Statement by Chairman Ben S. Bernanke
I welcome our guests to the Federal Reserve.
The proposed rulemaking we are considering today is a further step toward putting in place the integrated and comprehensive regulatory capital framework, known as Basel III, that the Board has been developing for some time in consultation with our domestic and international colleagues. Critically, this framework would require banking organizations to hold more and higher quality capital. It would also finalize the market risk capital requirements (thus implementing what is known as Basel II.5). To reduce compliance costs and minimize effects of higher capital on lending, the proposed rulemaking would phase the new requirements in over a period of time.
Capital is important to banking organizations and the financial system because it acts as a financial cushion to absorb a firm's losses, while reducing the incentive for firms to take excessive risks. With these proposed revisions to our capital rules, banking organizations' capital requirements should better reflect their risk profiles, improving the resilience of the U.S. banking system in times of stress, thus contributing to the overall health of the U.S. economy.
I look forward to today's discussion of this important initiative.
I now turn first to Governor Tarullo and then to Governor Duke for further remarks on today's rulemakings.