WASHINGTON -- Comptroller of the Currency John D. Hawke, Jr.
said today that the Basel Committees work on a new Capital Accord is an
extremely important endeavor that deserves strong support from the industry and
bank regulators. However, he added, important issues must still be resolved and
the Office of the Comptroller of the Currency will carefully weigh industry
comments before adopting new capital rules for national banks.
A major concern for the OCC, Mr. Hawke said in a speech to
the Institute of International Bankers, is the proposed Capital Accords
complexity. The committees effort has given rise to hundreds of pages of
rules, guidelines and standards and is saturated with mathematical formulae.
Theyre not written
by or for bankers -- or for that matter, by or for conventional bank
examiners, he said. Theyre written by mathematicians and economists for
mathematicians and economists. While the draft Accord may be conceptually
sound, we need to make certain that the final Accord is written in a form that
is understandable to those responsible for implementing it.
The complexity of the rules has a cost that goes beyond the
heavy burden it will impose on banks that have to design systems and educate
staff, Mr. Hawke added. It also has a cost in terms of public acceptance and,
most important, in terms of competitive equality for U.S. banks.
Bank supervision varies significantly from one country to
another in approach, intrusiveness and quality, he said. While the OCC has up
to 40 examiners working full time in its largest banks, some countries rely on
outside auditors for supervisory oversight.
Is it realistic to think that an enormously complex set of
rules will be applied in an evenhanded way across a broad spectrum of
supervisory regimes? Mr. Hawke asked.
The Comptroller said that the OCC does not believe that a
reduction in minimum capital for some institutions is an adverse feature of
Basel II, provided that it is based on a regulatory regime that has validity
and integrity, and that reflects the degree of risk in a banks positions and
activities.
Until we have better evidence that Basel II meets that
standard, the OCC will be reluctant to allow national banks to materially lower
their current capital levels, Mr. Hawke added.
Mr. Hawke said a U.S. rulemaking proceeding based on Basel
II will be initiated later this year and that the OCC will give careful thought
to all of the comments it receives during this rulemaking.
The OCC, which has been vested by Congress with the sole
authority to fix capital requirements for national banks, will not give its
final agreement to Basel II until we have fully and objectively considered all
the comments we receive, he said.
And we will not sacrifice good public policy to the
dictates of an arbitrary time schedule, he added. If, after reviewing
comments, we determine that changes to the Basel proposal are necessary, we
will insist upon such changes.
Mr. Hawke expressed confidence that the efforts of the OCC
and others on the Basel committee will ultimately result in a more workable
Basel agreement -- one that all concerned parties can live with and prosper
under.
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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.
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