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Circular Letters

Circular Letter 5600

September 11, 2003

To: All Member Banks and Others Concerned in the Third Federal Reserve District

Attention: Chief Executive Officer and Chief Compliance Officer

Subject: Basel Accord Implementation

Summary:

The Federal Reserve Board and the other bank and thrift regulatory agencies have announced the publication of joint notices in the Federal Register and requests for public comment on two interagency documents related to the proposed implementation of the new Basel Capital Accord in the United States.

The new Accord, which is being developed by the Basel Committee on Banking Supervision, builds on and, for certain banks, would replace the Basel Capital Accord of 1988, which is the framework for capital adequacy standards for large, internationally active banks and the basis for the risk-based capital adequacy standards now in place for all U.S. banks and bank holding companies.

The Advance Notice of Proposed Rulemaking sets forth for public comment the agencies’ current views on a proposed framework for implementing the revised Capital Accord in the United States. Under the proposal, internationally active banks meeting certain criteria would be subject to the advanced internal ratings-based approach for credit risk and the advanced measurement approaches for operational risk.

The Draft Supervisory Guidance with Request for Comment contains two sections. The first section sets forth draft supervisory guidance on internal ratings-based systems for corporate credits and the second describes draft supervisory expectations for operational risk management.

Comments are requested through November 3, 2003. Specific information on how to file a comment is contained in the Federal Register notices published August 4, 2003, copies of which are attached.

Proposed Rule PDF Icon (342 KB, 50 pages)

Notice PDF Icon (411 KB, 40 pages)