A Work In Progress: Implementing Basel III In The U.S.

The planned transposition of Basel 3 in the US is providing the first occasion for a thorough revision of prudential standards for banks the adoption of Basel I in 1991. In June 2012, the US federal regulators (Federal Reserve, FDIC and OCC) put forward three rules intended to transpose the international solvency capital requirements (Basel 2 and Basel 3 frameworks) into U.S. law. The comment period for these rules ended late October 2012. In June 2012, the regulators published a final rule, revising the calculation of risk-weighted assets for trading activities (Basel 2.5 framework). On the strength of these documents, the Basel Committee on Banking Supervision (BCBS) issued a report in October 2012, expressing an overall favourable judgment on the process of convergence of U.S. standards to the new international standards.

At the time, though, the new rules were still in proposal stage, and nothing about them was binding as to the final content or implementing conditions. If proof were needed on this point, it arrived quickly. On November 9 , 2012, after reviewing just a portion of the two thousand comments received, the US regulators announced that they would be unable to adopt final rules that could take effect on the January 1, 2013 deadline. The main complaints expressed by commenters concerned the transition period, deemed too short. The special characteristics and business models of small local banks were given also short shrift; the removal of prudential filters on unrealised gains and losses in available-for-sale asset portfolios, represented a source of excessive volatility in capital ratios. While the U.S. regulators agreed that their proposed rules were indeed complex for banks of modest size, another factor in their decision to postpone transposition of Basel 3 was the EU's delay in finalising the European Commission's proposed legislation, the regulation and directive known as CRR/CRD 4.

BY Céline CHOULET

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