ABA Opposes Wholesale Adoption of Basel Credit Risk Approach

In a comment letter to the federal regulatory agencies last week, ABA expressed concerns over the wholesale adoption of the Basel Committee’s revised standardized approach to credit risk, which would apply to large, internationally active banking organizations. ABA pointed out that institutions subject to the approach would have to manage two risk-based capital floors, which would create significant implementation and compliance burdens.

While the association voiced its opposition for wholesale adoption of the standards, the letter pointed out several elements that are improvements over current standards, including the revised methodologies for securities lending transactions, exposures to securities firms, corporate exposures and retail exposures. ABA encouraged the agencies to propose these measures as options under the Generally Applicable Capital Rules for all banks.

ABA also highlighted the need for greater public engagement as international standards for regulatory capital rules are developed. For more information, contact ABA’s Hugh Carney.