Fed's Ferguson defends US position on Basel

The US approach to regulatory capital is "perfectly consistent" with the spirit of the new risk management proposals from the Basel Committee, said Roger Ferguson, vice-chairman of the board of governors of the US Federal Reserve System, this week.

Speaking to delegates attending a PricewaterhouseCoopers Basel II conference in Brussels via a video link in Washington, DC, Ferguson said that on a parallel track with any new accord, member countries have to complete their own domestic processes. He said steps taken by US regulators should not be taken as a sign of the country’s lack of commitment to Basel II.

“Of course it is expected that other countries, and the European Union, will follow their own processes,” said Ferguson. “While our approach is better for the US, it is not for other countries.”

Ferguson has previously said that US regulators plan to apply Basel II only to the country’s largest internationally active banks, which is expected to be around 20 institutions.

He defended this by saying that because of the heterogeneous nature of the US banking system, “some balance is needed”.

“The overwhelming majority of [US] banks are smaller and not international,” he said. Ferguson said US agencies do not want to force the costs of implementing advanced risk measurement systems on smaller banks. He added that small and medium-sized US banks already hold capital “in excess of Basel II requirements”. He said the culture of disclosure in the US already “comes close to or exceeds” the new guidelines on transparency.

“We believe the current approach in the US is at least as prudent as Basel II,” he said.