Big US banks forced to adopt Basel II, says expert

Boston -- Internationally active American banks will have to implement the new Basel Accord, also known as Basel II, even if it is not adopted in the United States, says Kevin Fisher, president of Boston-based management consultancy Dartmouth Research.

Speaking in an interview after the workshop, Operational Risk in the Securities and Investment Industry, organised by the Securities Operations Forum in New York at the end of January, Fisher says US banks would be forced to implement Basel II by regulators in the countries in which they operate.

“The bottom line is that all the foreign banks with operations in the US have to comply with such rules as the Sarbanes-Oxley and others; it is only fair and operationally efficient for US banks to comply with Basel II when they operate in a Basel II country.

“Whether Basel II is adopted here or not, the banks that have operations in Europe, for example, or in any other region where Basel II will be in effect, will have to adopt the accord for them to operate there.

“Basel II is a real international forum which brings about change in how we manage our risks. This is necessary because the markets and risks have changed themselves. We have to expect regulations to move with these changes in the market. If the banks follow the spirit of the regulations, they will not find Basel II burdensome,” says Fisher.

He says although the regulatory landscape in the US banking industry had been complicated by the presence of four regulators, each with different expectations and interpretations of Basel II, there was a general agreement that there is a lot of good in the new international capital accord.

“The challenge to the US government is to rationalise and streamline the level of regulation among the different regulators, who all have different rules,” he says.

The chairman of the US Senate Banking Committee, Richard Selby, was quoted in the UK press in January as having expressed serious reservations about whether the US could ever adopt Basel II, speaking at a World Economic Forum fringe event in Davos, Switzerland. Selby says bank regulators in the US had expressed scepticism about adopting Basel II in its current format.