Basel
ii in the United States of America
From the
Basel ii
Compliance Professionals Association (BCPA),
the largest association of Basel ii Professionals in the
world
Final Rule, USA: Risk-Based Capital Standards:
Advanced Capital Adequacy Framework — Basel II
Principle of Conservatism
Several commenters asked whether it would be permissible
not to apply an aspect of the rule for cost or
regulatory burden reasons, if the result would be a more
conservative capital requirement.
For
example, for purposes of the RBA for securitization
exposures, some commenters asked whether a bank could
choose not to track the seniority of a securitization
exposure and, instead, assume that the exposure is
not a
senior securitization exposure.
Similarly, some commenters asked if risk-based capital
requirements for certain exposures could be calculated
ignoring the benefits of risk mitigants such as
collateral or guarantees.
The agencies believe that
in some cases it may be reasonable to allow a bank to
implement a simplified capital calculation if the result
is more conservative than would result from a
comprehensive application of the rule.
Under
a new section 1(d) of the final rule, a bank may choose
not to apply a provision of the rule to one or more
exposures provided that
(i)
the bank can demonstrate on an ongoing basis to the
satisfaction of its primary Federal supervisor that not
applying the provision would, in all circumstances,
unambiguously generate a risk-based capital requirement
for each exposure greater than that which would
otherwise be required under this final rule,
(ii)
the bank appropriately manages the risk of those
exposures,
(iii)
the bank provides written notification to its primary
Federal supervisor prior to applying this principle to
each exposure, and
(iv)
the exposures to which the bank applies this principle
are not, in the aggregate, material to the bank.
The
agencies emphasize that
a
conservative capital requirement
for a group of exposures does not reduce the need for
appropriate risk management of those exposures.
Moreover, the principle of conservatism applies to the
determination of capital requirements for specific
exposures; it does not apply to the qualification or
disclosure requirements in sections 22 and 71 of the
final rule. Sections V.A.1., V.A.3., and V.E.2. of this
preamble contain examples of the appropriate use of this
principle of conservatism.
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