead
without conducting a fourth quantitative impact study based on the final Basel
document.
I do not believe any responsible bank supervisor can or
should make a judgment about the impact of Basel II on the capital level of the
banks it supervises based on QIS-3, he said, referring to the third
quantitative impact study of the proposed accords effect on capital. That
study, he said, had significant shortcomings.
Should QIS-4 lead us to project that there might be wide
or unwarranted swings in the capital of our banks, either up or down, that will
present us with a very significant decision point, and we would feel compelled
to bring that concern back to the Committee, he said.
The Comptroller noted that the success of the Basel
Committee, since its beginning nearly three decades ago, has turned on its
ability to reconcile widely varying national supervisory practices.
I believed then and believe just as fervently today
that the better able we are to harmonize and accommodate those differences, the
more likely we are to achieve the common supervisory excellence and global
financial stability to which all nations aspire, he said.
# # #
|
The OCC charters, regulates and examines
approximately 2,100 national banks and 52 federal branches of foreign banks
in the U.S., accounting for more than 55 percent of the nations banking
assets. Its mission is to ensure a safe and sound and competitive national
banking system that supports the citizens, communities and economy of the
United States.
|