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ICBA Applauds Revised Basel II Plan

Washington, D.C. (October 4, 2005) - The Independent Community Bankers of America applauded federal banking regulators for revising their plan to implement the "International Convergence of Capital Measurement and Capital Standards: A Revised Framework," otherwise known as Basel II.

"The revised implementation timeline for Basel II will allow more time for the regulators to evaluate the competitive effects of Basel II and determine if further changes are needed," said ICBA's Camden R. Fine, President and CEO. "We also strongly support the current effort by the regulators to revise Basel I to enhance its risk-sensitivity (Basel 1A) and agree that a concurrent Basel I and II timetable will give the industry a chance to evaluate both proposals at the same time and study and compare the competitive impact of each proposal."

Under the revised timeline, the first opportunity for a banking institution to conduct a parallel run of both Basel I and II would be January 2008. U.S. institutions adopting the Basel II would be subject to a minimum three-year transition period beginning January 1, 2009 during which the agencies would apply limits on the amount by which each institution's risk-based capital could decline with the application of Basel II. The agencies expect that a notice of proposed rulemaking (NPR) on Basel II would be issued in the first quarter of 2006.

"We are pleased that agencies have agreed to retain both the existing Prompt Corrective Action and leverage capital requirements in the proposed implementation of Basel II," said Fine. "Eliminating or reducing the leverage ratio could jeopardize the safety and soundness of our financial system and pose substantial risks to the FDIC."