Circular
Board Seeks Public Comment on Proposed Revisions to Basel I
October 12, 2005
Circular No. 11740

To All Depository Institutions and Others Concerned
in the Second Federal Reserve District:

The Federal Reserve Board is requesting public comment on proposed revisions to the U.S. risk-based capital standards for banking organizations. These current standards are based upon the 1988 Basel Capital Accord, also known as Basel I.

The proposed revisions should more closely align risk-based capital requirements with the risk inherent in various exposures and could mitigate competitive inequalities that may arise as new capital rules, known as Basel II, are implemented for the most complex internationally active banking organizations.

The modifications that the Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Office of Thrift Supervision are considering would apply to banks, bank holding companies and savings associations. They will be set forth in an advanced notice of proposed rulemaking to be published shortly in the Federal Register. Comment is requested within ninety days of publication.

In considering possible revisions, the agencies are seeking to enhance risk sensitivity without undue complexity or regulatory burden.

Specifically, the agencies are soliciting comment on

  • increasing the number of risk-weight categories,
  • permitting greater use of external ratings as an indicator of credit risk for exposures for purposes of determining the appropriate risk weight,
  • expanding the types of guarantees and collateral that may be recognized,
  • modifying the risk weights associated with one-to-four family residential mortgages,
  • applying credit conversion factors to certain types of commitments, as well as the appropriate risk-based capital treatment of certain securitizations with early-amortization provisions, and
  • modifying the risk weights for loans that are ninety days or more past due or in nonaccrual status, as well as for certain commercial real estate exposures, and other retail and commercial exposures.

Press release OFFSITE
ANPR for Proposed Revisions to the U.S. Risk-Based Capital Rules OFFSITE PDF

Contacts:
Stefan Walter
Vice President
Financial Sector Policy and Analysis
stefan.walter@ny.frb.org
(212) 720-5487

Lance Auer
Assistant Vice President
Financial Sector Policy and Analysis
lance.auer@ny.frb.org
(212) 720-2847