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Basel II Capital Accord
Notice of Proposed Rulemaking (NPR) and Supporting Board Documents

Remarks by Chairman Ben S. Bernanke
At the Federal Reserve Board of Governors, Washington, D.C.
March 30, 2006

Today, the Board is considering an interagency proposal to revise the regulatory capital framework for large, complex U.S. banking organizations.

The Federal Reserve has responsibilities both for the safety and soundness of our banking system and for overall financial stability and economic growth. In this regard, experience has clearly demonstrated that both strong capital and strong risk management are important for maintaining bank safety and soundness and promoting financial stability.

Given the increasing complexity of the activities at our largest banks, and the related risks of those activities, I fully support efforts to develop a more appropriately risk-sensitive capital framework for those institutions. The current Basel I framework has become increasingly inadequate for capturing the risks at large, complex U.S. banking organizations. Accordingly, I welcome this opportunity to consider the draft interagency proposal implementing the Basel II framework.

At the same time, I recognize that the U.S. implementation of the Basel II framework raises a number of important issues. We must be confident that the capital requirements determined in this framework will enhance safety and soundness of the banking system, and we need to ensure that the framework does not artificially distort the competitive playing field. To help us achieve both of these objectives, the Federal Reserve welcomes any and all comments on the draft being released today.

Governor Bies, I now turn to you, as oversight Governor for this initiative, for your introductory thoughts.