Basel II in the USA - What is Different?
RH202 Outside the United States,
In the USA
These 4 agencies have identified 3 groups of banks
1. CORE BANKS
These are large internationally active banks. They are required to adopt only the advanced approaches. These advanced approaches provide more incentives for banks to improve their risk management practices.
RH302 Core banks must meet either of the following two independent threshold criteria:
A. $250 billion or more consolidated total assets. B. $10 billion or more total on-balance sheet foreign exposure.
2. OPT-IN BANKS
These are banks that volunteer to adopt the advanced approaches.
3. GENERAL BANKS
The remaining banks that do not adopt the advanced approaches
RH033 Foreign Banks (non-US banks) with US Subsidiaries
A subsidiary of a foreign bank is subject to the United States regulatory capital requirements for domestically-owned U.S. DIs. If a subsidiary of a foreign bank in the USA meets any of the threshold criteria, it is a core bank and is subject to the advanced approaches.
If a subsidiary of a foreign bank in the USA does not meet any of the threshold criteria, the U.S. DI is a general bank (unless it decides to opt in to the advanced approaches).
Conclusion
There are many important differences in the implementation of the Basel ii framework in the USA and the other countries around the world.
Basel ii will only apply to a limited number of institutions in the USA.
There is a lot of discussion about the need for:
A. Internationally active institutions to:
1. Adopt the more risk-sensitive advanced approach for the most significant share of their portfolios.2. Have the opportunity to implement simpler approaches for a limited part of their portfolio.
B. General banks to:
1. Introduce the standardized approach.2. Avoid the competitive disadvantage of having Basel i and Basel ii banks.
In the USA
These 4 agencies have identified 3 groups of banks
1. CORE BANKS
These are large internationally active banks. They are required to adopt only the advanced approaches. These advanced approaches provide more incentives for banks to improve their risk management practices.
RH302 Core banks must meet either of the following two independent threshold criteria:
A. $250 billion or more consolidated total assets. B. $10 billion or more total on-balance sheet foreign exposure.
2. OPT-IN BANKS
These are banks that volunteer to adopt the advanced approaches.
3. GENERAL BANKS
The remaining banks that do not adopt the advanced approaches
RH033 Foreign Banks (non-US banks) with US Subsidiaries
A subsidiary of a foreign bank is subject to the United States regulatory capital requirements for domestically-owned U.S. DIs. If a subsidiary of a foreign bank in the USA meets any of the threshold criteria, it is a core bank and is subject to the advanced approaches.
If a subsidiary of a foreign bank in the USA does not meet any of the threshold criteria, the U.S. DI is a general bank (unless it decides to opt in to the advanced approaches).
Conclusion
There are many important differences in the implementation of the Basel ii framework in the USA and the other countries around the world.
Basel ii will only apply to a limited number of institutions in the USA.
There is a lot of discussion about the need for:
A. Internationally active institutions to:
1. Adopt the more risk-sensitive advanced approach for the most significant share of their portfolios.2. Have the opportunity to implement simpler approaches for a limited part of their portfolio.
B. General banks to:
1. Introduce the standardized approach.2. Avoid the competitive disadvantage of having Basel i and Basel ii banks.
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