Complaints are reaching me about the way in which the US regulators have released the notice of proposed rulemaking (NPR). My sources point out that the advance notice of proposed rulemaking – released way back in those halcyon days of August 2003 – came with the draft supervisory guidance on internal ratings-based systems for corporate credits and supervisory expectations for operational risk management.
Unfortunately no such supervisory guidance was forthcoming with the release of the long-delayed NPR. Without the accompanying guidance, many do not know quite how to interpret large chunks of the NPR. Words like "mish mosh" and "goobly-gook" have found their way into my email box. Even I, who has been known to digest the occasional European Commission document for breakfast, will admit that the notice of proposed rulemaking isn’t the best example of ‘plain English’ the US government has ever produced.
‘Enlighten us’, scream the hoards of risk management executives, compliance professionals, consultants, and yes, even the software vendors. ‘What does it all mean?’
Certainly there will be changes to the new supervisory guidance for operational risk. My sources tell me that the supervisory standards have been reduced in number, with a couple of them co-mingled – possibly the ones that specified the four advanced measurement approach building blocks. Possibly a new one has been added that gives more detail about the level of granularity that is expected in units of measurement.
It would be nice to have some more certainties from the US regulators, although I suppose I would also commend them for the flexibility that they have shown in recent weeks, what with deciding to consult on the standardised approach for credit risk in the NPR and meeting with all those irate banks over what I hear was a rather warm summer. I think many would welcome a move by the US regulators to implement Basel II more along the lines that are seen in other jurisdictions. Certainly, other jurisdictions would welcome with open arms the return of the US regulators to the international fold on a number of issues.
Speaking of regulators around the world, I’d like to mention that presentations from the recent e-symposium by BaselAlert.com can be found archived online. The all-day event had supervisors from Australia, Hong Kong, the Netherlands, Canada, the UK, and the US – among others – speaking on how Basel II implementation is going in their jurisdictions. Some – including the FSA and the US regulators – didn’t mince words. The presentations can be found at www.baselalert.e-symposium.com.
Have a good month!
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