It took nearly seven years for the banking industry to hash out proposed revisions to the Basel Capital Accord and get the Federal Reserve to approve them. Now, while the industry awaits approval from the three other federal banking regulators, four large U.S. banks have raised objections as to how the revised accord should be implemented.
The four banks - Citigroup, JPMorgan Chase, Wachovia and Washington Mutual - want to be allowed to use a simpler version of Basel II, called the standard approach. This sets aside the advanced approach that allowed the banks to use internal estimates as to how much regulatory capital they need to hold against their assets. It also raises questions as to whether the federal banking supervisory agencies can meet their end-of-summer deadlines to approve the set of proposals and get the accord on track for implementation by 2008. At this point, some industry participants say the Basel II accord might not take effect in the U.S. until 2012.