Chairman of FDIC says three-year implementation period vital to safeguarding capital under Basel II

Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation (FDIC), has said the three-year implementation period for Basel II in the US is vital to preserving capital levels. Citing the fourth quantitative impact study (QIS4), Gruenberg said capital will be protected by successive floors that will limit the extent to which capital falls in participating banks.

“The purpose of Basel II is to improve risk management by the largest internationally active banks without a significant reduction in aggregate risk-based minimum capital. It was because of that commitment to preserve capital that the regulatory agencies were so concerned over the results of the most recent US quantitative impact study,” Gruenberg said.

Upon implementation of Basel II in the US, risk-based capital will not fall below 5% in the first year, 10% in the second and 15% in the third

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