Statement by Chairman Ben S. Bernanke
Governor Kroszner and the representatives of the other bank regulatory agencies have worked closely to develop a proposal for a new risk-based capital framework based on the standardized approach of the Basel II capital accord. This is good news. Many medium-sized and smaller banking institutions have neither the need nor the capacity to adopt the advanced approaches under Basel II. It is important to give these institutions the option to calculate risk-based capital requirements using a more updated framework, while being mindful of regulatory burden. Recent market events remind us that institutions of all sizes need prudent risk measurement and management practices and levels of capital that are commensurate with the risks that they bear.
The standardized framework provides an alternative way to determine regulatory capital requirements that is more risk sensitive than the current Basel I-based rules, yet is less complex than the advanced approaches final rule. It addresses certain competitive equity issues raised by the industry in light of the implementation of the advanced approaches final rule in the United States. At the same time, its optional nature recognizes that the current rules remain appropriate for many banking organizations. I am pleased that the proposed framework calls for increased disclosure and transparency and encourages sound risk management. I look forward to continued close cooperation with the other agencies as we review the comments on this proposal and work expeditiously toward the implementation of a final rule.